With the up and down price gyrations of the market over the last two months, it's a good time to step back and take a hard look at our Market Timing Graph. You may open this graph by clicking on Graphs in the Main Menu Bar and selecting Market Timing Graph, Standard. The closing Price of the VectorVest Composite, V V C, which is the cornerstone of our market timing system, is shown in the upper portion of the graph. Our Market Timing Indicator, MTI, which provides insight on the price behavior of the market, is shown in the lower portion of the graph.

The first thing to note is that the Price of the V V C closed at its highest point on February 1, 2006. Only three days earlier, it had closed above its March 10, 2000 all-time high of $26.46. This was a notable event because the March 10, 2000 high represented a major resistance level and closing above it could have lead to substantially higher highs. But it did not. The Price of the V V C plunged from its February 1st high of $26.64 to a low of $25.98 on February 13th. During this period, the Primary Wave, which reflects the week-to-week price movement of the V V C, went from Up to Dn and on February 10th; the Price of the V V C marked its second consecutive week-to-week down move, giving a preliminary signal of a sustainable downturn.

The two-week signal is not something that can be ignored because it works most of the time. In this case it did not work. The market began to move higher on February 14th and the Primary Wave reverted to Up. The Price of the V V C rose for the second consecutive week on February 21st, signaling a sustainable uptrend. Sure enough, the Price of the V V C went down yesterday, but closed up 9 cents today. At today's close of $26.65 per share, the Price of the V V C is 1 cent above its February 1st high of $26.64 and 16 cents above last Friday's close of $26.49. An upward price movement will extend the rally or a small down move could flip the Primary Wave back to a Dn signal. Net, net, this is a market that is trending higher but can easily start going down again.

Why did I say that? First of all, the Price of the V V C is forming a double top, which is a bearish signal. Secondly, the paths of the Price of the V V C and MTI have been diverging in a bearish fashion, i.e., the Price of the V V C has moved above to its February 1st high while the MTI has not. Thirdly, this last rally has been shorter and weaker than the previous two rallies in the upturn from 10/21/05. An important price level to watch is shown by the 40-Day Moving Average. Notice that the Price of the V V C approached it twice before, then bounced higher. Will it happen again? I don't think so, but the only way to know for sure is to keep looking at The Market Timing Graph.

THE RIMM STRADDLE/STRANGLE SWAP.
As noted two weeks ago, see my essay of 02/10/06, I sold 10 Feb 70 Calls and 10 Feb 70 Puts, the Straddle, for a credit of $3,550 and bought 10 Mar 75 Calls and 10 Mar 65 Puts, the Strangle, at a cost of $5,700. My net cost was $2,150. Last week I bought the Feb straddle back for a profit of $1,322.50. Today I sold my 10 Mar 75 Calls for a profit of $1,490.00. Right now I've booked a gain of $662.50 and still own the 10 Mar 65 Puts which are priced at a $1.00 per share.

The judge ruled today and did not shut RIMM down, but he left a lot of things yet to be done. RIMM's stock moved higher by as much as 8+ dollars/share, but didn't stay there very long. RIMM is not out of the woods yet, so I hung on to my puts.