Exactly four months ago, on October 19, 2009, the Price of the VectorVest Composite closed at $23.61 per share. Yesterday it closed at $23.64 per share. During this four month period it hit a low Price of $22.03 and a high Price of $24.45. How does one make money in a flat, herky-jerky market?

Last week I said one needs to "see through the market's daily gyrations and stay with the prevalent trend." I then described a method of doing this by using the Enhanced ProTrader Market Timing Graph, EPMTG, and the Daily Color Guard. We also gave a "Strategy of the Week," SOTW, presentation which illustrated the efficacy of the technique. We also used the technique in last Friday's Views to explain exactly what to do should the market move higher, as we expected, on Tuesday and we suggested five Strategies to use for your stock selections.

Indeed, the market did open higher on Tuesday, February 16, 2010, and the stocks in the Strategies we had suggested took off like birds. At the end of the day, QuickTest Portfolios of the top 10 stocks from each of the five suggested Strategies showed an average gain of 3.78% with 45 winners and five losers. As of 12:15PM, today, February 19, 2010, these same five Portfolios are showing an average gain of 6.21% for an annualized rate of return of over 300%. Fantastic!

So what are Derby Leaders and how does one find them? Derby Leaders are the five Strategies which are showing the highest cummulative percent gains from the day the Color Guard gives a Red or Green Light in the Price Column to the end of the current day. The Color Guard showed a Green Light in the Price column last Friday, February 12th, so we reported the five Strategies with the highest percent gains for that day. On Tuesday, February 16, 2010, we reported the five Strategies with highest total percent gains for the two day (Friday to Tuesday) period. On Wednesday, we reported the five Strategies showing the highest total percent gains for the three day (Friday to Wednesday) period, and so on.

These Strategies are extremely easy to find since we give them to you in the Strategy section of the Daily Color Guard Report shown on the Home Page of VectorVest U.S., and in the Views of both VectorVest U.S. and VectorVest RealTime. Subscribers to VectorVest RealTime who have the Derby Tool can also check them out during the day by using the Tote Board.

We call these Strategies Derby Leaders because we want to differentiate them from the Daily Derby Winners, i.e., the Strategies with the best single day gains. Daily Derby Winners are great to use for finding "hot poppers," but I like to find Strategies that are producing winners on a consistent basis, day after day. Logically, one would think that the Strategies that have performed the best from the onset of an upturn or downturn would be the ones which are consistently producing winners. So we have been illustrating methods of identifying these Strategies. For example, you may refer to the SOTW presentations of 10/09/09, 10/30/09, 11/06/09, 11/27/09 and 02/12/10 to see how this technique has developed.

The results shown in these SOTW presentations as well as those that you will see in this week's SOTW presentation should encourage you to bet your money on Derby Leaders.

HOW TO USE DERBY LEADERS WITH CONFIDENCE.
Mr. Todd Shaffer, Instructor and Product Support Consultant, will be giving a very special presentation this week which will show you how to use the Enhanced ProTrader Market Timing Graph and Color Guard to know exactly when to enter an upwave or downwave and use the Derby Leaders. So join Mr. Shaffer at the VectorVest University to see this week's extremely important "Strategy of the Week" presentation: "How to Use Derby Leaders with Confidence."

P.S. The techniques shown in this week's SOTW presentation are so good that we will be using them in our Daily Color Guard Report videos.

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."

Last week I said that my goal for 2010 was to help you learn an end-of-day stock selection and portfolio management system that was consistently profitable and easy to do. The "Green Light Buyer" technique, introduced in my August 21, 2009 essay, was a major step in this direction. It is based upon the idea of buying rising stocks in a rising market, and our tests have shown that it consistently produced profits and was very easy to do.

However, it still left the end-of-day trader, a.k.a., The Midnight Cowboy, in the position of assuming that the market would go up the next day. While the odds of having an up day the day after receiving a green light in the Price column of the Color Guard would be in your favor, there are no guarantees that an up day would actually occur. Therefore, we have urged you to check the stock futures before the market opens to get a better idea of the market's likely direction.

In addition to checking the Color Guard and the stock futures, we also suggested using the technique of buying stocks only when they have gone above their previous day's high. The benefit of this technique, i.e., ensuring that you are buying rising stocks, was illustrated in the "Strategy of the Week" presentations of 11/27/09 and 12/18/09. We explained how an end-of-day trader might execute these trades by placing Buy Stop Limit orders on 12/24/2009.

Last week, I introduced a new Strategy, "Higher Ups," that finds top VST stocks that have gone above their previous day's high. "Higher Ups" is an intriguing little Strategy but I found it to be too restrictive in that it looked at only five stocks and required a stock's price go more than 1% above the previous day's high. So I created a new, but similar, search which looks at the top 10 VST stocks and removes the 1% requirement. I called it "Higher Highs" and we put it into the Strategies - Price Volume Group of the UniSearch tool.

Although these Strategies were created with the thought of helping end-of-day traders, I have found the "Higher Highs" strategy to be extremely useful in working with VectorVest RealTime. To be clear, end-of-day traders must select their stocks and place their orders before the market opens, but users of VectorVest RealTime can run their Strategies, modified to find higher highs, any time they wish and immediately see which stocks are hitting Higher Highs.

USING HIGHER HIGHS IN VECTORVEST REALTIME.
To see exactly how the "Higher Highs" strategy works, what it does and what you can do with it, please join Mr. Dan Misch, Instructor and Product Support Representative, at the VectorVest University to see this week's terrific "Strategy of the Week" presentation: "Using Higher Highs in VectorVest RealTime."

What will the market do in 2010? Nobody knows for sure, but I'm pleased to say that although analysts are mostly bullish, their forecasts are tempered by a healthy dose of skepticism. This is a good sign since advisor sentiment is a contrary indicator.

The Investors Intelligence Percent Bullish Advisors Sentiment Indicator, shown in the Climate section of these Views, is at 51.1%. It peaked at 62.0% when the Mighty Dow hit its all-time high on 10/19/07, and it bottomed at 21.3% on 10/31/08, two weeks after I wrote an essay entitled, "Time to Buy." Given today's mid-range reading of 51.1%, I think there's still room for this market to move higher. But stock selection will be the key to making money.

In this regard, I want to further develop some of the ideas we have been exploring for stock selection and position entry. In particular, I like the idea of buying selected stocks when they have gone above the previous day's high. We demonstrated how this technique helps you pick winners and avoid losers in the "Strategy of the Week" presentations of 11/27/09 and 12/18/09. We even went so far in last week's SOTW presentation as to illustrate how the Buy-Stop-Limit order works for those of you who cannot watch the market during the day.

I liked this technique enough to consider using it to manage our Model Portfolios in 2010, but before deciding to do that, I did some additional testing. I ran some tests in which I combined the Green Light Buyer idea with the Daily Double idea using top VST stocks. Mr. Paul McCann, one of our whiz-bang developers, created a neat little search for me that looks at the top five VST stocks and finds those that went at least 1% above the previous day's high. I call it "Higher Ups" and we put it into the Strategies - Price-Volume Group of the UniSearch tool.

In a typical test, I ran a 10 stock portfolio in which I ran the search only when the Color Guard showed a green light in the Price column to buy stocks as needed the next day, and sold stocks that received 'S' Recs on three consecutive days. From 03/17/09 to 10/19/09, this portfolio was up 99.22%, but it took a hard hit over the next 10 days, down to 42.20%. Nevertheless, it ended the year up 67.88%. Not bad for such a simple strategy.

There are a lot of variations to this system and I plan to try some of them out. So beginning Monday, January 4, 2010, we'll be using them in managing our Model Portfolios of which there will be four: The Yellow Brick Road, Riding-the-Wave, Premier Growth Stocks and High Income Stocks.

This means that while we will continue to buy rising stocks in rising markets, we will no longer be using the 1% rule to enter the market. It's a good rule, but it misses too many good buying opportunities. Moreover, we will no longer feel obligated to buy baskets of stocks. We will be using selected Strategies to buy a few selected stocks, i.e., 1 to 3 at a time, that have risen at least 1% above their previous day's high.

My goal is to help you learn an end-of-day stock selection and portfolio management system that will be easy to do and consistently generate profits. That's what I want to accomplish in The Year Ahead.

THE MIDAS TOUCH.
If you've seen one TV commercial exhorting you to buy gold, I'll bet you've seen a hundred of them. I'll also bet you know that the price of gold has been on a multi-year tear and is projected to go much, much higher. But you also know that gold prices are very volatile and you have to know when to get in and when to get out. So how should you play this trade? Ms. Angel Clark, Research Strategist, knows and she's going to show you some of her innermost secrets on how to go for the gold. So join Ms. Clark at the VectorVest University to see this week's esoteric "Strategy of the Week" presentation: "The Midas Touch."