Stock prices peaked on March 7th of this year and went into an excruciating downturn that lasted until April 28th. Investors who bought the right stocks in the succeeding rally had a very nice summer. So how does one buy "the right stocks?"

It's no secret that buying rising stocks in rising Business Sectors and Industry Groups in a rising market is a sure fire way of improving your odds of picking winners. Here's one way to go about it:

1. DETERMINE THE MARKET'S TREND. This is incredibly easy to do with VectorVest. Simply look at the Color Guard. On April 28th, it showed three red bars and a DnDn situation. Three trading days later, on May 4th, it showed a green bar and an UpDn situation. Had the market bottomed? On May 6th, it showed another green bar and an UpDn situation. It was time to go shopping.

2. BUY STOCKS IN BUSINESS SECTORS AND INDUSTRY GROUPS WITH RISING PRICES. While I like to look at graphs of all the Business Sectors and the top 30 or so Industry Groups at least once a week, you only need to look at those with RT values above 1.00 for this exercise. On May 6th, only seven Sectors had RT values above 1.00, but 59 Industry Groups had RT values above 1.00. The graph of the REIT Sector shows that its Price bottomed on March 29, 2005 and actually was going up while the market was going down. Its Price crossed above the 40-Day MA on April 25, 2005 and RT had already gone above 1.00. Therefore, it was a good Sector in which to look for stocks to buy. The point here is to look at Sectors and Groups in which Price has crossed above the 40-Day MA and the move has been confirmed by RT going above 1.00.

3. MONITOR YOUR STOCKS FOR SECTOR AND INDUSTRY PRICE TRENDS. As time goes by, you MUST make sure that the stocks you own are in Business Sectors and Industry Groups whose prices are still rising. You may do this by simply right clicking on a stock from any Viewer; then clicking on "View Stocks in Business Sector" or "View Stocks in Industry Group." You may see the RT of the Sector or Group in the data row at the bottom of your screen. You may see a graph of the Sector or Group by highlighting the Sector or Group data row and clicking on Graph in the Local Tool Bar.

If the RT of the Sector or Group is below 1.00, consider selling the stock. Look at the Sector and Group graphs even if its RT is above 1.00. If Price has gone below its 40-day MA and RT is moving lower toward 1.00, be prepared to sell the stock.

4. DON'T FIGHT THE MARKET. If the Color Guard begins flashing red bars and gives a DnDn signal, it usually is wise to sell your long positions. In any case, you should be prepared to sell Covered Calls, buy Puts, use Collars or protect profits in some manner. Do not be dismayed by a market downturn. It is the market's way of setting the stage for another good buying opportunity.

By using the stock selection and portfolio management technique I have outlined here, you'll always be Buying the Right Stocks.

SPITZER'S FOLLY.
Even though New York Attorney General, Elliot Spitzer, was able to wrangle $1.46 billion out of 10 major Wall Street investment houses for biased research, misleading small investors, conflicts of interests and other assorted misdeeds, nothing has changed. The small investor is still being fed a lot of bad advice.

Take the case of Delphi Corp., which went bankrupt last week. A telling article in last Tuesday's Wall Street Journal, "Despite Delphi's Spiral, Some Experts Said Buy," pg. C3, details how several analyst's continued to push the stock even after it was known to be a candidate for bankruptcy. How could they?

I don't know, but they sure weren't using VectorVest. VectorVest gave DPHIQ an "S" recommendation on 09/02/05 and we never looked back. So the big money was paid by the Wall Street sharpies and it was back to business as usual. As far as I'm concerned the whole idea of leveling the playing field is Spitzer's Folly.