The Truth Chart was introduced in March 21, 2003. It presents eight stock market scenarios, four bullish and four bearish, depending upon the particular combination of earnings, interest rate and inflation trends existing at that point in time. These trends are shown in the Investment Climate Section of the Views each week. Moreover, I have written essays on the Investment Climate and the Truth Chart on the following dates: 03/28/03, 10/24/03, 04/16/04, 03/11/05, 04/22/05, and 10/07/05. The whole purpose of this work is to recognize and prepare for forthcoming bear and bull markets.

We are now in a Case 3 Bull Market Scenario. This case exists when earnings and interest rates are rising while inflation is trending lower. You may see 10-year graphs of our inflation indicators, the Consumer Price Index, CPI, and the Commodity Research Bureau Index, CRB, by clicking on Graphs on the Main Menu Bar and selecting Market Climate Graph. The CPI graph shows that it bottomed in 2002 at a 1.10% year-over-year rate, and moved to a recent high of 4.7% in November 2005. By falling to 3.60% this month, its trend indicator rose to above 1.00. Since a lower inflation rate is deemed to be favorable for stock values, this indicator goes above 1.00 when the inflation trend is down.

The CRB graph shows that it hit a major bottom of 184.49 in October 2001; then proceeded to move upward, relatively steadily, to a recent high of 346.96. Currently, it stands at 333.18 and its trend indicator stands at 0.92, saying that the CRB Index is still rising.

We concluded that inflation is falling by noting that the average value of the CPI and CRB indicators is above 1.00. This happy event occurred briefly in June and July of last year, but did not reappear until this month. The Truth Chart says that Case 3 Bull Market Scenarios don't last long. The reason is that interest rates typically go up when inflation is rising, not falling. So what's it going to be? Is the Fed going to stop increasing interest rates or is inflation going to start rising again?

So far this year, the market has had one rally after another on dreams of an early end to the Fed's interest rate increases. But let's look at the facts. Dr. Bernanke, Chairman of the Federal Reserve Board, has been on the job for only two months. He has to show that he is tough on inflation. So chances that he will put an early end to interest rate hikes are virtually nil.

As for inflation, just take a look at the graph of the CRB Index. It shows little sign of reversing the uptrend started in October 2001. Indeed, prices of copper and platinum are hitting all-time highs and gold and silver are at 25-year highs. Many analysts believe the bull market for raw materials will last another ten years. Then there's oil. It may have sporadic drops in price, but only a global recession will cause a lasting price decrease to occur. And a global recession is not in the cards right now. So inflation will begin to rise again, and the Case 4 Bull Market Scenario will return. That's not so bad. We've been there before and made money. We'll soon be saying bye, bye to the Case 3 Bull Market Scenario.

IMPROVED HISTORICAL ACCURACY.
VectorVest has improved the historical accuracy of its database in regard to a stock's historical exchange identity and to its option status. VectorVest Online is already live with the new database changes, so there is no update required. If you use VectorVest ProGraphics 6.0, there is an update that must be installed. You also need to download stock data through March 29, 2006 to complete the process. The ProGraphics 6.0 update may be downloaded and installed by clicking on "Help" and then "Check for Updates" in the program. Simulator users also need to install an update by clicking on "Help" and then "Check for Updates" in the Simulator.

It is not necessary to do this, but you can check to see that your database has been corrected by looking up the historical data on NTRI. First, find Nutri Systems in the Stock Viewer. Then click on "History" on the local toolbar. Click on "Layout" and add "Exch" from the "Columns to Hide" to the "Columns to Show" and move "Exch" up to the top of the list. Next click "OK". Now scroll down the data and notice that on 5/13/04 Nutri Systems moved from the
Bulletin Board "B" to the American "A". You should also see that NTRI became optionable on the American "xA" on 6/6/05, and finally it became optionable NASDAQ "xO" on 6/23/05. Thank you for your continued support, and we hope you are looking forward to future improvements as we strive to give you the best service possible and Improved Historical Accuracy.

MARCH MADNESS.
Two weeks ago, I said I was betting on all of the lowest seeded teams in the NCAA Basketball Tournament. Boy did I get clobbered. Not one of my No. 1 seeds made it to the Final Four. This hasn't happened in 21 years. My only consolation was that only one person in the entire office pool has one team, UCLA, in the Final Four. Oh well, my system worked well in the past and it was easy to do. It got me this year, but I'll be back next year for March Madness.