I've been getting a lot of email lately, complaining that our Market Timing System needs to be fixed. I can understand why someone would say that because the market's behavior this year has been, "a riddle wrapped in a mystery inside an enigma." (Apologies to Prime Minister Churchill.)

Yes, we've had three Confirmed signal reversals so far this year, the most ever, and we are still in the midst of an incredible string of seven two-week trend reversals. We have never seen anything like this before. Moreover, the Color Guard has produced a virtual kaleidoscope of red, yellow and green lights and the Primary Wave has been Up and Dn like a yo-yo. What's going on?

We track the market on a day-to-day and week-to-week basis using the Price of the VectorVest Composite as our primary indicator. It is an arithmetic index of all of the stocks in our database, which I believe is better than anything else out there. For example, the Price of the V V C increased by only $0.047 per share yesterday, a change of 0.2%. Yet the headlines, based upon the DJI and SPX, reported that the market was strong...the DJI went up 0.67% and the SPX was up 0.58%. They also misrepresented the overall market's performance by reporting that the number of advancing stocks on the NYSE far exceeded the number of declining stocks.

In last night's Daily Color Guard Report, Mr. Shaffer showed that the number of advancing stocks, 3,456, in our database was only slightly higher than the number of declining stocks, 3,417. Mr. Shaffer also illustrated the sensitivity of the Price of the V V C by noting that the Primary Wave changed yesterday from Dn to Up on the strength of a $0.005 per share week-over-week change in the Price of the V V C. If you listen to the talking heads on TV, you'd think the market is soaring higher and higher, but the Price of the V V C closed yesterday only $0.04 per share higher than it did on 11/09/09. The high since 11/09/09 was $23.45 and the low was $22.83 for a range of $0.62, or about 3%. Now that's a flat market if I ever saw one.

When the market is as flat as it has been recently, small but erratic changes in the Price of the V V C can cause numerous and seemingly inconsistent color changes in the Color Guard, which cause confusion if one does not look at the Market Timing Graph. Even better, it pays to watch the video of the Daily Color Guard Report for a complete analysis of the market's action.

Last night, Mr. Shaffer also pointed out that the percentages of both the Buys and Sells had gone up for the last three days. He then explained that this type of rotation is what we call "Focusing." I've seen this happen before and wrote about it in my essay of 12/10/99. In observing that incredible rally, I said "money is focusing on high-fliers when the percentage of Buys and Sells are both going up. The BSR is telling us that we have a highly selective, momentum driven market...a dangerous market. This may not be what you want to hear, but it's an important part of Understanding the BSR."

If you understand our Market Timing System, you'll see that it accurately reflects what the market is doing. It doesn't predict the market, but it provides timely analysis and Valuable Insight.

PROFITING IN A FLAT MARKET.
Yes, you can make money in a flat market. No, it doesn't require sleight of hand and it's not all that hard to do. Mr. Todd Shaffer, Product Consultant and Instructor, will show us several ways of achieving this nearly magical feat. So visit the VectorVest University to see this week's nifty "Strategy of the Week" presentation: "Profiting in a Flat Market."

PREMIER GROWTH STOCKS.
Last week I said I was going to start a Premier Growth Stock Portfolio, but didn't say when. Well, I plan to do it around the beginning of next year. I've been working on ways of coping with extended, severe downturns and still have some work to do. I have several options in mind, but I'm hoping that Santa will put the answer in my Christmas stocking.