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.

Six weeks ago, on 07/03/08 to be exact, I announced that we had created two new Industry Groups: Market(ETFs-Long)and Market(ETFs-Short). The following week, 07/11/08, I wrote an essay called, "ETF Classifications," in which I described how we had classified all the ETFs into seven additional Industry Groups. While this move received considerable praise, I wasn't sure I was satisfied with the results. So now we have classified all 686 ETFs in our database into 36 Industry Groups, and I think it's marvelous.

To see what we have done, please click on Viewers on the Main Tool Bar. Click on Sector Viewer; then double click on ETFs. Shazam, a screen with all 36 ETF Industry classifications, sorted by RT Desc, appears before your eyes. You should see ETFs(Sector\Biotech) at the top of your screen and ETFs(Commdty\Futures) at the bottom. So Biotech is hot and Commodity Futures are not.

Double click on the Industry column header. Whalaa, the 36 Industry classifications are now sorted alphabetically from A to Z with ETFs(Commdty\Futures) at the top of the list and ETFs(Short) at the bottom. This allows you to find a specific class of ETFs in a jiffy. For example, if you want to play the currency markets, just double click on ETFs (Currency\Country). Like magic, WisdomTreeIndRp, ICN, appears at the top of your screen. So what currency are we dealing with here? Click on News at the top of your screen. Bingo, you're in Yahoo!Finance and you can see we're dealing with the Indian Rupee. Click on Profile for more details.

If you want to see what the world markets are doing, simply find the ETFs(Foreign\Country) Industry Group and double click on it. Presto, 42 country ETFs appear on the screen, sorted by VST Desc. Wow, only one country ETF, has a 'B' rating, the iShares MSCI Turkey Fund, TUR, and at the bottom of the list is the iShares MSCI Belgium Fund, EWZ, who is getting crushed with an RT of only 0.56. So stock markets around the world are getting pounded.

OK, please close the ETFs(Foreign\Country) and right click on the row labeled ETFs at the bottom of your "Industries in Sector" screen. In the pop up window which appears, please click on "View Stocks in Business Sector." Open sesame, all 686 ETFs now appear on your screen, ranked by VST Desc, with PwrShsDBGldSht, DZZ, at the top. Now click on Layout at the top of your screen. On the right hand side, scroll down the box until you find Industry. Click on Industry; then click on Move Up, and move Industry up as high as it will go. Click OK. Hocus pocus, now the Industry classifications appear right next to the Company and Symbol columns. Wow!

I can immediately see that the top ranked ETF is in the ETFs(Short) Industry Group. And I thought the market was going up! Yes, it is, but large parts of it are going down. Fifteen of the top twenty-three ETFs, ranked by VST Desc., are in the ETFs(Short) Industry Group. You must remember that these stocks represent Contra Funds and they go up when the price of the asset they represent goes down. Sure enough, DZZ, is designed to reflect the inverse performance of a gold index and the price of gold has been falling like a lead balloon. DZZ is a hot stock right now, but keep your eye on it. It won't be that way forever.

Note that the fifth stock from the top is Healthshrs Emrg, HHJ. I can see that it's in the ETFs(Specialty\Disease) group, but what does Emrg, have to do with a disease? Click on Analysis at the top of the screen. The Business description says that the Fund's objective is to track the performance of the HealthShares Emerging Cancer Index, which includes biotechnology companies that have been identified as "emerging cancer" companies. OK, I've got it. Please close the Stock Analysis window.

Double click on the Company column header. Abrakadabra, all the ETFs are sorted alphabetically from A to Z. Isn't that great? Now, I can quickly see the entire array of ETFs by name, symbol and classification. Now I quickly know what I'm looking at without going to a lot of trouble. It's like magic, ETF Magic.

P.S. If you layout your Viewer as suggested above, you will also see the Industry Groups on all your other screens. I like that.