Last Friday I said that the market had been "as flat as a pancake" and the Buy, Sell Ratio, BSR, a.k.a., the Canary, had given us fair warning that the magnificent rally from the March 9, 2009 low was losing steam. Sure enough, stock prices fell sharply on Monday, June 15th, and the Primary Wave, i.e., the week-over-week movement of the Price of the VectorVest Composite, went from Up to Dn.

It is highly unlikely that the Primary Wave will return to an Up mode today, given the market's wishy-washy performance. Therefore, it's time to prepare to go short in the Model Portfolio if the market moves sharply lower. It is also a good time to review and update the procedure we will use. Here are the basic steps:

1. BEST STRATEGIES. First of all, we will identify five Strategies that we believe are the best ones to use under current conditions. We give you five Strategies instead of one because we do not want to "move the market." We have also discovered that being open to using more Strategies increases your chances of picking a really big winner.

2. EXAMINE THE STRATEGIES. Before the market opens on Monday, use the UniSearch and Quick Test Tools to see how each Strategy has performed recently and what kind of stocks they have been finding. Are they right for you? If not, it's OK to cherry pick a list of stocks that are more to your liking.

3. WATCH THE FUTURES. The Futures give an indication of whether the stock market is likely to open higher or lower. Since we're planning to go short, on Monday, we want to see the Futures on the Dow, S&P 500 and NASDAQ go down. This information is available on TV as well as the internet. PLEASE NOTE: THE MARKET DOESN'T ALWAYS DO WHAT THE FUTURES INDICATE.

4. WATCH THE MARKET OPEN. The key to making a good entry is to make sure the market is going in the direction you want. All sorts of things happen as the market opens. It often reverses course in early trading, so it's best to wait 30 to 60 minutes to get a better idea of what it wants to do. We want to go long on a sharp up move and short on a sharp down move. By "sharp," I mean that the DJX, SPX and IXIC all must be up or down by one percent or more after 10:00 AM EST. They also must be trending in the right direction at the same time before you trade. BOTH OF THESE CONDITIONS MUST BE MET.

If you miss the Open, it's OK to make your trades as long as the appropriate conditions prevail.

5. TRACK STRATEGY PERFORMANCE. You should begin tracking the real time performance of the top 10 stocks from each Strategy from the time you see the market moving in the right direction. If you don't have VectorVest RealTime, you may use VectorVest Portfolio Tracker, but it is on a 15 minute delay. You may also track a portfolio's performance in real time on Yahoo!Finance, or similar facility.

6. PICK STOCKS FROM THE STRATEGY WITH THE BEST PERFORMING RATING. The performance rating is the percent winners times the percent gain. For example, a Strategy may yield seven winners and an eleven percent gain. Its performance rating would be 7.7. Another Strategy may have three winners and a 20 percent gain. Its performance rating would be 6.0. I'd pick the Strategy with the 7.7 rating. When going short, I will not sell any stocks that are going up in price.

7. BE PATIENT. If the desired conditions do not develop on Monday, just sit tight. Watch the Daily Color Guard Report on Monday evening and re-assess the situation. The whole idea is to make the right trades at the right time.

The procedure I have just described has evolved over a long period of time and I have written about it many times. Today I simply covered that aspect of entering positions. Next week, I'll cover the subject of Position Sizing; then Managing the Model Portfolio. That should complete this Update on Riding the Wave.