VectorVest teaches that one of the cardinal rules of investing is to never buy stocks going down in price. The corollary to this rule is, of course, to only buy stocks which are rising in price. Indeed, this rule seems illogical and is totally contrary to what most of us have been taught to do.

All of us are looking for bargains, so it's natural to believe the brokers, Wall Street Wizards and so-called experts on CNBC when they exhort us to buy stocks which are falling in price. Surely, Apple Inc. is a much better buy at $130 a share than is was at $200. Yes, of course it is, but only if it is going up in price. Only if it's going up in price? How do we know that? The simplest way is to check RT. If it is above 1.00, the stock's price is in an uptrend. As of last night, Apple's RT was 0.56. That tells me Apple's price is getting crushed. So I'm not touching this stock.

But wait just a minute. I really love this stock, and Cramer loves it too. He said to buy, buy, buy it clear through to the end of the year. So, phooey on your stupid RT. I'm going to look at a graph and see what's really going on. The Standard graph shows me that Apple closed at $199.83/share on 12/28/07, broke below its 40-day MA on 01/04/08, got an 'S' rating at $159.64 and hit a low of $119.15 on 02/26/08. Since then, it's been working higher. Has it bottomed? Is it on its way back up?

Apple has tested and bounced off of the $120 level, which is just above the low it hit last August, three times. So it appears to have a lot of support at $120. The RT hit a low of 0.38 on 02/07/08 and has been hitting higher lows since then and Apple's price crossed back above the 40-day MA on Tuesday and went above its Stop-Price on Wednesday. Very good!

Now let's see how it looks on a ProTrader Graph. I like to use a 3-Month, Daily graph with Prices shown as Candlesticks, a 30-Day Weighted MA, 9,12,26 MACD and 20-period Detrended Price Oscillator, DPO. Sure enough, Price has crossed above the 30-day Weighted-MA, the MACD is signaling an uptrend and the DPO crossed above 1.00 on 03/13/08. So it sure looks like Apple has consolidated and is moving higher. But wait. RT is still well below 1.00 and that bothers me. Isn't it awful risky to buy a stock with a low RT? Yes, it is, but that's how aggressive investors make (or lose) their fortunes.

Take Mr. Joe Lewis, the currency speculator, for example. He bought a billion dollars worth of Bear Stearns, BSC, right after the sub-prime debacle last August. I heard he bought in at an average price of $130/share. Yup, that must have sounded great since BSC peaked at $170 in January '07. But he made one fatal mistake. He bought the stock on the way down. Stupid old RT was way below 1.00 and the stock had an 'S' rating when he did that. So, Mr. Joe Lewis broke the cardinal rule and bought BSC, big-time, on the way down. When the BSC Board agreed to sell the company last Sunday to J.P. Morgan for $2.00 per share, Mr. Joe Lewis, a.k.a. the boxer, was KO'D.

P.S. On March 11, 2008, Mr. Jim Cramer told his viewers that it would be silly, just plain silly to sell their Bear Stearns stock. BSC closed that day at $62.97 with a 0.48 RT and an 'S' rating. I don't know if Mr. Lewis was watching the show, but it doesn't appear that he was using VectorVest either.

On Tuesday, the Fed offered to loan $200 billion to financial institutions for low grade securities. The Mighty Dow soared 400 points. Standard & Poor's said yesterday that the end of subprime mortgage write-downs by big banks may be in sight. Stock prices, which had opened sharply lower, moved sharply higher. The Labor Department reported this morning that consumer prices were unchanged last month. Prices of stock futures soared.

These explosive rallies are typical of bear markets and don't last very long. As I write this essay, the Mighty Dow is up a paltry 60 points from last Friday's close. The reason is that none of these events is going to end or even mitigate the bear market. The Fed, for example, who raised interest rates too high and waited too long to lower them, still believes inflation will moderate due to a slower economy. How can inflation moderate if the government continues to debase the dollar? Standard & Poor's was one of the accomplices in the subprime fiasco. So why should we believe anything they say about the subject? Finally, the CPI report is sheer BS. Am I really supposed to believe that food and energy costs moderated in February? Who are they kidding? (See my essay of 06/15/07.)

This is not a pretty picture folks and this bear market is not going to end soon. So we've got to learn to live with it and make money in it.
Last week I said, "The easy way of making money in a bear market is to sell stocks short." I know a lot of investors don't like to sell short, but it's not that hard to do. To learn how, read my Special Report which can be accessed by clicking on Research at the top of your screen, clicking on Special Reports, then clicking on "How to Short Stocks." Develop your short-selling skills by paper trading with the VectorVest Portfolio Tracker. It's easy to use and it's FREE. When you think you're ready to trade with real money, start out with small positions and always use Stop-Prices.

If none of this appeals to you, try buying Contra ETFs. I wrote an essay on this subject on November 2, 2007, one day after VectorVest signaled a Confirmed Down market. Our "Strategy of the Week" that day was "How to Make Money Using Contra ETFs." I also wrote a special note to new subscribers that day in which I said, "The Confirmed Down signal could be the entree to a long bear market. So don't be deceived by the endless parade of experts who will appear on TV and other places telling you to buy stocks."

Deception plays a major role in bear markets. Take Bear Stearns for example. Just yesterday, its Chairman said their liquidity was fine. Today they're being bailed out by the Fed. When there's a torrent of negative news, investors hope for something positive to happen and become vulnerable to spin doctors. So don't fall for the fluff. Remain positive, learn how to sell short and look for signs of rising earnings. Do these things and you won't slide down The Slippery Slope of Hope.

SELL HIGH, BUY LOW.
This week, Mr. Gordon White will show us how to "Sell High, Buy Low." Shorting stocks is the easiest way to make money in a down market. Please visit the VectorVest University to enjoy Mr. White's excellent presentation.