According to what I wrote last year, 12/30/05 to be exact, 2007 should be a good year for the stock market. This view was based upon my faith in the Presidential Cycle. I have written about this phenomenon on several previous occasions and the references were cited in last year's Views. A more extensive review of the subject was written by Mr. David Penn in Stocks & Commodities Magazine, December 2006, pg. 26.

As Mr. Penn phrased it, one should buy stocks at the mid-term elections and sell stocks at the Presidential elections. In other words, a low point in stock prices, a good buying opportunity, usually occurs near the end of a President's second year in office and a high point in prices, a time to sell, usually occurs near the end of the fourth year in office. This year, a double-bottom was formed in June and July instead of the more traditional October bottom. Nevertheless, 2006 ended, as expected, with stock prices in a rally mode. If all goes according to historical precedent, stock prices should be nicely higher this time next year.

This is not to say that 2007 will be a walk-in-the-park. A quick look at an All-Weekly display of our Market Timing Graph shows that stock prices rose sharply from both the October 1998 and October 2002 bottoms only to encounter turbulent times before taking off in the following year. Indeed, the Price of the VectorVest Composite was lower on 10/22/99 than it was on 12/31/98. Similarly, the Price of the V V C was lower on 03/14/03 than it was on 12/27/02.

It also would be foolish to expect the kind of rally in 2007 that occurred in 1999 and 2003. While there is plenty of fuel in the way of valuation to power such a rally, there are far too many obstacles, geopolitical and economic, for investors to overcome to achieve the huge gains garnered in those years. So I expect to see very good, but not spectacular price performance in The Year Ahead.

DOGS OF THE DOW.
As I sat at my desk this morning, I noticed that CNBC was having another talk fest over "The Dogs of the Dow" and I wondered why do they waste their time on such drivel? Here's a stock picking system that's alleged to beat the market by a few measly points and it gets all kinds of media attention every year. Is it part of a vast Wall Street conspiracy to have us accept mediocrity as a norm for expectations?

Here's a stock picking system that works 99.26% of the time. The top 20 stocks ranked by VST-Vector as of 12/28/05 have gained an average of 38.10% with 14 winners and 6 losers as of yesterday's close. Take that, Dogs of the Dow.

HAVE A HAPPY, HEALTHY AND PROSPEROUS NEW YEAR.