Barron's magazine, dated June 24, 2006, was as bearish as it could get. Mr. Alan Abelson, the magazines' chief prognosticator of doom and gloom, gleefully wrote about an impending collapse of the housing market and the catastrophic financial consequences to follow. Ms. Sandra Ward, a Senior Editor, said, "the market's off its May peak and could keep falling through early '07. Are any stocks or sectors safe?" On a more even keel, Michael Santoli was "In Search of a Buyable Panic Point." He said, "The indexes surrendered few clues last week about whether such a buyable panic point had been reached," but "markers of negative market sentiment are numerous. It's now the point where stocks should rally very soon if they are going to." Now what kind of guidance is that?

On June 16th, three days after the market hit its low point, VectorVest said, "We have probably seen the bottom of this downturn. As noted a number of times, the market is deeply oversold when the BSR goes below 0.20. This happened on Monday, June 12th when it hit 0.14. Therefore, a trading rally is in the offing." We advised that "Prudent Investors should get their shopping lists ready. Aggressive Investors and Trader's should play the market up or down as it develops with a bias to the upside." We went long in our Model Portfolio on June 21st.

It may have seemed a tad too early for some people to go long when we did, but we have nearly 20 years of experience with the BSR and had confidence that we were on the right track. Indeed, the BSR is a great tool to use when you're Nailing A Bottom.

P.S. If you think this call was sheer luck, read my essay and strategy dated October 21, 2005.

FWS FAVORITES, 2006.
I simply love the Fourth of July. I love the summer's heat. I love barbequed ribs. I love to drink beer. And I love fireworks. I also love buying low-priced stocks that double, triple or quadruple in a matter of weeks or months. So that's what I wrote about last year, July 1st, actually. Also see my essays dated June 30, 2000, July 2, 1999, and July 2, 1998.

Last year's essay focused on "Finding Firework Stocks." The following week I wrote about finding low-priced Firework Stocks, and finally, I wrote about "FWS Favorites." FWS Favorites is a WatchList of Firework stocks created each week from the techniques I described in my essays of July 1, 2005 and July 8, 2005. Some of the best performers, 07/15 price to peak, shown in the very first FWS Favorites WatchList include NTRI, up 356% in 43 weeks, XWG, up 94% in 11 days, VPHM, up 87% in 14 weeks, ASPN, up 166% in 8 weeks and ENG, up 70% in 14 days.

Just for the fun of it, we are illustrating the performance of a portfolio of FWS Favorites as this week's "Strategy of the Week." Make sure you see it at the VectorVest University. Have a safe and happy 4th of July and don't forget the sky's the limit with FWS Favorites, 2006.

Summer's here, the market's in a funk, and CNBC is as boring as it can be. Nevertheless, I want to make some money and have some fun doing it. There's no better way than to trade explosive low-priced stocks.

You may recall that we gave a presentation on "How to Find Explosive Low-Priced Stocks" at the Traders Expo in Ft. Lauderdale. We liked it so much, we added it to our Technical Analysis Course, also given in Ft. Lauderdale. The attendees loved it. While I can't give you all the details in this essay, I can share some of the key factors in finding these guys.

First of all, we define explosive low-priced stocks as those that are less than $6.00 per share and are likely to double, triple or quadruple in a matter of days or weeks. For example, Nutri Systems first hit our radar screen on 10/21/04 at $2.25/share. Our Teeny Boppers search found it 14 times in January 2005 at less than $4.00 and it appeared in the VectorVest Views 11 times in 2005, the first time at $10.10. It closed at a high of $74.86 on May 10, 2006.

The second important factor in finding explosive low-priced stocks is that VectorVest has the system, tools and methodology for getting the job done with considerable ease. All you need to do is point and click your mouse on a strategy such as "Price-Volume Winners," and the stocks are presented to you ranked by VST-Vector. Although VST is a wonderful indicator, it pays to look at the graphs. This is what the TA Course is all about, and looking at graphs is the third key factor in finding explosive low-priced stocks. The best choices are the stocks that are breaking out of long-term consolidation patterns, hitting successive new price highs and having smooth chart patterns. Look at a three year daily graph of Nutri Systems and you'll see what I mean.

Finally, our presentation featured four strategies: Price-Volume Winners, Teeny Boppers sorted by VST, FWS Favorites and Best New Highs/BMB. Try them, they're great. Even so, a new search, Price-Volume Winners SC, (the SC stands for Super Charged), is being demonstrated as this week's "Strategy of the Week." If you can't make it to a show or VectorVest Course, the next best thing to do is visit The VectorVest University. It pays to know how to find Explosive Low-Priced Stocks.

For the last nine months, I have been writing about the fact that portfolios of high VST-Vector stock prices go up over time and one could make a lot of money if one had the patience and intestinal fortitude to buy and hold them for an extended period of time, say nine to twelve months. Since I am somewhat deficient in both of the key characteristics required to be successful with a "buy and hold" strategy, I asked for your help in the form of a competition to devise a strategy for actively managing a portfolio of high VST stocks that would capture the attractive gains seen in our performance studies. I called it "The Chairman's Challenge."

The three winning strategies were reviewed in my essays of 05/26/06 and 06/02/06. While each of these entries beat the 198% gain illustrated in our 03/24/06 "Strategy of the Week," none of them provided the downside safety I was looking for. So I created my own strategy, called "Summer Hiatus," which was illustrated last week. I said the equity curve (over a ten plus year time period) was a thing of beauty, and I would use the strategy to invest my own money. Now here's how I will do it.

1. I'm going to wait until October 6, 2006 to make my first stock selections.

2. I'm going to use 20 positions instead of the 15 used in the strategy because I want the increased diversification a twenty stock portfolio provides.

3. I'm going to open five positions in each of four consecutive weeks rather than all 20 at the same time. Again, it's a matter of diversification.

4. I'm going to limit my positions to only two per Business Sector. I hope you know why.

5. I'm going to buy 9-month, at-the-money Call Options instead of stocks whenever possible. This action will greatly reduce the money I have at risk. Please see my essay of February 17, 2006 called "Albert's Gift to VectorVest."

6. I'm going to sell, short-term, out-of-the-money Put Options on the underlying stock positions whenever the market is in an up-trend. With luck, this action will reduce the cost of my Call Options. However, it will also increase my risk of incurring substantial losses. Please see my essays on Synthetic Long Positions dated October 7, 2005 and December 17, 2004.

With the exception of possibly selling naked Puts, everything I'm going to do is aimed at gaining the upside potential of owning a portfolio of high VST-Vector stocks long-term without suffering the pain of market downturns. Can I have my cake and eat it too? I think so, and that's My Game Plan.

As we saw last week, Pedro's Pride is a very simple strategy that produced excellent results, up 382% in 39 months. The only problem I had with it is that it suffered badly during the bear market years of 2002 - 2004 with a max drawdown of over 40%. It had a clever twist to it, however, that I really like. It was out of the market from July 11th to August 11th each year.

Mr. Yale Hirsch, creator of the Stock Trader's Almanac, has made it common knowledge that the market performs much better from November to May than it does from May to November. So, I thought, why not give it a try? I'll own the top 15 VST stocks only from November to May. Alas, this strategy mitigated the drawdown problem, but it returned a paltry 196.5% from January 5, 1996 to May 5, 2006, (I traded on Fridays only). Nevertheless, I still liked the idea of being out of the market during the summer months.

Mr. Hirsch's Stock Market Almanac also indicates that July and September have been the worst performing months when trading the Nasdaq and August and September were the worst performing months when trading the DJIA. So why not be out of the market during July, August and September? When rebalancing the top 15 VST stocks in this fashion, the results were stunning! I got a 911.9% gain from January 5, 1996 to June 8, 2006 with 66.1% winners and a max drawdown of only 21.43%. This strategy sailed through the 2002 - 2004 bear market like a piece of cake, the equity curve is a thing of beauty.

To be fair, I must report that we also tested Pedro's Pride over the same time period and it produced a return of 1,054.2% with 68.5% winners. But the max drawdown was 43.5%. I know I can't handle that, so I would not invest my money using that strategy. But I definitely will use the new strategy illustrated as this week's "Strategy of the Week," called Summer Hiatus.

P.S. Next week I'll write about how to further improve profits and reduce risk when rebalancing high VST-Vector stocks.

HOW TO FIND EXPLOSIVE LOW-PRICED STOCKS.
It's easy to get discouraged when the market is getting hammered the way it has over the last four weeks, but it's not necessarily a bad time to find some great winners. In July 1998, when the market was getting killed, I discovered QLGC at $3.44 per share on a split basis. It went on to triple in less than a year and ultimately peaked at over $95 in March 2000. In the summer of 2002 when the bear market was at its worst, I found SINA and SOHU at less than $2.00/share. Both stocks turned into 20 baggers. Finally, there's NTRI, which I found at $2.25/share in October 2004. It recently hit a high of over $75.00.

I've written about how to find stocks such as these on many occasions and have demonstrated the techniques numerous times. If you're interested in learning how it's done, attend the Technical Analysis Course in Ft. Lauderdale next Friday and Saturday. No matter what the market does, you can always make money if you know How to Find Explosive Low-Priced Stocks.