We missed a great buying opportunity a week ago Monday and I'm not happy about it. You may recall that the Price of the VectorVest Composite got crushed on Wednesday, November 19th and Thursday, November 20th. Fortunately, the Model Portfolio was long with some high-volume Contra ETFs, so we were feeling no pain. The Price of the V V C was also down sharply on Friday, November 21st, until it was rumored that Mr. Timothy J. Geithner was to be recommended as the next Secretary of Treasury, sparking a monster reversal on huge volume. We went into cash on that rally and noted that "we are looking for a new short-term trend to develop." Why didn't I prepare you for the possible follow-through rallies that occurred on the next five days?

The reason is that I had simply become so hidebound by all the rules, procedures, conditions and restraints that we were applying to managing the Model Portfolio, that I wasn't using my head anymore. That was crazy. If I want to make big money in this market, I've got to recognize and move quickly to take advantage of great opportunities as they occur. This is what I intend to do in the future. Rules are nice, but "He who hesitates is lost." From now on I'm going to do my best to Seize the Moment.

QUICKFOLIO.
Day traders love high volatility. It gives them opportunities to quickly make huge profits. So they love what most of us hate: big, fast price movements. As far as I know, most day traders have a WatchList of volatile, high-volume stocks that they watch like a hawk. While every trader has his or her special way of playing the game, many of them live and die trading support and resistance levels. I have found this technique to be tedious, so I look for movers and shakers another way.

I use a tool in VectorVest RealTime called, "QuickFolio." It allows me to create a portfolio of stocks and track their performance from the Opening Bell with just a few clicks of my mouse. For example, I ran our "Buying Contra ETFs" strategy as of last night's close and made a QuickFolio of the top five stocks ranked by AvgVol Desc. VectorVest RealTime actually began tracking this portfolio's performance as of 8:00 AM this morning.

What I really like to do is create a variety of QuickFolios of stocks on any given day and see how they break out of the gate. Then I'll cherry pick my trades from stocks in the best performing up or down QuickFolio.

TAMING THE TIGER.
While day traders may love volatility, investors who can't sit at their computers all day hate it. So how do they make money in this jungle of a market? They execute low-risk trades by hedging their bets. Let's say, for example, that you wanted to short some stocks, but were fearful of explosive up moves that could hurt very badly. To protect yourself, you hedge your short stock positions by buying out-of-the-money Call Options. Imagine, receiving substantial credits to your account by shorting stocks and limiting your risk with relatively low-cost Call Options. To see how it's done, visit the VectorVest University to see Mr. Glenn Tompkins' outstanding "Strategy of the Week" presentation: "Taming the Tiger."

As if this market weren't volatile enough, now you can put more zip into your portfolio. Direxion Funds, a leading provider of leverage funds, recently introduced eight new exchange traded funds, ETFs, offering 300% leverage. Four are regular funds that go up in price when the underlying indexes go up, and four are inverse funds that go up price when the underlying indexes go down. Here they are:

BGU Russell 1000
TNA Russell 2000
ERX Russell 1000 Energy
FAS Russell 1000 Financial
BGZ Inverse Russell 1000
TZA Inverse Russell 2000
ERY Inverse Russell 1000 Energy
FAZ Inverse Russell 1000 Financial

These stocks will make relatively large price moves on most days and should be a Day Trader's Delight.

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.

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.