If the stocks ranked lowest by VST-Vector are in stock market hell, the ones ranked highest must be in heaven. The top stocks ranked by VST-Vector are supposed to have the best combinations of Value, Safety and Timing, so what have the Contra ETFs been doing up there?

Contra ETFs are strange beasts that go up in Price when the market goes down. Not only that, but VectorVest doesn't compute a Value or Safety Rating for Contra ETFs or for any ETFs, actually, but assigns a Value equal to Price and gives default ratings of 1.00 for Relative Value, RV, and Relative Safety, RS, to all ETFs. So Relative Timing, RT, plays a key role in analyzing, sorting and ranking ETFs. When RT goes up, VST-Vector goes up. When RT goes down, VST-Vector goes down. VST follows RT up or down like a puppy on a leash.

So what kind of a VST does it take to make it to heaven? It takes a VST rating of 1.35 or better. This means that any ETF with an RT of 1.76 or higher will show up among the highest ranked VST stocks. As far as I can tell, the first time a Contra ETF had a VST above 1.35 was on August 15, 2007, when SRS, ProShrsUlShRE showed up in Stock Viewer as the eighth highest stock ranked by VST. Had you bought SRS that day and held it to yesterday's close, you'd be up 14.35% vs. a 34.45% drop in the Price of the VectorVest Composite. But there are many, many ways to do much better than that with Contra ETFs. See, for example, our August 3, 2007 "Strategy of the Week," "How to Make Money with UltraShort ETFs," or see our November 2, 2007 "Strategy of the Week," "How to Make Money with Contra ETFs."

I've received feedback that some of our subscribers are upset that some high VST Contra ETFs have 'B' ratings and have been distorting the accuracy of the Buy/Sell Ratio, BSR. On a day such as October 27, 2008, for example, when the Price of the VectorVest Composite closed at a five-year low of $17.13, 99 stocks were rated a 'B' and the BSR was reported to equal 0.01. No, no, no they said, 57 of those stocks were Contra ETFs and they shouldn't count. The "true" BSR should have been reported as 0.005. Now I have to ask you, does a BSR of 0.005 give you any more information than a BSR of 0.01? Both readings indicate a brutally oversold market.

I must admit, however, that there is something I don't like about these guys showing up as high VST stocks. It's that high VST stocks typically have excellent financial track records and go up in Price over the long-term. Contra ETFs do not have the engine of earnings growth to drive their Prices higher and higher over time. In fact, they will be heading back to Hades as soon as the market begins to move higher. That will be a good thing because we would no longer have any Strangers in Paradise.

Nothing, absolutely nothing, attracts more attention at this MoneyShow Conference in Washington DC than when we begin talking about Timing the Market. One look at our Market Timing Graph, which shows the incredible October drop in the Price of the VectorVest Composite and our market calls and the audience becomes spellbound.

It's easy to understand why this is happening. Most of the attendees here have been told by Wall Street Wizards that you can't time the market, so hang in there and buy, buy, buy while your profits wither away. Now, wiser but poorer, they see the light and more than one person has approached me and said, "I attended your presentations last year and I wish I had listened to what you said."

Yes, we were here in Washington last September and while I had turned somewhat bearish on the market, I tried not to make any predictions. I simply advised my listeners to follow our Market Timing Indicators and they would be all right. Many of them did follow our guidance and they are doing just fine. But they now want to know when this bear market will end. I can't give them an exact date, but I can say it will not be soon. How do I know?

Please refer to the Climate Section of these Views. Each week it reports on the Bullish/Bearish status of the market as defined by the Truth Chart. This week it is reporting that the market is in a Case 7, Bear Market Scenario with inflation, interest rates and earnings falling. We will remain in a Bear Market Scenario as long as forecasted earnings are falling. You may get a visual of these data by clicking on Graphs on the Main Menu Bar, selecting Market Climate Graphs, a Period of 5-Years, and both S&P Earnings fields. Then click on Get Graph.

This graph shows how dramatically S&P 500 forecasted earnings rose from 2003, leveled off and peaked on January 4, 2008. Its trend indicator turned lower even as earnings continued to rise because the momentum of the earnings gains lessened. Then the trend indicator fell below 1.00 to 0.99 on February 15, 2008. This is when the bear market began.

The bear market will prevail until the S&P 500 earnings trend indicator goes back above 1.00. I expect to see several months go by before this happens. Not only does the S&P 500 trend indicator move quite slowly, but analysts are cutting earnings forecasts and companies are reporting lower earnings. Taken together, these factors suggest that it will be at least six months before we see the birth of a new bull market. Of course, this does not preclude the occurrence of powerful Bear Market Rallies.

According to the Stock Trader's Almanac, October is known as a "jinx month" because of the crashes of 1929, 1987 and the 554 point drop in the DJIA on October 27, 1997. Well, it certainly didn't harm its reputation as a jinx month this year with catastrophic DJIA drops of over 100 points on four occasions, over 200 points on two occasions, over 300 points on three occasions, over 500 points on two occasions, over 600 points on one occasion and over 700 points on another occasion. But it also had several incredible up days. On October 13th, the DJIA soared 936.42 points and it also soared almost 900 points on October 28th.

The Mighty Dow is now completing its best week since 2001. Is this the October turn of the tide that has happened 11 times since WW II? If so, this October will also preserve its reputation of being a Bear Killer.

SHARING YOUR WISDOM.
I haven't written much about our User Groups lately, but we do have many wonderful User Groups throughout the country, including Alaska. We even have three groups in Canada and one in England. A new one is due to be formed in Australia. Several of these groups have been functioning for 10 years or more and new groups are being formed all the time. So what's the attraction?

As far as I can tell, people want to learn how to use VectorVest to make money in the stock market. Gee whiz, that's what our User Groups are all about. But where does one start? What does one do? Who does one call? No problem. Simply refer to the User Group section of these Views and find a User Group located near you. As a VectorVest subscriber, you're entitled to attend any Group anywhere, anytime. You don't have to call anyone. Just go to the meeting and see what's going on. Hopefully, you will find it to be both enjoyable and informative.

Had you been fortunate enough to attend Jim Mahoney's Lake Geneva, WI User Group last Saturday, you would have had a real treat. Jim is a long time VectorVest subscriber and a brilliant investor. Here's an unsolicited email of what Jim had to say about Saturday's meeting:

Hi Angel, Dr. D,

I just thought I would send you an email about our V. V. User Group Meeting this morning here in Lake Geneva, WI and you can share it with Dr. D.

After viewing the Home Page, I showed them a little technique that I use to view the Market Indexes. Thinking about why sometimes the 'newbies' didn't seem to understand, I suggested that they ask questions of themselves before they view the index charts in the Performance Graph Section.

Questions like: Is the Market Trending Upward or Downward? Which way is the VIX trending? Is the MTI below 1.00 or above 1.00? Is the BSR trending below 1.00 or above 1.00? Have either the MTI or BSR broken support or resistance? Once they prepared their mind by asking the above questions, they can now open the Performance Graph Charts and insert these symbols: SPX, DJX, IXIC, IWM, QQQQ and VIX. After determining that the five indexes were trending downward on 9-3-08, we then went to the VV Views and looked at the Strategy. Bingo. Now I had their undivided attention because I showed the results of the Ultra Short ETF's, MZZ, SCC, QID, TWM, SDS and DXD showing a return of 78% through 10-10.

I talked about the benefits of viewing ALL SECTOR CHART GRAPHS THREE TIMES A WEEK, IN DIFFERENT TIME FRAMES. I then showed them results of Sectors turning at precisely the time of the V V Calls or closely to it at turning points. From there I showed them some Industries within the Sectors and encouraged them to commit to learning as much as they could before the next meeting. Then I showed the results of doing it correctly. I also showed some ETF's to match the Sectors and the results.

I took them on a little journey showing opportunities within VectorVest on October 8-9-10-13 by first going the Sector Page, highlighting the DY column and highlighting Petroleum. Then before I moved on I said in the Petroleum Sector there 450 Stocks in a total of 10 Industries. One Industry where the treasures were found on the above dates is the Pipelines because the DY's are rich. Stocks like MMP, PAA, KMP, BPL and OKS allowed me to lock in double digit yields along with some quick gains. By now they are squirming in their seats will all kinds of questions. They are excited about the potential in Vector Vest.

I then went back and showed MTI charts and explanations of the Views around the turning Point bottoms along with the MTI of where we are now and "When will we know the bottom is in place conversation." We had a short discussion about why this Market is going to produce some amazing Profits within the next cycle up and they should prepare now to know what to do, how to do it and when to do it.

Around the close of the Meeting we discussed this week's comments and the Buffett Strategy and how you can find those types of stocks within VV. At closing I asked the attendees if they would commit to studying VectorVest like they never did before because they are the most fortunate people to come into VV at the bottom of the cycle. Many nodded their heads showing their intent. A couple of attendees came up and said it was the best $10 they ever spent. Hopefully we will see some follow through.

Today we had 26 enthusiastic people attend the Meeting. Some mentioned that they did not apply themselves to learning VV as they should have. Another long time user who I have known for quite a few years said, "Remember, the strength of the efforts are the measure of the results."

I don't care or wish to know what percent of the people that buy the trial actually buy the program, but I do have one suggestion. How about a 3-4 minute video like you find on U-tube, showing testimonials, graphs, results, testimonials where Users could go to upon purchase and see, hear and feel what it would be like to make 30% in a 2-3 month cycle. Would that help your closing ratio? I think it would. But then I am not always the sharpest nail in box.

What a wonderful program you have, Dr. D. VectorVest is doing an awesome job and what a vibrant, young dedicated group of employees VectorVest has. I am glad you came my way and I thank you for the gift of your friendship.

Jim.

Wow, what can I say, except thank you Jim for Sharing Your Wisdom.

How would you like to pick stocks like Mr. Warren Buffett does? You're not alone. USA TODAY featured a cover story yesterday on 47 books with Mr. Buffett's name in their titles. I'm happy to say I ingested Mary Buffett's excellent book, Buffettology, many years ago.

Here's what I wrote on February 6, 1998: "Want to know how Warren Buffett turned $37,000 into $20 billion? Read Mary Buffett's book, Buffettology. Want to know how VectorVest really works? Read Mary Buffett's book, Buffettology."

Yes, the similarities between the VectorVest system of stock analysis and Mr. Buffett's methodology are striking. But it's not a coincidence. Both seek to identify safe, undervalued stocks. Both are based upon the valuation fundamentals of Graham and Dodd. Both employ the comparison of earnings yield to interest yield and both favor stocks of companies with consistent, predictable earnings growth. When Prudent Investors buy high Relative Value, high Relative Safety stocks, they are using VectorVest to implement the concepts of "Buffettology."

With the famous words of Mr. Buffett, "To be fearful when others are greedy and greedy when others are fearful," still ringing in my ears, how can I build a stock portfolio that would make Mr. Buffett proud and still not read all 47 books? Simple, I'll just create a VectorVest search to find all the stocks in our database having RV > 1.00 and RS > 1.00 and sort them by RV*RS*GRT*MC Desc. I'll call it the "Best of the Biggies."

As of yesterday, 10/23/08, this search found 474 stocks with mighty Exxon Mobil ranked at the top. I also saw names like Microsoft, Apple and Google high on the list. But seven out of the top 10 stocks were in the Petroleum Business Sector. While these are all great companies, I still want to pick stocks Warren would love and I also want to diversify my selections. What should I do?

I know, I'll use Portfolio Manager. It will allow me to limit how many stocks I get from any single Business Sector or Industry Group and it will also allow me to sort and rank them however I want. A complete click-by-click procedure of how to create a 100 stock portfolio using the "Best of the Biggies" search is presented in the Strategy section, shown below. The portfolio is called "Blue Chip Bargains" because the RV and RS criterion assures me that all of these stocks are undervalued and have above average financial track records.

The "WatchList View" feature within Portfolio Manager allows me to analyze, sort, screen and rank all 100 stocks however I want. First, I'll sort them alphabetically just to see what I have. Wow, what a list of great names, starting with ABB Ltd., at the top and finishing with Westpac Banking. Some of the more familiar names include Anheuser Busch, Caterpillar, Hewlett-Packard and Lockheed Martin. Some of the less familiar names include Alcon, Danaher, Hologic and Sasol.

Next I'll rank these 100 stocks by VST-Vector Desc. This indicator brings the stocks with the best combination of Value, Safety and Timing to the top of this list. Guess what? Mighty Exxon Mobil is ranked highest with a VST of 1.24 and it has an "H" recommendation. The stock with the lowest VST, 0.92, is Google with an "S" rating. I wouldn't worry about the "S" rating at this point because we're bottom-fishing and just about all of these stocks have an "S" rating. To be sure, Google should have been sold last January when VectorVest gave it an "S" rating at $617 per share.

One more thing I like to do is sort by YSG-Vector, i.e., Dividend Yield, Safety, Growth Vector. I see that Banco Sandantar and PetroBras are at the top of the list with juicy dividend yields of 9.93% and 7.35%, respectively. If you think that's good, read my essay of August 29, 2008 on how you can double or triple your cash income on these stocks even if their prices go nowhere.

The next thing I would do is look at a five-year graph of each of these stocks, taking special note of those with the smoothest, most consistent earnings (EPS) patterns. Take a look at Alcon, ACL, for example. Yes I know it got killed yesterday, but this company knows how to make money. Also look at Schlumberger, truly a great company. It, too, has gotten killed. My oh my, just look at the great stocks in this list, selling at bargain basement prices.

OK, so how would I go about building a portfolio from this list of stocks? I'll re-read my "Guide to Worry-Free Investing." It says to: (1) Buy high VST-Vector "B" rated stocks, (2) Diversify in What and When you buy, and (3) Use Stop-Sell Prices. I would be in no hurry to buy these stocks right now. I'd wait at least until the Price of the VectorVest Composite goes up for two consecutive weeks; then I would begin to nibble at the list and I would buy Leaps instead of stocks unless I wanted the cash from dividends and I'd sell Covered Calls against my positions to reduce cost and risk. That's what I would do with these Blue Chip Bargains.

MAKE MONEY FOR A LIFETIME.
I took a call yesterday morning in which the caller wanted to know whether I had purchased the Contra ETF's we had written about Wednesday evening. I didn't answer his question directly, but asked whether the market was going up or down. As I remember it, he said he wasn't sure. Then I suggested we take a look at the Yahoo!Finance homepage. It was just before 11:00 AM and we saw immediately that the Dow and S&P were up, but the NASDAQ was down. Obviously, the market was mixed, so we could not conclude that it was going down. Therefore, I had not purchased the Contra ETF's.

As we talked I suggested he click on the "Read more" link located in the lower left hand corner of the Yahoo!Finance homepage. A neat summary of market activity appeared on the screen which showed trading volume, number of advancing and declining issues and so on. The Dow and S&P began taking off as we spoke, but there were far less advancing issues than declining issues. I said it looked like a sucker rally to me. Sure enough, the Dow peaked at 8,779 exactly at 11:00 AM and started to move lower. So what did I do? I started thinking about buying some Contra ETF's.

Before doing that, however, I had to make sure the market was trending lower. So I checked VectorVest RealTime and waited until the Price of the VectorVest Composite had fallen by at least 2.00% and the Advance/Decline ratio of all the stocks in our RealTime database was less than 0.50. This happened shortly after 1:00 PM, so we began to buy the top five Contra ETFs ranked by VST with AvgVol > 100,000. If you do not have VV RealTime, you could have waited until all three major indexes shown by Yahoo!Finance were in the red and the NASDAQ was down at least 2.00%. Moreover, the NASDAQ would have to have more than 1,000 declining issues. This also happened shortly after 1:00 PM.

Had I been looking to go long, I would have waited until 10:30 AM; then checked to see if the Price of the VVC was up at least 2.00%, the Advance/Decline ratio was above 2.00, and the Price of the VVC was trending higher before making any purchases. If you do not have VV RealTime, you could have waited until 10:30 AM; then checked to see if all three major indexes were in the green and the NASDAQ was up at least 2.00%. Moreover, the NASDAQ would have to have more than 1,000 advancing issues and be trending higher.

So why don't we just send out an email blast telling everyone what we're doing? Simply because it would move the market and you would be hurt in the process. When we first began "Riding-the-Wave," I wanted to make it oh so simple. We would say exactly what we were going to do the next day and which strategy we were going to use. This approach caused some severe problems. For example, we felt compelled to follow the plan regardless of what the market did the next day. When the market went against us, we would lose a lot of money. We and our subscribers lost money even when the market went our way because the stocks we were going to buy or sell had been marked up or down, as much as 50% in some cases, by the rush of orders that had come in prior to the open. We had to change our ways.

The two big changes were to make our commitment to trade conditional upon the market moving in a favorable market direction the next day and we listed several strategies we might use instead of one we would use. Our results improved dramatically but we now had the job of teaching you how to do what we would do. We have done this on an ongoing basis. To learn more about Riding-the-Wave, read my essays of 01/11/08 and 12/23/05, or click on Search Views at the top of your screen and type Best Strategies in the text box. You can also search our blog at www.vectorvest.com using the term, Best Strategies.

A man once said, "If I give you a fish, you will eat for a day. If I teach you to fish, you will eat for a lifetime." So learn to do what we do and you will Make Money For A Lifetime.