Congratulations to Mr. David Price of Columbus, Ohio for achieving the 2nd Prize Award of $100,000 in CNBC's Million Dollar Portfolio Challenge. Fantastic! How did he beat all but two other guys in a contest of over 254,000 contestants?

Of course, he used VectorVest. According to David, VectorVest was the catalyst that sent him to the top ranks of the contest. He implemented the Stalwarts strategy, buying the top four stocks when the contest began on May 12, 2008. He said that Stalwarts kept his portfolio moving up and moving down, but staying in the top 25 ranking. Then when the market started moving down, he sold out of his Stalwarts picks and just selected stocks "hit and miss." This approach sent him down to 31st place in the overall contest.

Then, he said that when I wrote about the consolidation pattern on Friday, July 11, 2008, that was enough for him. He spent a good deal of time testing the five strategies that I recommended to go long with on the 16th and said that he liked Odd Fellows Long and Pirates Long. He then selected Pirates Long because the stocks it returned were mostly financial stocks, which everyone knew had been beaten down the worst. So he bought Freddie Mac, Fannie Mae, Wachovia and Regions Financial on the 17th and by the end of trading on the 18th when the contest ended, his portfolio had climbed from $1.8 million to $2.8 million, leaving him in third place and winning $100,000.

Wow! What a story. We're very happy for you David, and we're extremely proud that VectorVest helped you become a $100,000 Winner.

A GREAT TRY.
On June 12, 2008, Dr. Sarosh Quereshy was in 1st place in the CNBC contest and said it was because of VectorVest. He too was using Stalwarts and he did very well until the big correction occurred the week before the end of the contest. He fought back from 116th place to 10th place using bank and financial stocks as the contest end was nearing. His portfolio was up 38% in the last week of the contest, but he still didn't win! Ouch.

Dr. Quereshy says that if that had been his IRA, he would be retired now. Nevertheless, it must have been a great thrill to come so close to winning. Our compliments go out to Dr. Quereshy on A Great Try.

STOCKS YOU SHOULD KNOW ABOUT.
Many of you have noticed that we have put a new feature on the Home Page of our website called "Stocks You Should Know About." This feature highlights "Best Performers > $1.00" when the Dow Jones Industrial Average is going up and "Worst Performers > $10.00" when the Dow Jones Industrial Average is going down. You have also asked for the strategies we use to find these stocks. Here they are:

Best Performers > $1.00: Price (Split Adjusted) > $1.00, AvgVol > 100000, %PRC > 2, REC = B, RV > 0.90, RS > 0.90, Sorted by RT*CI Desc.

Worst Performers > $10.00: Price (Split Adjusted) > $10.00, AvgVol > 100000, %PRC < -2, REC = S, RV < 0.90, RS < 0.90, Sorted by RT*CI Asc.

These strategies will be placed into the UniSearch Tool this evening. As far as the website goes, these strategies are being run on VectorVest RealTime every 60 seconds, but with a 15 minute delayed signal. If you actually have VectorVest RealTime, you can run them on a refresh cycle time of your choice with actual, real-time pricing. If you don't have VectorVest RealTime; then visit www.vectorvest.com to watch a fascinating display of Stocks You Should Know About.

The Second Place Winner of the VectorVest 2008 Bear Market Beaters Contest is Mr. Eugene Blyar from Greenville, Alabama. Mr. Blyar has been a subscriber for a little over three years now and his strategy is named Blyar's Bottom Feeders/BMB. It showed a gain of 27.59% from November 1, 2007 through March 7, 2008. That's very good compared to the 13.06% loss in the Price of the VectorVest Composite over the same time period.

The most striking thing about Eugene's strategy is that it uses an approach which is the completely the opposite of the one used by Richard Leclercq, last week's Third Place Winner. Eugene's strategy sorts stocks by RV/RT Desc., which is a bottom fishing sort that places the most undervalued, most beaten down stocks at the top of your screen. Richard's strategy sorts stocks by RT*CI Desc., which is a high momentum sort. It places the hottest stocks with the most consistently rising prices at the top of your screen. So Eugene is looking for dead cat bounces and Richard is looking for high fliers.

Another interesting comparison is that Blyar's Bottom Feeders/BMB uses very tight Gain/Loss limits of 9% and 4% as the exit criteria while Richard's Rangers/BMB uses an extremely wide Gain/Loss range of 70% and 35%. It seems reasonable that a tight %G/L range would work well in a bottom fishing strategy while a wide %G/L range would suit a momentum strategy. Nevertheless, I wanted to make sure. So I ran Eugene's strategy with Richard's sort. The result was disastrous. The combination of buying high fliers with tight %G/L Stops lost money right from the beginning, and it was down 33.66% on March 7th. I then ran Eugene's strategy with Richard's exit criteria. This combination of buying beaten down stocks with a wide %G/L Stops combination also lost money, but not nearly as much...losing only 16.90%. So both Eugene and Richard were right in using the exit criteria they selected.

Another interesting point is that both Eugene and Richard used a %G/L ratio of 2.00 or greater. This fact is especially important in Eugene's strategy because the win/loss ratio was about 1/2. A major drawback that concerns me with Blyar's Bottom Feeders/BMB is that it generates an insane number of trades, like over 360 in just four months! I haven't had much time to work with Blyar's Bottom Feeders/BMB but I did try widening the %G/L spread. This change lowered the performance to a 17.57% gain, but the number of trades was reduced by about 50%.

In comparing these two strategies, Blyar's Bottom Feeders/BMB is clearly for very active traders who are happy with small gains. Richard's Rangers/BMB is for home run hitters who don't mind striking out from time to time. I find both strategies intriguing and will work with them as I go along. Meanwhile, Mr. Blyar will receive a $50.00 VectorVest Savings Certificate and a check for $1,500.00 for his Second Place Winning strategy, Blyar's Bottom Feeders/BMB.

SIGNS OF DANGER.
The percentage of Buys decreased in Monday's trading and so did the percentage of Sells. This is a sign that money rotated out of rising stocks and went into falling stocks. On Wednesday, the percentage of Buys went up and so did the percentage of Sells. This is a sign that money moved out of falling stocks and into rising stocks. At the same time money rotated out of our top rated, high VST stocks as evidenced by the losses they suffered. These phenomena of rotation, focusing and wide-spread profit taking on high VST stocks are all Signs of Danger.

P.S. For more information, see my essay of 12/13/96.

We have received the entries to the 2008 Bear Market Beaters Contest and hope to announce the Third Place Winner on April 18, 2008.

A WINNING FORMULA.
Two weeks ago, on March 28, 2008 to be specific, I wrote an essay called "Riding-the-Wave Made Easy." The technique described therein sounded so good, I decided to use it in managing the Model Portfolio. So far, it hasn't worked very well and several problems became apparent. Needless to say, I'm not going to use it anymore.

The major problem with the strategy I tried is that trying to manage the portfolio on an end-of-day basis led to a host of problems. Take the evening of March 31st, for example. Since the Primary Wave went from Up to Dn on that day, I was required to sell my long positions at the open and go short at the open on the next day. Unfortunately, the market went up instead of down on April Fool's Day, and the Model Portfolio got creamed. Not only that, but the market went up so much that day, the Primary Wave went from Dn to Up. Happily, I covered my shorts at the open on April 2nd and went long with Top VST stocks.

By this time, it was clear that there were tremendous disadvantages to Riding-the-Wave on an end-of-day basis. Not only did I have to decide to go long or short before the market opened, but I had to decide what strategy to use. I had learned, long ago, to wait until I saw what the market was actually doing before jumping in and I had spelled out in some detail in my essay of December 23, 2005 exactly how to find the best strategy to use. So I went long with Top VST stocks on April 2nd and crossed my fingers. Fortunately, these stocks performed quite well. All but one, Kirby, KEX, made money. I would have kicked Kirby out as soon as it lost 5%, but the strategy did not use any portfolio management during a wave, which was another problem.

After four wishy-washy days of trading, the market tanked on Wednesday, April 9th and the Primary Wave went from Up to Dn. So I had to sell my longs at Thursday's open and was also supposed to go short. But I didn't do that since I had said in Wednesday's Views that I wouldn't go short unless the market was heading lower. As you might expect, the market went higher. So there I was in cash when I should have retained the right on Wednesday night not to sell my longs.

OK, after the drubbing the market took today, thanks to GE, I don't feel so bad. So what am I going to do now? Well, I'm going to wait until the Primary Wave goes to Up again; then I'll go long on a day the market is moving higher. I'm going to stay long until the Primary Wave goes to Dn, but I doubt that I'll entertain the idea of going short while the MTI and BSR are trending higher.

In a nutshell, I'm going back to what worked for the last three plus years. There's no need to mess with A Winning Formula.

P.S. We're going to work on developing an end-of-day procedure that resolves the problems cited above.

BIGGEST BARGAINS.
The biggest companies in the world didn't get to be that without outstanding management. It's not a bad idea to buy some of these guys when the market rallies from a steep bottom. Mr. Gordon White will show us how in this week's "Strategy of the Week." For further demonstration of this strategy, please see VectorVest University.

As we saw last week, Pedro's Pride is a very simple strategy that produced excellent results, up 382% in 39 months. The only problem I had with it is that it suffered badly during the bear market years of 2002 - 2004 with a max drawdown of over 40%. It had a clever twist to it, however, that I really like. It was out of the market from July 11th to August 11th each year.

Mr. Yale Hirsch, creator of the Stock Trader's Almanac, has made it common knowledge that the market performs much better from November to May than it does from May to November. So, I thought, why not give it a try? I'll own the top 15 VST stocks only from November to May. Alas, this strategy mitigated the drawdown problem, but it returned a paltry 196.5% from January 5, 1996 to May 5, 2006, (I traded on Fridays only). Nevertheless, I still liked the idea of being out of the market during the summer months.

Mr. Hirsch's Stock Market Almanac also indicates that July and September have been the worst performing months when trading the Nasdaq and August and September were the worst performing months when trading the DJIA. So why not be out of the market during July, August and September? When rebalancing the top 15 VST stocks in this fashion, the results were stunning! I got a 911.9% gain from January 5, 1996 to June 8, 2006 with 66.1% winners and a max drawdown of only 21.43%. This strategy sailed through the 2002 - 2004 bear market like a piece of cake, the equity curve is a thing of beauty.

To be fair, I must report that we also tested Pedro's Pride over the same time period and it produced a return of 1,054.2% with 68.5% winners. But the max drawdown was 43.5%. I know I can't handle that, so I would not invest my money using that strategy. But I definitely will use the new strategy illustrated as this week's "Strategy of the Week," called Summer Hiatus.

P.S. Next week I'll write about how to further improve profits and reduce risk when rebalancing high VST-Vector stocks.

HOW TO FIND EXPLOSIVE LOW-PRICED STOCKS.
It's easy to get discouraged when the market is getting hammered the way it has over the last four weeks, but it's not necessarily a bad time to find some great winners. In July 1998, when the market was getting killed, I discovered QLGC at $3.44 per share on a split basis. It went on to triple in less than a year and ultimately peaked at over $95 in March 2000. In the summer of 2002 when the bear market was at its worst, I found SINA and SOHU at less than $2.00/share. Both stocks turned into 20 baggers. Finally, there's NTRI, which I found at $2.25/share in October 2004. It recently hit a high of over $75.00.

I've written about how to find stocks such as these on many occasions and have demonstrated the techniques numerous times. If you're interested in learning how it's done, attend the Technical Analysis Course in Ft. Lauderdale next Friday and Saturday. No matter what the market does, you can always make money if you know How to Find Explosive Low-Priced Stocks.