The VectorVest RealTime Derby was first demonstrated at the New York Traders Expo in February 2009. It has been an exciting and fascinating tool ever since. More than that, it has proven to be an incredible source of information.

On a day-to-day basis, it tracks and exhibits the performance of 185 10-stock portfolios tick-by-tick from the moment the market opens until it closes at 4:00 PM. With the Derby, there's absolutely no problem seeing what is really going on in the market and today was no different. The major indexes opened sharply lower, but the Derby was showing Bullish strategies as the biggest gainers in early trading.

The leading Strategy was "Best Performers > $1.00." I clicked on the performance bar to see which stocks were in the portfolio and saw that Power-One, PWER, had gapped up about 20% at the open and it wasn't pulling back. I took a look at its one-year graph and saw that this stock was trading at about $1.30 per share last September and it's now over $12. Did I miss a good stock here?

Sure I missed the early moves, but the stock still looks interesting to me. It has gapped higher on high volume several times since last September and certainly looks like it's going higher. I bought some.

Then I opened the Tote Board. This tool is my favorite part of the Derby. It shows the cumulative performance of all the Strategies over any time period since August 18, 2009. The calendar for selecting the beginning and end dates of the test periods was updated recently to show the C/Up and C/Dn dates given by our Market Timing System. For example, the best performing Strategy for the Upwave which started on 02/19/10 and ended on 05/07/10 was none other than "El Cheapo Cheapos," with a Total Gain of 51.95%.

Are you kidding me? What kind of record does it have? Well along with its terrific gain, it had 62% Winning Days, 42% Winning Trades, a Maximum Drawdown of 27.43% and an Efficiency of 18.92. An Efficiency of 18.92, what's that all about? It's something that VectorVest calculates which combines the Percent Winning Days, the Percent Winning Trades and Maximum Drawdown Percentage into a single item called the Efficiency Factor.

Is 18.92 any good? Well it's not bad, but the next biggest gainer is "Thornton's Thunder," which had a Total Gain of 49.23% and has an Efficiency of 24.84. From what I can see, Thornton's Thunder had the best combination of Total Gain Percent and Efficiency during that particular up wave.

Interesting. What Strategy had the best Efficiency over that time period? "Great Stocks," with an Efficiency Factor of 32.06, but it had a Total Gain of only 3.96%. So it seems that there's a trade-off between Total Gain and Efficiency.

Of course there is, we've seen it over and over again. The most effective Strategies, those that give the highest gains, are those which return volatile, low-priced stocks and the most efficient Strategies, those that produce relatively modest gains, are those which return less volatile, higher-priced stocks. That's no surprise, but is it possible to use the RealTime Derby to find Strategies that will be both effective and efficient? Yes, I believe so. Next week I'll report some surprising things I discovered by using the Tote Board and The Efficiency Factor.

EFFICIENT PERFORMERS.
The Price of the VectorVest Composite hit a low point on July 6th; then shot higher for several days. It was time to go long. When would you have gone long and what Strategy would you have chosen? Let's see what Mr. Jerry D'Ambrosio did to make his selections. Visit the VectorVest University to see this week's "Strategy of the Week" presentation: "Efficient Performers."

MANAGING THE MONEY MAKER.
Last week, we illustrated three trades on selling Covered Calls which were based on using the Options Rate of Return tool and the "Optionable 2x4s" Strategy. Two of the trades were profitable, one was not. None of the trades were managed. This week we will illustrate how all of these trades would have been profitable, had we used the portfolio management guidelines given in the PayDay Portfolio Report.

Six weeks ago, June 11th to be exact, I wrote an essay called, "Tentative Bottom." That turned out to be oh so true. This time, I think it's different.

Caterpillar bulldozed the Bears out of the way yesterday, leading a strong rally with news that its orders are growing and production will increase in the second half of the year. UPS also raised its outlook because of more spending by businesses. These reports support evidence of increasing economic activity as seen by rail shipments which have been increasing for the past several months.

In another good sign, investors pushed bad news on housing and unemployment aside, rationalizing that it could have been worse. They focused instead on earnings reports from a wide range of companies that showed little sign of a slowdown in the economy. This behavior is reminiscent of that at the bear market bottom in March 2009. Is the market ready for a sustainable rally?

As I said last week, the combination of low inflation, low interest rates and rising earnings is the perfect recipe for driving stock prices higher. This week, it finally appears that stocks of companies with great earnings reports are getting rewarded with higher prices. Those companies who missed their forecast got punished. That's the way it's supposed to work. A quick look at our Market Climate Graph shows that forecasted S&P 500 earnings are expected to soar higher into next year.

Going back to the January - February 2009 period, it is interesting to note that the Price of the VectorVest Composite was caught in the jaws of a Wicked-Wedge as it has been recently. Back then the market broke to the downside on February 10, 2009, leading to the March 9th bottom, which we nailed. Yesterday, however, the Price of the VectorVest Composite broke-out to the upside, which I view as a positive sign. This view is supported by the fact that the Price of VectorVest Composite hit the low point of $22.57 per share on 07/06/10. This was only nine cents above the $22.48 per share support level hit on 02/08/10.

The market rallied almost three months from the 02/08/10 support level to a closing high of $26.29 per share hit on 04/23/10. While I doubt that this is likely to happen again, we could see the market rally into the September - October time frame. Exactly 50 trading days passed during the downturn from the 04/23/10 high to the 07/06/10 low. That seems long enough to me. Thirteen trading days have passed during the rebound from the 07/06/10 low to today, and the Price of the VectorVest Composite went up for two consecutive five-day periods yesterday, giving a preliminary signal of a sustainable upturn. The Color Guard also flashed a Green Light in the Price column yesterday.

Now all of this happened several times during the bumpy downturn from the April 23rd high, so don't run out and bet the farm on this rebound. We are not reliving the March 2009 bottom. A nascent rally has begun, however, and we could be seeing A Breakout Bottom.

THE MONEY MAKER.
The up and down price fluctuations we have encountered since the market peaked on April 26th, have made it awfully hard for most stock traders to make money. But those who trade stock Options have found a bonanza. Volatility causes Option premiums to go up, making them more expensive. Therefore, it was a good time to sell Covered Calls. That's exactly what we have been doing in the PayDay Portfolio, which was up 26.64% as of yesterday's close. How does one sell juicy Covered Calls? Mr. Glenn Tompkins, Manager of Educational Services, will show us. So visit the VectorVest University to see this week's money making "Strategy of the Week" presentation: "The Money Maker."

Hardly a day goes by that I don't hear a discussion or read an article about "the" forthcoming double-dip recession and today was no exception. The market tanked on more bad economic news and every self-appointed expert on the history of the Depression alleges to see striking similarities with today's political, economic and financial conditions. That may be so, but I do not believe a double-dip recession is likely to happen.

Yes, the economy is slowing down and even the Federal Reserve has lowered its forecast of economic growth. Unemployment is still near 10%, the housing market is still weak, retail sales have slipped for two consecutive months and consumer sentiment is sinking fast. But inflation is benign, interest rates are extraordinarily low and corporate earnings are rising. This combination of factors is bullish, very bullish, for stock prices.

Supporters of the double-dip theory can talk all they want about government debt, slowing consumer spending, the oil spill, LeBron James or whatever. It doesn't drive the economy like inflation, interest rates and earnings do. So why is the economy slowing?

The economy is slowing because small business owners are not spending money and creating jobs as they have done in the past. They are concerned about the political turmoil within the country and uncertain of the future. Those who need the money to grow, can't get it. Those who can get the money, don't want it. Those who have it, won't spend it. The traditional effect low inflation and interest rates have on stimulating the economy will be inhibited until government policies become more business friendly. So where do we go from here?

It is my contention that regardless of government policies, a double-dip recession will not occur as long as inflation remains benign, interest rates stay low and corporate earnings continue to rise. The Fed has repeatedly said it will keep interest rates low as long as it takes to keep the economy growing. That's great, but it may not be possible. They can control interest rates, but they cannot control inflation.

If inflation turns into deflation, the economy will shrink. If inflation takes off, the Fed will be forced into raising interest rates. When that happens, a double-dip recession is a virtual certainty. So it all depends upon what inflation does. It's The Wildcard.

MOVING TO THE SIDELINES.
I hate to say this, but it appears that we have gotten caught within the jaws of another Wicked Wedge. What does this mean and what to do now? Mr. Bryan Barnes, Consultant and Instructor, will explain what it all means and what to do now. So visit the VectorVest University to see this week's insightful "Strategy of the Week" presentation: "Moving to the Sidelines."

I'll be giving an extremely important talk entitled, "Planning for a Secure Retirement" at the upcoming Money Show in San Francisco on August 20, 2010. Why do I say this is an "extremely important" talk?

On June 13th, a Financial Advisor, Mr. Adam Butler of Butler Philbrick Associates, appeared on CNBC and said that "Our models suggest there is almost a 50% chance that a couple will run out of funds before they die if they adhere to a traditional financial plan." The reasons, he said, are that traditional financial plans miss two pretty serious risks: The risk they might live too long and the risk of lower than expected market returns. Traditional financial plans generally assume a linear sequence of financial returns of say, seven percent year-in and year-out, and that is unlikely to occur. So what does one do if they dramatically underestimate what they need?

Mr. Butler said retirees should put their money in two layers. The first layer should be the "guaranteed" layer for food, shelter and so on. The second layer should include an allocation of riskier assets which provide an upside for "retirement life style needs," such as bequests, charitable giving, etc. He advocates investors broaden their asset allocations to include REITS, commodities and international stocks, in addition to traditional domestic stocks, bonds and cash.

He also believes investors should have some sort of systematic exit strategy for each asset class so that they can move to the sidelines when market risk is high and move back in when market risk is favorable.

Finally, he said investors also should consider a third layer, a "momentum" overlay, which can really increase returns with a small increase in risks. My goodness, was he talking about market timing and the use of Options to augment income?

Much of this interview came to me as a breath of fresh air because most of the retirement plans I've read fail to advise retirees of the extreme importance of being able to augment their retirement income by some independent means. You simply cannot run the risk of running out of money and the returns you will get from annuities, dividends and bonds are not going to provide the security you should have. Of course, you could always work at McDonalds or Wal-Mart, but I prefer to make my extra money by investing in the stock market. I presume that you do too. That's why we have been making presentations on retirement strategies at the Money Shows and VectorVest events.

We will be making three presentations on the subject of retirement at the Money Show in San Francisco on Friday, August 20th and we will also be giving a One-Day Options Course on Sunday, August 22nd. "The PayDay Portfolio" will be featured at the Options Course. This portfolio was started with $100,000 on January 8, 2010, and had a total value of $122,364 as of yesterday. It was down 1.69% on stock trades, but has garnered $24,470 in cash deposits so far. You may learn more about this portfolio by reading my essay of June 4, 2010.

You may also register for the Money Show by clicking on the link shown above under Coming Events. We're going to have a great series of talks in San Francisco, and it's all going to start with Planning for a Secure Retirement.

P.S. The PayDay Portfolio Report has been completed and will be shipped out this coming week. We have had many requests for this report from subscribers who have not taken our Options Course, but claim to know how to trade Options and want to buy the report. If you are among them, you may buy the report for $95.00. If you have previously attended a VectorVest Options Course or bought our Options Course CD set, you may purchase the report for only $29.00.

BUYING THE DIPS.
If you look at an 18-month Standard view of the Market Timing Graph, you will see that there have been five C/Dn signals since the great blast-off from the March 2009 bottom. Buying stocks at that time produced sensational results. You will note, however, that stocks prices did not go up in a straight line. Fear and greed are always present and once the bull market has been established, some investors begin to fear that it will end and take profits along the way. Others will stay-the-course and "climb the wall of worry." Still others, who missed the boat, will wait until the pull-backs or "dips" occur and buy stocks at slightly lower prices. Buying the dips can be very profitable if you know when and how to do it, but disastrous if you don't. Fortunately, Mr. Todd Shaffer, Manager of Research, knows when and how to do it correctly. So visit the VectorVest University to see this week's instructive "Strategy of the Week" presentation: "Buying the Dips."