We were demonstrating VectorVest RealTime to some very important guests yesterday when it was noted that while the major indexes, DJI, SPX, IXIC, and VVC, had been up all morning, the Derby Summary window was showing a higher percentage of winning Bearish portfolios than Bullish portfolios. How could that be?

Clearly, the Derby Summary was showing portfolio performance from the market's Open and it meant that traders were taking profits from the modestly higher opening prices. On the other hand, the Derby Summary, when taken from the market's prior Close, was still showing a higher percentage of Bullish portfolios than Bearish portfolios. I commented that this conflict of Bullish and Bearish winning percentages was an indication of a weak rally and a price reversal was quite possible.

Indeed, the Mighty Dow went from a high of 12582 at 10:29 AM to a low of 12416 at 1:21 PM for a reversal of 166 points. It closed the day at 12437, down 54 points from its prior Close.

The same thing is happening again this morning. The market opened to the upside, all of the major indexes were up, but the percentage of winning Bearish portfolios when taken from the Open is higher than the percentage of winning Bullish portfolios. The reverse was true when taken from the prior Close. Are we going to have another intraday reversal?

I don't know for sure, but I know that this signal worked very well when I wrote about it in last Friday's essay. It has also worked well for me on many other occasions. Try it. The Derby Summaries provide a great way of Sensing Intraday Reversals.

P.S. Stock prices carved-out a "W" profile today: opening higher, falling, rising, falling again; and then closing modestly higher. So while we didn't get an honest-to-goodness reversal day today, the percentage of winning Bearish portfolios from the Open accurately reflected today's wishy-washy market remaining higher than the percentage of winning Bullish portfolios all day long.

GAME CHANGER.
Last Friday I asked if robust Q2 earnings reports will be enough to keep the rally going in the face of June's dismal jobs report. I thought they could in light of the market's recovery from Friday's intraday lows, but stock prices got crushed on Monday and went lower again yesterday. While I haven't given up on the recuperative power of strong earnings, the acrimonious negotiations over the debt limit aren't helping investor sentiment at this time. If an acceptable solution to the nasty debt ceiling problem can't be found, it may be the game changer that changes the Game Changer.

THE ARMAGEDDON COLLAR.
President Obama wants to raise the debt ceiling and he wants to pay for it through a combination of tax increases and spending cuts. The Republican leaders do not want to raise the debt ceiling and do not want to pay higher taxes. So there is a stalemate going on and the government is going to run out of money on August 2nd if a solution is not found. Nobody knows what will happen if the U.S. defaults on its debt payments. Some people say it will be no big deal. Others, including Helicopter Ben, say the consequences will be very serious...even catastrophic. So what are you going to do if worse comes to worst?

Visit the VectorVest University and join Mr. Bryan Barnes, Consultant and Senior Instructor, for the answer to this serious problem. He will illustrate how you can protect your portfolio in this week's very important "Strategy of the Week" presentation, "The Armageddon Collar."

I have very good news for you folks. Our Product Development Group has been very busy and is about to release a new build of VectorVest 7 which will do virtually everything that VectorVest 6 did and a whole lot more.

I am especially pleased by the great work done on enhancing the functionality of the BackTester. You're going to love this tool because you'll be able to run it automatically or manually. It can be started and stopped at any point in a test and it will run over any specified time period. While in manual Mode, you can move it forward or backward within your test period in one or five day increments. If you have access to the AutoTester, you can set the BackTester to stop running whenever an event, such as a C/Up or C/Dn signal, occurs. When a backtest does stop, you can quickly refer to the VectorVest Views for that date by clicking on a new Views button. You'll also be able to see buy/sell transactions, portfolio positions, WatchList analysis and equity performance during a backtest.

When opening new positions from a search, you can set a custom amount to spend per position and you may set specific stop criteria on each position. A new stop criterion, "Loss 3% below prior days low," also has been added. In addition to many other features, you will be able to easily add dividend payments and option premiums to the Transaction Log. The alerts management screen has also been revamped so that you can keep up to 4 email addresses on file and select what type of alert goes to which email address.

In the graphics function, you will be able to see the data values behind any line, bar or candlestick by hovering your mouse pointer over the item. A new MACD setting, (8,17,9), and a new Stochastic setting, (14,5), have been added to the Technical Analysis function in UniSearch. For users behind a proxy server, we have added a screen for proxy settings to help you connect to our data servers. Finally, a myriad of bugs have been fixed.

For all intents and purposes this release of VectorVest 7 fulfills our promise to make it as fully functional and more powerful than VV6. In our pre-release demonstrations of the Enhanced BackTester at the Traders Expo in Dallas, it has received rave reviews. Thanks team for A Job Well Done.

P.S. The release of this new build will begin on Monday morning and will be completed by next Friday.

DOING DON'S DIVIDEND DANDIES WITH THE ENHANCED BACKTESTER.
Try as I might, there is no way I can describe how good the Enhanced BackTester is. So I would urge you to take a few minutes of your time to join Mr. Bill Iuliano, Instructor and Product Support Representative, at the VectorVest University to see this week's wonderful "Strategy of the Week" presentation, "Doing Don's Dividend Dandies with the Enhanced BackTester."

Today we are pleased to announce the winners of the first event in the 2011 VectorVest Triathlon Challenge. In this challenge, participants compete in sequential events using the VectorVest BackTester, RealTime Derby and Automated Portfolio Manager. The goal is to achieve the greatest percent gain of a hypothetical $100,000 portfolio in each event. Separate cash awards will be made to the top three winners of each event and Grand Prize Awards will be made to the three participants having the highest total gain for all three events. The results from first event, the Backtester Competition, which ran from March 31, 2010 to March 31, 2011, have been verified.

The First Place Winner, gained a stunning 324.99% with 49.92% winning trades and had only a 12.11% drawdown. Commissions were $11,701.20. The creator of this entry, will be identified as "DS" and he will receive a check for $500.00. He used "El Cheapo Cheapos" to buy long in Up markets and "Sinking Sectors II" to sell short in Dn markets. He used the Primary Wave to signal market direction, and used a 10% Gain, 20% Loss exit criteria for his long positions and a 15% Gain, 10% Loss to exit his short positions.

DS has been a VectorVest subscriber for about 2 years and lives in Orange, Texas. (I lived there in the early '70s and enjoyed it.) When asked if he would actually trade this system with real money, he answered that he has come up with a trading system using the Simulator and Variator, but if he had some extra money, he would trade it in a heartbeat! I admire his confidence and I'm going to give it a try. But you, my dear reader, should see how well it works in the upcoming RealTime Derby and Automated Portfolio Manager Competitions before you bet big bucks on it.

The Second Place Winner, gained 307.24% with 52.83% winning trades, but experienced a 24.88% max drawdown. Commissions were $15,721.00. The creator of this entry will be identified as "DB" and he will receive a check for $250.00. DB also used "El Cheapo Cheapos" to buy long in Up markets and sold, yes I said sold, "Worst Performing Contra ETFs" in Dn markets. He also used the Primary Wave to signal market direction. He used a 10% Trailing Stop on his long positions and a 50% Gain, 25% Loss to exit his Contra ETFs in Dn markets.

The Third Place Winner, gained 258.37% with 51.95% winning trades, but had a 26.76% max drawdown. Commissions were $15,681.20. DB, the same person cited above, was also the creator of this entry and he will receive a second check for $125.00. DB used "El Cheapo Cheapos" again to buy long in Up markets and sold, yes I said sold, "Buying Contra ETFs" in Dn markets. Again he used the Primary Wave to signal market direction and a 10% Trailing Stop to exit his long positions. He used a Rec = "B" to exit his Contra ETFs in Dn markets.

In reporting the performance of the Triathlon entries in forthcoming Competitions, the contestants will be identified as follows: The First Place Winner will be designated as "T-1-DS," the Second Place Winner will be designated as "T-2-DB," and so on. The T stands for Triathlon, 1, 2, etc., stands for the entrant's standing in the Backtester Competition, and DS, DB, etc., represents the initials of the creator of the entry.

Since T-1-DS uses both Bullish and Bearish Strategies, they will be designated as "T-1-DS-L" and "T-1-DS-S" in the Derby Competition and in the UniSearch Tool. Strategy T-1-DS-L will be operative when the market timing signal is Up and T-1-DS-S will be operative when the market timing signal is Dn.

This system will allow you to easily track the performance of any Triathlon Strategy in the Derby and examine their search criteria in the UniSearch Tool. As noted in last week's essay, we will show the three top Derby performers in the Views each day and show a cumulative performance report of the top three Triathlon Leaders at the end of each week. We will also create a web page each week which will show the standing and cumulative performance of all 50 portfolios.

The Score Sheet will look as shown below:
..Current...Portfolio....Backtester....Derby L....Derby S...Grand.Total.
...Rank......Identity......%G/(L).......%G/(L).....%G/(L).....%G/(L).....
....1.........T-1-JD.......100.06........X.XX......(0.79)......99.27.....
....2.........T-2-JD........67.42........X.XX......(4.31)......63.11.....
....3.........T-3-JD........41.79........X.XX......(0.18)......41.61.....

In regard to the high commission costs shown in the winning portfolios, I'm reminded that we're not trading in your grandfather's stock market anymore. A high frequency trader makes more trades in the blink of an eye than these portfolios had in a year.

As a final note, I just want to say we were blown away by the creativity and performance of the entrees to this competition. While we are showing only the top three Backtester performers in this week's "Strategy of the Week" presentation, we plan to show many more great investment ideas as the year unfolds. We will send a $100.00 check to the creator of any entry we use who has not received an award. On behalf of everyone here at VectorVest, we thank those of you who entered the Triathlon Challenge and give our heartiest congratulations to the Triathlon First Event Winners.

P.S. If a two or three hundred percent gain in one year doesn't spike your interest, I don't know what will. Visit the VectorVest University to see how Mr. Dan Misch, Director of Retirement Strategies, proves that these Backtester results are really true. They are all end-of-day strategies, so anyone could emulate these "Triathlon First Event Winners."

With the recent addition of the AutoTester tool to VectorVest 7, I thought it would be a good idea to see how some of the Retirement Strategies were performing. I was especially interested in the "High VST+YSG Stocks" and the "Optionable 2x4s" Strategies because I had written an essay on their performance on October 1, 2010. Moreover, I had touted the "High VST+YSG Stocks" Strategy as being capable of delivering good performance with tolerable risk. I had also developed a portfolio management technique called the "PayDay Portfolio" with the "Optionable 2x4s" strategy.

To make a long story short, the "High VST+YSG Stocks" strategy had delivered a gain of 26.05%, not counting dividends which have added about 1.5%, with 10 winners and 2 losers from 09/18/09 to 09/30/10. This was not too shabby, given the miserable summer of 2010. But what has it done for us lately?

Finding out was a breeze with the VectorVest 7 BackTester. Bingo, the gain from 09/18/09 to 03/10/11 was up to 50.08% with 70% winners and only a 9.99% drawdown. Wow, I'll sign up for that anytime, but could I do better?

OK, let's see what the Green Light Buyer timing system could do for us. The Green Light Buyer timing system is one in which you buy stocks only when you see a green light in the Price column of the Color Guard. The beauty of this system is that you don't buy stocks when the market gets nasty. Unfortunately, it's a pain to back-test. Err, well, it was a pain until the AutoTester and Timing Lists were put into the VectorVest 7 BackTester.

So, with a few clicks of my mouse I selected the Green Light Buyer timing list and repeated the BackTest described above. Bingo, the gain from 09/18/09 to 03/10/11 was a somewhat better 64.82% with 71.88% winners and a 9.63% drawdown. The only drawback I saw was that a lot more trades were made when the Green Light Buyer technique was used. Still, I'm pleased with the results.

In regard to the "Optionable 2x4s" strategy, I use it primarily in conjunction with the "Options Rate of Return" tool to run a technique I call "Double Juicy." See my essay of 10/02/09. The basic idea with this technique is to buy stocks paying juicy dividends and sell expensive Covered Calls against them. The technique was illustrated in our "Strategy of the Week" presentation on 10/02/09.

Subsequently I developed a simple, rules based portfolio management system aimed to produce steady income and an ROI of 20 to 30% per year. I called it the PayDay Portfolio. See my essay of June 4, 2010. A backtest of this technique since January 8, 2010 has produced total return of over 45%. A detailed report of this investment technique along with personal instructions is available to option savvy subscribers for only $95.00. Simply ask for The PayDay Portfolio Report.

If you do not understand how to trade options, you definitely should learn how to sell Covered Calls. It's like turning your computer into an ATM machine.

Fortunately, Mr. Dan Misch, Manager of Retirement Strategies, is prepared to demonstrate how the VectorVest 7 BackTester works with and without the AutoTester and its timing lists. He will also demonstrate how the Options Rate of Return tool was used to conduct a trade in the PayDay Portfolio, and he will share the results of the PayDay Portfolio since January 8, 2010.

Visit the VectorVest University to see this week's very important "Strategy of the Week" presentation: "Retirement Strategies Update."