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."

You might say it's just dumb luck, but our Market Timing System has had us playing defense or the downside of the market on every major downturn since VectorVest was created. But it isn't dumb luck...it's the way our Market Timing System is designed.

Take the current downturn, for example. There was no way to predict what happened yesterday, but that doesn't matter. What matters is that our Market Timing System informed us that the market was moving lower and we advised you well in advance of yesterday's historic events not to buy stocks and to play the market with a bias to the downside. This guidance wasn't dumb luck. It was based upon factual, objective analysis.

On Monday, May 3rd, the market rallied sharply. The Primary Wave, i.e., the week-over-week trend of the Price of the VectorVest Composite, however, remained in a Dn mode. So our guidance remained the same as it had been on Friday, April 30th: Prudent Investors should not to buy stocks and Aggressive Investors and Traders should play the market with a bias to the downside.

On Tuesday, May 4th, the market dropped sharply and a Red Light appeared in the Price column of the Color Guard. So we strengthened our guidance that evening by removing the words, "with a bias," and said, "Aggressive Investors and Traders should play the market to the downside." We also went into Cash in the "Riding-the-Wave" portfolio and said we would go short if the market continued to move lower.

On Wednesday, May 5th, we went short in the Riding-the-Wave portfolio and we had our Stops in place in our other portfolios. So yesterday's market collapse allowed the RTW portfolio to make money and caused limited damage in the other portfolios.

We've been through a lot of rough down days in the 22 years we've been in business and we have survived them all. Much of the credit goes to our Market Timing System. But no Market Timing System can predict an unexpected, catastrophic event such as a terrorist attack. We were lucky to be playing the market to the downside when 9/11 occurred and that's why techniques, such as using Stop Prices, selling Covered Calls, buying Put Options or simply trimming investment exposure are also used to reduce portfolio risk. But the most important thing to do, is know market direction.

Our Market Timing System has been telling us whether the market is rising or falling for many years, and it will continue to do so. I have come to trust it and depend upon it...like An Old Friend.

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."