Six weeks ago, on 07/03/08 to be exact, I announced that we had created two new Industry Groups: Market(ETFs-Long)and Market(ETFs-Short). The following week, 07/11/08, I wrote an essay called, "ETF Classifications," in which I described how we had classified all the ETFs into seven additional Industry Groups. While this move received considerable praise, I wasn't sure I was satisfied with the results. So now we have classified all 686 ETFs in our database into 36 Industry Groups, and I think it's marvelous.

To see what we have done, please click on Viewers on the Main Tool Bar. Click on Sector Viewer; then double click on ETFs. Shazam, a screen with all 36 ETF Industry classifications, sorted by RT Desc, appears before your eyes. You should see ETFs(Sector\Biotech) at the top of your screen and ETFs(Commdty\Futures) at the bottom. So Biotech is hot and Commodity Futures are not.

Double click on the Industry column header. Whalaa, the 36 Industry classifications are now sorted alphabetically from A to Z with ETFs(Commdty\Futures) at the top of the list and ETFs(Short) at the bottom. This allows you to find a specific class of ETFs in a jiffy. For example, if you want to play the currency markets, just double click on ETFs (Currency\Country). Like magic, WisdomTreeIndRp, ICN, appears at the top of your screen. So what currency are we dealing with here? Click on News at the top of your screen. Bingo, you're in Yahoo!Finance and you can see we're dealing with the Indian Rupee. Click on Profile for more details.

If you want to see what the world markets are doing, simply find the ETFs(Foreign\Country) Industry Group and double click on it. Presto, 42 country ETFs appear on the screen, sorted by VST Desc. Wow, only one country ETF, has a 'B' rating, the iShares MSCI Turkey Fund, TUR, and at the bottom of the list is the iShares MSCI Belgium Fund, EWZ, who is getting crushed with an RT of only 0.56. So stock markets around the world are getting pounded.

OK, please close the ETFs(Foreign\Country) and right click on the row labeled ETFs at the bottom of your "Industries in Sector" screen. In the pop up window which appears, please click on "View Stocks in Business Sector." Open sesame, all 686 ETFs now appear on your screen, ranked by VST Desc, with PwrShsDBGldSht, DZZ, at the top. Now click on Layout at the top of your screen. On the right hand side, scroll down the box until you find Industry. Click on Industry; then click on Move Up, and move Industry up as high as it will go. Click OK. Hocus pocus, now the Industry classifications appear right next to the Company and Symbol columns. Wow!

I can immediately see that the top ranked ETF is in the ETFs(Short) Industry Group. And I thought the market was going up! Yes, it is, but large parts of it are going down. Fifteen of the top twenty-three ETFs, ranked by VST Desc., are in the ETFs(Short) Industry Group. You must remember that these stocks represent Contra Funds and they go up when the price of the asset they represent goes down. Sure enough, DZZ, is designed to reflect the inverse performance of a gold index and the price of gold has been falling like a lead balloon. DZZ is a hot stock right now, but keep your eye on it. It won't be that way forever.

Note that the fifth stock from the top is Healthshrs Emrg, HHJ. I can see that it's in the ETFs(Specialty\Disease) group, but what does Emrg, have to do with a disease? Click on Analysis at the top of the screen. The Business description says that the Fund's objective is to track the performance of the HealthShares Emerging Cancer Index, which includes biotechnology companies that have been identified as "emerging cancer" companies. OK, I've got it. Please close the Stock Analysis window.

Double click on the Company column header. Abrakadabra, all the ETFs are sorted alphabetically from A to Z. Isn't that great? Now, I can quickly see the entire array of ETFs by name, symbol and classification. Now I quickly know what I'm looking at without going to a lot of trouble. It's like magic, ETF Magic.

P.S. If you layout your Viewer as suggested above, you will also see the Industry Groups on all your other screens. I like that.

If you were watching CNBC before the open this morning, you probably noticed that most of the stocks streaming along the bottom of the screen were Exchange Traded Funds, ETFs. Yes, ETFs. They have become very big players in today's market and can be very important to your wealth.

I first wrote about ETFs on September 8, 2000. In that essay, I gave a brief explanation of what ETFs are and described how to find them in the VectorVest database. Finding them was pretty easy to do since we had put all 66 of them into an Industry Group called, "Market(Baskets)." As the number of ETFs in our database grew, we changed the name of the group to Market(ETFs). Last week, I reported that we had split the Market(ETFs) group, which had grown to over 650 stocks, into two new Industry Groups: Market(ETFs - Long) and Market(ETFs - Short). Wow, this move showed that Market(ETFs - Short) was the hottest Industry Group in the database!

Now we have taken the major step of creating a Business Sector called ETFs and we are classifying the ETFs in the Market(ETFs - Long) Industry Group into seven new Industry Groups, called: ETFs(Commodities), ETFs(Currency), ETFs(Fixed Income), ETFs(Foreign), ETFs(Sector), ETFs(Specialty) and ETFs(United States). We're still completing this process, so some ETFs still remain in the Market(ETFs - Long) group. Of course, we renamed the Market(ETFs - Short) group to ETFs(Short).

The primary guide we are using to make these classifications is a book called, "The ETF Book: All You Need to Know About Exchange Traded Funds," by Richard A. Ferri, published by Wiley. Mr. Ferri provides much more detailed classifications than we have chosen to use. I believe these new classifications will give you the information you need to make better decisions without fragmenting them too much.

Take a look at what we have done. Click on Viewers on the Main Menu Bar, click on Industry Groups and bingo, there's ETFs(short) at the top of the list, followed by ETFs(Commodities) just below it. Note that the CI, Comfort Index, rating for the ETFs(Short) group is 0.89 and that of ETFs(Commodities) is 1.53. This means that the ETFs(Short) group is quite volatile and while ETFs(Commodities) has been very stable. Both groups have been big winners lately. Look at their graphs, and you'll see what I mean. It was impossible to get this kind of information prior to creating the new ETF Classifications.

In my March 23, 2007 essay, I said I would like to see a slam, bang, bone-crushing sell-off to provide the bargain prices needed for a long rally. Well, it looks like I got what I wished for. Now that The Fed has lowered interest rates and the market is rebounding, how do we take advantage of it?

The easiest thing to do is to go bargain hunting for high RS stocks. I've written about this technique on several occasions and it is very easy to do. Simply sort Stock Viewer by RS Descending and look at the stocks with "S" recommendations. For example, Apple Inc., AAPL, still had an "S" rating as of yesterday. An "S" rating and low RT means that a stock has been beaten down in Price. Is it time to buy it? It sure is, if you're a red-blooded, fearless bargain hunter. For more information on bargain hunting for high RS stocks, you may read my essays of 08/10/07, 08/04/06, 10/14/05, and 05/13/05.

Last Friday's Strategy section also said the Model Portfolio was long with "high volume ETFs." Why did we go long with ETFs and why did we pick XLF, SPY, QQQQ, and IWM? We chose to go long with ETFS because, at that stage of the rebound, we wanted to play the market instead of taking single stock risk. We chose the stocks we did because we wanted to beat the performance of the VectorVest Composite with minimum risk.

On several occasions VectorVest has demonstrated bargain hunting strategies. Some of the more recent demonstrations include: "AC's Climbers" demonstrated on the VectorVest University, October 12, 2007, "Window Shopping for Bargains," August 10, 2007, and "Golden Goodies," March 23, 2007. Of course, the "Biggest Bargains" strategy in the Research section of UniSearch is always worth looking at. Wow, what a fabulous list of choices it came up with yesterday. Try it and see what I mean.

As a final note, I strongly suggest you look at the top 10 Industry Groups ranked by RT descending. Notice that most of them are bouncing off of long, steep declines. They include home builders, trucking and banking that have been hammered over the past 18 months. Low interest rates are the manna they need to grow and flourish once again. Buying them now may seem risky, but that's what the Pros do when it's Bargain Time.

PIRATES LONG.
For those of you who don't care for stodgy old high RS stocks, take a look at this week's "Strategy of the Week." It's called Pirates Long (Exploding From A Bottom). These stocks are blistering. Visit the VectorVest University to see how Mr. Glenn Tompkins found them.