The Bulls stampeded on Wall Street yesterday, driving stock prices sharply higher on news of the Commerce Department's GDP report of 3.5% annual growth. Hurray, the recession is over...or is it?

The Bulls had a right to celebrate yesterday's GDP report. An expanding economy means jobs, higher earnings, a sustainable bull market and, indeed, a return to happier days. But some analysts say the GDP report was as phony as a three dollar bill. Be that as it may. The things I watch are earnings, inflation and interest rates. If the economy is on the road to recovery, it will be reflected by these factors. The Investment Climate shown below shows that the Trend Indicators for inflation and interest rates are favorable. The problem is earnings. What is going on with earnings?

Thomson Reuters, a leading data provider, says that with half the companies having reported, an astounding 81% have exceeded expectations. So what? Any CFO can low-ball a forecast; then beat it hands down. Let's turn to our trusty VectorVest database to see what we can learn. Let's open the S&P 500 WatchList and look at the average EPS for all the stocks in the S&P 500. As of yesterday, it was $2.26 per share. When I go back exactly one year, I see that it was $3.27 per share. Two years ago, very close to the S&P 500's all-time high, it was $3.70 per share. So the current EPS is still 39% lower than it was two years ago. That's not good.

When I look at an All-Weekly, Standard Graph of the S&P 500 average data, I can see that EPS literally fell off a cliff in September 2008 and hit bottom at $1.70 per share in March 2009. But it has been climbing higher over the last few months and that's good. However, it looks like it will take years to reach its former high. Indeed it will, but that's not the issue. The issue is the trend. This information is shown each week in the Investment Climate section of these Views. It is also shown graphically in the Market Climate Graph. As long as the S&P 500 EPS continues to rise, I am content to believe that we are on The Road to Recovery.

BEST PERFORMING STRATEGIES.
If you have been reading the Daily Views or watching the Daily Color Guard Report, you may have noticed how the Best Performing Strategies have shifted from predominately Bullish in early October to a mix of Bullish and Bearish in mid-October to predominately Bearish in late October. On Wednesday, October 21st, the five Best Performing Strategies were all Bearish. Which Strategy has performed the best since then? How well could you have done had you gone short with any of those Strategies? Mr. Glenn Tompkins, Manager of Internal Training, has all the answers. So join Mr. Tompkins at the VectorVest University to see this week's "Strategy of the Week" presentation: "Best Performing Strategies."

If you haven't been watching the videos of the Daily Color Guard Report, you've been missing out on some great information. Where else can you get an objective analysis of exactly what the market is doing, a list of the best and worst performing Strategies of the day and guidance on what to do now for the price of just a few minutes of your time?

For example, last night's presenter, Mr. Don Thornton, said that even though we are waiting for the 1% trigger to go long in our Yellow Brick Road and Riding-the-Wave portfolios, it was OK for you to buy stocks of your choice if the market was moving higher. In other words, it was OK to "tippy toe" into the market when the Color Guard is Bullish.

While I thought this would be self-evident, we continue to get hundreds of calls each day asking about the YBR and Model Portfolios. You may now go to http://www.vectorvest.com/modelportfoliocalls to see the current status of this portfolio. In order to not move the market, it will tell you whether we are Long, Short or in Cash, but it will not reveal the Strategy we used. Incidentally, thousands of you have learned how to know what we're going to do and I think that's great. But it is the reason we plan to use high volume stocks in our portfolios. See my essay of July 31, 2009.

Since this decision may place more of a burden on you to find the hottest Strategies, we will list each day's top five winners of the VectorVest RealTime Derby in the Strategy section of the Views. Last night, Mr. Thornton discussed each of these Strategies and suggested that you use the UniSearch Tool to see what they were offering for today's trading activity. That's great advice. Mr. Thornton also suggested that you join him in tonight's "Strategy of the Week" presentation. He's got something very special to share with you.

To get into the rhythm of knowing what to do and when to do it, watch the "Daily Color Guard Report" and the "Strategy of the Week" presentations. They're Priceless.

BEELINE SIXERS.
Fifteen years ago, when we were Beta testing VectorVest ProGraphics v1.0, I became fascinated by stocks that had received a series of consecutive "B" Recommendations. Of course, these stocks were performing quite well and many of them continued to do so long after they had achieved the exalted status of having received six consecutive 'B' Recommendations. I coined the term, "BeeLine Six," for these stocks and that was fine. But I never turned the idea into a killer Strategy. Now I think I'm a step closer.

In last Wednesday's Daily Color Guard Report, Mr. Thornton observed that seven Strategies had identical results. The key was that every one of the Strategies sorted stocks by VST Descending and five of them found stocks that had received two or more consecutive 'B' Recommendations. A ha, I thought, the momentum market has surely returned. So I went into UniSearch and ran a series of "BeeLine" searches from March 17, 2009 forward and Quick Tested them to yesterday. The results were quite good.

Then I thought, "What would happen if I sorted by VST Asc instead of VST Desc?" The performance was usually better, sometimes much better. By golly, bottom fishing works even when you're dealing with high momentum stocks such as the BeeLine Sixers.

The key to making money in any market lies in mastering the fine art of buying low and selling high. This, of course, is a lot easier said than done.

When it comes to stocks, most of us have been taught that a stock's price is low after it has fallen in price. So we bought stocks that were going down in price, hoping they would turn around and start going up. Bitter experience taught me that this was a dangerous practice...you never knew how low they would go. So the alternative would to be to buy stocks that were going up in price, right? Right.

You have to be kidding. If they were going up in price, they are higher now than they were before, so how could they be low? The answer lies in your assessment of what the stock's price is likely to do. If the stock's price has been going up and you thought it was likely to continue going up; then it would be low in price. On the other hand, if you felt that the stock's price was more likely to start going down; then it would be high. So the secret to buying low and selling high lies in assessing what a stock's price is likely to do.

Fundamentalists, who tend to invest for the long term, believe that undervalued stocks, such as those with low P/E ratios, are most likely to go up in price over time. They also believe that stocks of companies with consistent, predictable earnings and solid growth rates, i.e., safe stocks, also will go up in price. Technicians, who tend to invest for the short-term, look for evidence, such as moving averages, of price movement to the upside. Both of these schools of thought have merit, therefore, VectorVest advocates buying safe, undervalued stocks, rising in price. Even so, judicious application of these techniques is not enough to achieve the best results in both bull and bear markets.

Our experience has shown that if you want to make money in both bull and bear markets you must let the trend be your friend. You must buy rising stocks in rising markets and sell falling stocks in falling markets. Everything starts with the market direction and that's why we put the Color Guard right at the top of our Home Page. It tells you in an instant what the market is doing. When the Color Guard is showing Green, the market is rising. When it is showing Yellow, the market is in transition. When it's showing Red, the market is moving lower.

In my essay of September 12 2008, I said, "Think of the Color Guard as you would a traffic light. Green means go, it's OK to buy stocks. Yellow means caution, it may or may not be OK to buy stocks. Red means stop, don't buy any stocks." I urge you to read the entire essay, which is entitled, "The Color Guard, Clarified." It will go long way in helping you master the fine art of Buying Low and Selling High.

IS USING LEVERAGED ETFs WORTH THE RISK?
If you "Google" the term "Risk of Using Leveraged ETFs," you'll get about 175,000 hits with several good articles in the top 10. So the risks of using leverage ETFs has not gone unnoticed, but understanding why and how the risks arise may also be of interest to you. We're not going to go into those subjects here, but Mr. Todd Shaffer, one of our best instructors, will give us a fascinating presentation in which he compares the performance of standard ETFs vs. leveraged ETFs. So visit the VectorVest University to see this week's "Strategy of the Week:" "Is Using Leveraged ETFs Worth the Risk?"

Two weeks ago I wrote an essay called, "One Day at a Time." The point was that you don't have to predict the stock market to make good money in it. In fact, having a preconceived notion of what stock prices are going to do could be very harmful to your wealth.

Then I began to wonder what would happen if I bought the top stock, ranked by VST, every time a Green light appeared in the Price column of the Color Guard. VectorVest preaches that we should buy rising stocks in rising markets. So I should make money. I ran some tests.

The first test I ran started on March 17, 2009, when a Green light first appeared in the Price column of the Color Guard from the March 9th bottom. I bought $1,000 worth of Buckle Inc., BKE, the top VST stock as shown in Stock Viewer, at the Open on the 18th. I decided that I would sell it on an 'S' Rec or if it went up 100%. Another Green light appeared in the Price column of the Color Guard on the 18th, so I bought $1,000 worth of Aeropostale, ARO, at the Open, on the 19th. I repeated this process of looking for a Green light in the Price column of the Color Guard and buying the top VST stock, until yesterday.

During this time, I made 44 purchases of $1,000 each and closed 19 positions with four winners and 15 losers. The average winning trade made $706 and the average losing trade lost $195. The current portfolio holds 25 positions with 17 winners and 8 losers. The portfolio is worth $31,165 from an investment of $28,013, for a net gain of $3,071, or 11.25%.

While this performance is not overwhelming, one must remember that the money was invested over a period of time, not all at once. This means that there was far less risk during the early stages of building the portfolio. In another test in which I bought 10 stocks on the March 17, 2009 Green light, I used a 50% gain or 20% loss to exit positions and replenished positions only upon receiving a Green light produced a gain of 49.74%. Other tests going back to March 21, 2003 also showed that buying top VST stocks when a Green light appears in the Price column of the Color Guard is a viable strategy.

The thing I like the most about this technique is that it's so easy to do. Simply look at the Color Guard. See a Green light in the Price column and buy a top VST stock you don't already own. Try it. You may wish to Become A Green Light Buyer.