With triple digit up and down days becoming par for the course, the market has been herky-jerky lately, to say the least. So how can one survive these wild swings and still make some money? The best way I can think of, is to learn how to see through the market's daily gyrations and stay with its prevalent trend, the way to do this is to use the Enhanced ProTrader Market Timing Graph, EPMTG. I wrote about this graph on November 30, 2007 and an excellent "Strategy of the Week" presentation was given which showed what it is and how to use it.

Nowadays, we use the EPMTG regularly in our Daily Color Guard Report, but before I go too far, let me tell you more about the original ProTrader Market Timing Graph. It used three key indicators: A Detrended Price Oscillator, Envelopes and a 30-Day Weighted Moving Average. Many of our subscribers refer to it as the "DEW" system of Timing the Market. But make no mistake, the DEW system does not conflict with or replace our Standard Market Timing System. It serves as a compliment. All I did to create the EPMTG was to add the MACD to the DEW graph. The key to using it properly is to use the MACD crossovers to pinpoint meaningful changes in market direction.

To see the EPMTG, simply access the Standard Market Timing Graph; then click on ProTrader Graph in the box labeled Graph Type. (If you do not have ProTrader on your computer, you may visit our website, or click here, to sign up for a Free 2-week Trial). I usually set the graph up with a 3-month Period in order to clearly see the MACD crossovers. If you do this, you can easily see that the DEW indicators signaled the start of a rally on 12/11/09. The Color Guard flashed a green light on 12/14/09 and the day's "Five Best Performing Strategies," all Bullish, were listed. Which one would you have chosen to use?

According to the EPMTG, the rally lasted until 01/20/10, and the Color Guard coincidentally flashed a red light. The day's "Five Best Performing Strategies," all Bearish, were listed. Which one would you have chosen to use?

I observed an interesting phenomenon while preparing for this essay. The Total Gain column of the Totalizer, in the VectorVest RealTime Derby, showed a steady series of top performing Bullish Strategies, day after day, throughout the rally from 12/14/09 through 01/20/10. It did not flip-flop from Bullish to Bearish and back again according to the daily whims of the market. It also showed a steady series of top performing Bearish Strategies, day after day, throughout the downturn from 01/20/10 through to today. It did not flip-flop from Bearish to Bullish and back again even when the market rallied sharply.

What this tells me is that we should be able to use the EPMTG, the Color Guard and the Totalizer to see through the market's daily gyrations, stay with the prevailing trend and pick sure-fire, money making Strategies. What A Magnificent Combination.

P. S. From this time forward, we will report to you the Strategies with the best Total Gain as shown in the Totalizer from the onset of a new trend. We will call them Derby Leaders.

GOING TO THE BANK WITH DERBY LEADERS.
How well could you have done if you went long with one of the Derby Winners listed in the 12/14/09 Color Guard Report, and went short with one of the Derby Winners listed in the Color Guard Report of 01/20/10? Mr. Glenn Tompkins, Manager of Internal Training, has the answer. So visit the VectorVest University to see this week's very important "Strategy of the Week" presentation: "Going to the Bank with Derby Leaders."

Last week I said that I wanted to take "a more flexible, natural course" to managing the Model Portfolios. This doesn't mean that we're going to discard all the rules and techniques we have used in the past, but with four portfolios, three prudent and one aggressive, being illustrated, it makes sense to focus more on the techniques Prudent and End-of-Day Investors could use in building and managing their portfolios as compared to those that Aggressive Investors and Traders might use. Here are the guidelines of how I plan to manage these portfolios:

WHEN TO BUY. VectorVest believes in buying rising stocks in rising markets, so we will continue to use the VectorVest Market Timing System for guidance on market direction. We will always plan to buy stocks long when the Primary Wave is Up. Occasionally, however, if we think a rally is imminent, we may plan to buy stocks long even when the Primary Wave is Dn.

Before the market opens, we will always check the stock Futures to see if the likely direction of stock prices is in agreement with our plan. If it is, we will proceed with our plan. If the direction of the Futures is not in agreement with our plan, we will wait to see what the market does at the Open. If the Futures indicate that the market is likely to make a big move contrary to our plan, we may abort the plan. End-of-Day Investors should check the Futures as close to the open as you can before placing your orders.

After the market opens, we will make a final assessment of market direction by waiting until the DJI, SPX, and IXIC are all higher than their previous day's close before buying any stocks long.

WHAT TO BUY. Whenever a new campaign is launched, we will recommend at least three Strategies which we deem appropriate for each portfolio. The reason for recommending more than one Strategy for each portfolio is to avoid a stampede into the stocks that a single Strategy would return.

Once we have decided to enter the market, we will select stocks from the top 10 stocks returned by the best performing Strategy, i.e., the one showing the best combination of percent price gain and percent winners. We will buy a stock only if its price is higher than its previous day's High. End-of-Day Investors may use "Buy-Stop-Limit" orders to emulate this technique. See my essay of December 24, 2009 on how to do this.

Although we have traditionally used model portfolios with 10 stock positions in them, we will build some portfolios with up to 20 stock positions because portfolios with 20 positions not only allow more diversification but they also allow the use of a 20% Stop-Loss instead of a 10% Stop-Loss without increasing single-stock risk. Moreover, portfolios with 20 stock, 20% Stop-Loss portfolios frequently perform better than 10 stock, 10% Stop-Loss portfolios.

WHEN TO SELL. Stop-Prices are the first line of defense on when to sell a stock. VectorVest gives a Stop-Price on every stock, every day. These are designed for Prudent Investors, not Traders. Even so, we generally will start out with a 10% Trailing Stop on new positions because we don't want to risk more than 1% of our portfolio value on any single stock position. We often will tighten our Stops when we see the market heading south, i.e., the Primary Wave turns from Up to Dn.

Traditionally, we have exited all long positions by the time the Price of the VectorVest Composite has given a C/Dn signal. We will continue this practice for the Riding-the-Wave and the Yellow Brick Road Portfolios. We will not feel compelled to exit all positions in the High Income and Premier Growth Stocks portfolios because we view these portfolios as suitable for less active investors. However, we will not violate the Stop-Loss criteria we have set for these portfolios.

WHEN TO GO SHORT. We will continue to go short in the Riding-the-Wave portfolio upon receiving a C/Dn signal. We may or may not go short in the Yellow Brick Road portfolio, depending upon market conditions. We will not go short in the High Income and Premier Growth Stocks portfolios.

I'm sure there's more I should have put into this essay, but we will learn what that is as we go forward, Managing the Model Portfolios.

LOW COST INSURANCE - THE COLLAR OPTION.
Many investors have racked up large unrealized profits in their stock portfolios recently, leading many of them to ask, "How can I protect these profits with the increasing uncertainty in the markets lately?" Please join Mr. David Thornton, Director of Sales and Marketing, at the VectorVest University to see this week's terrific "Strategy of the Week" presentation: "Low Cost Insurance - The Collar Option."

I received another email recently in which the writer is concerned about the future. Specifically, he is concerned about deficit spending, the money supply going through the roof with all of its unintended consequences, stagflation and inflation. He wants to know if there's a strategy one can use to help maintain a person's current buying power.

The issue of maintaining one's buying power is not a trivial matter and is more important now than ever before. Even with the rally from the March low, many investors are still recovering from sizeable investment losses suffered in 2008 and they cannot afford to see their buying power reduced further for any reason, be it retirement, a weaker dollar or inflation. So what to do?

As indicated in Chapter I of "Stocks, Strategies & Common Sense," the answer is to "invest in stocks which have earnings growth rates greater than the sum of inflation and long-term interest rates." True, but you can't buy just any old stock. You need to buy stocks of the most successful companies, companies that crank out higher and higher earnings year-in and year-out. These are large capitalization stocks that have visibility and are favored by Pros.

OK, so how does one find these stocks? Simple, I created a strategy called Premier Growth Stocks and put it into the Strategies - Retirement Group of the UniSearch Tool. I tested it over three time periods covering a total of 126 months: (1). January 5, 1996 to March 24, 2000; (2). March 21, 2003 to November 1, 2007; and (3). March 26, 2009 to December 2, 2009. I stayed "Long" 100 percent of the time during each test period and managed the 10 stock portfolios on a weekly basis. The Average Annualized Rate of Return for the three tests was 51.65% and the Average Maximum Drawdown was 14.15%. The Premier Growth Stocks Portfolio outperformed the VectorVest Composite in each test.

I tested the Premier Growth Strategy during the two Bear markets between the periods cited above and the results were not pretty. I have some ideas on how to cope with this problem for those who need or want to be long all the time, but for now my suggestion is to go into cash or buy some Contra ETFs when the next Bear market arrives. Yes, but how does one know when a Bear market has arrived? Simply read the Views. We called the one in March 2000. We called the one in November 2007, and we expect to be able to recognize the next one when it comes. Moreover, I plan to start a Premier Growth Stock portfolio next year so you can use that as a guide.

Right now I'm quite sure that you can maintain your purchasing power by investing in Premier Growth Stocks.

PREMIER GROWTH STOCKS.
This is a strategy that's easy to implement and produces good results. But you have to know the secret to making it work. Like anything else, it's so simple once you know how. So join Mr. Glenn Tompkins at the VectorVest University to see this week's wonderful "Strategy of the Week" presentation: "Premier Growth Stocks."

Four weeks ago I began writing about a $500,000 retirement strategy for people in IRAs or 401Ks that would produce $50,000 per year of current income while maintaining the principal. I said that I would put $200,000 into relatively safe bond funds that were paying about 6% interest and then build three $100,000 stock portfolios with the remaining $300,000. Almost immediately we began receiving calls and emails asking about safe bond funds. That's not our particular field of expertise, but I didn't think it would be all that hard to find such funds, and it's not.

Just recently I went to my bank and put some money into a "Tax-Advantaged Municipal Closed End Portfolio," which is expected to pay about 6.9%. You should be able to do the same if you wish. If you don't want to do that, you can Google the term, "safe bond funds," and get nearly 900,000 hits. The top three listings should more than meet your needs. Of course you can always Google the term, "Pimco," and also receive a wealth of information.

If you don't want to go that route, you can always use VectorVest. Simply click on Viewers on the Main Menu Bar, click on Sector Viewer, click on ETFs, right click on the ETFs row, click on View Industries in Business Sector, sort By Industries Asc, click on ETFs(FixedInc\Other), right click on the ETFs(FixedInc\Other) row, click on View Stocks in Industry Group and sort by DY. You should see JNK at the top of the list with a DY of 12.29%. Overall, you should see nine ETFs with dividend yields of 6% or more. Pick your poison.

As you can see, even in the world of zero percent Federal Funds rates, you can still find Relatively Safe Bond Funds Paying 6%.

ATTENTION REALTIME USERS.
Have you run any searches using double crossovers? Try it, you'll love it. I've been experimenting with a search that finds stocks having a 20 day DPO crossing above zero and MACD crossing above the signal line within the last two days. The search also find stocks with Price greater than $1.00, AvgVol > 100000, and %PRC < 100. It is sorted by %PRC Desc. It has found some really big winners, and virtually all of the Quick Tests I have run, of which there have been many, have given positive results.

DON'S DIVIDEND DANDIES.
Would you like to buy stocks with the highest combinations of Dividend Yield and Earnings Yield? Then sort them by DY*EY. Ah, but there's more to it than that. Mr. Don Thornton, one of our best instructors, will show us the magic little twist that produces the best stocks with the highest DYs and EYs. So join Mr. Thornton at the VectorVest University to see this week's "Strategy of the Week" presentation: "Don's Dividend Dandies."