Let's mark Thursday, August 16th, as the probable bottom of this downturn. The Price of the VectorVest Composite closed at $28.09, five cents lower than its previous close, but 70 cents higher than its intraday low of $27.39. A big price reversal such as this is a very good sign that buyers were jumping back into the market.

On many occasions, I have said that a Buy/Sell Ratio, BSR, below 0.20 indicates an oversold market condition and a time when investors should sense that a bottom is near. This event first happened on Friday, August 3rd, but it didn't feel right to me, so we stayed out of the market. Sure enough, the market rallied the next three days; then plunged yesterday to its capitulation low of $27.39. At this point, the BSR hit an intraday low of 0.05; then rallied back to close at 0.10, up 0.02 from Wednesday's close of 0.08. When the BSR closes up from a previous day while the Price of the V V C closes down, a bullish divergence is produced which signals that price momentum has swung to the upside.

Another sign that we've probably seen the bottom is that the Price of the V V C closed on Thursday only eight cents higher than it did on March 5th, the low point of the previous downturn. Had the Price of the V V C closed below this level, $28.01, we would have had to go way back to July 2006 for the next support level, which is $24.82. Whew, that would have been painful for those who stayed long all the time.

The best evidence that we have probably seen the bottom is that the Fed lowered the Discount Rate by 50 basis points to 5.75%. While this is not as strong a signal as lowering the Federal Funds rate, which is at 5.25%, it says that the Fed is aware of what is going on and will step in with a rate cut when needed.

Just for the record, the Discount Rate is the interest rate charged to commercial banks and other depository institutions on loans received from the Fed. The cut in the Discount Rate was aimed to strengthen the financial system. The Federal Funds rate is the interest rate at which private institutions lend to other depository institutions overnight. A cut in this rate would be aimed at strengthening the economy. Dr. Bernanke, Head of the Fed, hasn't admitted yet that the economy needs help, but it's expected that he will in the September FOMC meeting. In any event, there's hardly a better reason for the market to move higher than a Fed rate cut.

Why did we stay in cash when the market was getting killed earlier this week? The answer has two parts: 1. No one knows how low prices may go and, 2. You never know when the Fed is going to step in and drive the market sharply higher such as it did this morning. Yeah, you're missing the fun of shorting stocks as stock prices moved lower, but you've got a real problem when the market explodes. If you're in cash, you can join the party anytime you wish to.

Assuming you're in cash, what do you do now? If you're an Aggressive Investor or Trader, you should have bought stocks today. If you're a Prudent Investor, you should be getting your shopping list ready. If you're Riding-the-Wave, as we do in the Model Portfolio, you should be checking strategies with which to go long. We are going to go long the day after we get an Up signal from the Primary Wave provided the market is moving higher. I expect this to happen next Tuesday or thereabout. Just stay tuned to these Views, because we're Looking To Go Long.

EASY DOES IT.
If I had a crystal ball, I would tell you exactly which strategy to use when you get back into the market. But I can't see into the future, so we work real hard to see what has worked in the past and hope it works one more time. Fortunately, Ms. Angel Clark has done all the hard work and she has prepared a brilliant presentation on how to reap big profits by buying stocks at the beginning of Confirmed Up signals. Visit the VectorVest University to see this week's "Strategy of the Week," called "Easy Does It."

VECTORVEST REALTIME.
In case you're wondering how I got intraday information on the Price of the V V C and the BSR, I got it from VectorVest RealTime, a new product currently under development. While I don't know for sure when it will be released, I can tell you that it will be different from and better than anything else you have ever seen. It's going to be a sensational product. VectorVest RealTime.