Headline hysteria continued to dictate the day-to-day direction of the market this week and new leaders in Greece and Italy assumed the responsibility of cleaning up the economic crises in their respective countries. Their actions will dictate the performance of stock prices for months to come.

In this respect, Europe and the U.S. are on the same path. Mr. Barack Obama is campaigning actively to be re-elected President of the United States and a cadre of hopefuls are seeking to take his job. Whoever is elected President will face the awesome task of jump-starting a weak economy, reducing sovereign debt and creating new jobs. Difficult as these challenges may be, the power and prestige of the office is so great the candidates will do almost anything to get elected. History shows that the incumbent typically has the upper hand.

Incumbent Presidents usually have the power of the pocket book available to them and they spend tremendous amounts of money in the third year of their term to stimulate the economy and create jobs. Investors like a robust economy with rising corporate earnings and voters like plenty of readily available jobs. Jeffery Hirsch's Stock Trader's Almanac 2011, pg. 130, claims that, "the last two years (pre-election year and election year) of the 44 administrations since 1822 produced a total net market gain of 718.5%, dwarfing the 262.1% gain of the first two years of the administrations."

Mr. Dick A. Stoken stated in his book, "Strategic Investment Timing," that "The really juicy part of the election cycle is the fifteen-month period beginning in early October, two years before the election, and lasting until early January of the election year." Since the next presidential election will be in 2012, the really juicy part of this election cycle began in October 2010 and will end early in January 2012. Let's see how well it has done so far.

The Price of the VectorVest Composite closed at $25.34 on 10/01/10, and closed yesterday at $26.05. So it has shown a gain of $0.71 per share or 2.8% in the past 13 1/2 months. That's really not very juicy, so what went wrong?

A lot of things went wrong. President Obama spent a lot of money "stimulating the economy" in the first two years of his administration and Ben Bernanke, Head of the Fed pitched in by lowering interest rates and flooding the world with U.S. dollars. The stock market responded with healthy gains in 2009 and 2010, but that hasn't been the case this year. The economy has weakened this year; Dr. Bernanke tightened the spigot on money supply and Europe's debt problems have destroyed investors' confidence in the future. To make matters worse, conservatives won't let President Obama get his hands on enough money to do the things Presidents usually do at this point in time to soup-up the economy. No wonder stock prices have gone down this year.

But that doesn't mean we can't make money going forward. We just have to "Let the trend be our friend." Buy stock on rallies, take profits and/or sell stocks on drawdowns. Fortunately, that's what we do.

To sum it up, this Presidential Cycle has been reversed: monetary stimulus was applied in first two years of President Obama's term and the market performed well. There hasn't been much monetary stimulus so far this year and there probably won't be next year either. So the third and fourth years of this cycle will not be remembered as banner years in the chronicles of Presidential Election Cycles.

Are you a believer? If you are, you made a lot of money yesterday. And you made a lot of money this week...and last week...and the week before...and, by golly, the week before that!

Yes, we nailed the bottom of the market four weeks ago, October 4th to be exact, and began buying stocks on the morning of October 5th. The 50 stocks found by the five one-day Derby Winners shown in the October 4th Views have gained an average of 33.1%. Was this just dumb luck? Not at all, we've done it before.

Read the VectorVest Views of March 6, 2009 entitled, "Itching to Rally." In this essay, we prepared our readers to buy stocks in the event of an imminent, explosive rally. We repeated our guidance on Monday, March 9th, the day the market hit bottom. Stock prices exploded the next day for the buying opportunity of a lifetime. That wasn't dumb luck either. So how do we do it?

Take a look at an End-of-Week, All Data view of our Market Timing Graph. Show the Buy to Sell Ratio, BSR, at the bottom of the graph and change the color of the BSR to yellow, so you can see it clearly. Note that the BSR cycles up and down over and over again. Imagine how much money you could have made if you had bought stocks every time the BSR rose from a bottom. You'd be so rich you wouldn't have to buy lottery tickets any more. But it doesn't start there.

It starts by recognizing that you haven't made any money until you sell your stocks at a profit. So you want to sell stocks when prices are high, and we are just as proud of our ability to get you out at tops as we are of getting you in at bottoms. But that's not the point. The point is that when you sell stocks at high prices, you will learn to stop worrying and love bear markets. Yes, you read that right. You will learn to love bear markets because bear markets create great buying opportunities!

I do become concerned, however, when prices get too high. The period starting on July 1st presents a classic example of such a time. On the Friday, July 1st, I vented my concerns about "A Fearless Market" that was ignoring a variety of serious problems. The following week, I questioned whether a poor jobs report would become a "Game Changer." On July 15th, the "Strategy of the Week" was entitled, "The Armageddon Collar," and our Market Timing System issued a Confirmed Down signal on July 18th.

Although the market rallied into July 22nd, I advised readers that it could be a "sucker's rally." Indeed, stock prices fell for the next seven days, rallied one day; then plunged to a low point on August 8th.

By that time, the market was tremendously oversold and the BSR was at an extremely low level of 0.04. It was time to start preparing for a rebound. On August 12th, I wrote an essay called "Secret Weapon," in which I railed against the faulty practices Wall Street preaches to suffering investors. Most importantly, I shared how my sad experience of selling my stocks at a market bottom led to the creation of VectorVest.

The following week, August 19th, I wrote an essay explaining that stock values go up when prices go down. I advised my readers to not be afraid, and quoted Mr. Warren Buffet who said, "Be fearful when others are greedy, and be greedy when others are fearful." I also asked them to be patient because the market was "Giving Birth to Bargains."

The downturn continued, however, and investors became even more fearful. Many of them were becoming discouraged, so they needed encouragement. On September 2nd, I wrote an essay called "Bottom-Fishing: A Great Way to Get Rich." In this essay I described exactly how we do what we do. It's all there: When to Buy, What to Buy, and When to Sell. There are no secrets.

Finally, on September 30th, I wrote my now famous "Hang-on Sloopy, Hang-on." In this essay, I said, "the way to get rich is to have the patience and fortitude to buy stocks when everyone else is scared as hell." I also said we would use all the skill, knowledge and experience we have to signal the right time to start buying stocks. As noted above, that time came on the evening of October 4th.

If you want to become an expert bottom-fisher, you must have the sense to sell high and the courage to buy low. Most of all, you must Become a Believer.

P.S. Make sure you see this week's "Strategy of the Week" presentation, "Seeing is Believing."

Stock prices opened higher today on hopes that Germany and France will fashion a comprehensive rescue package to deal with Europe's crippling debt crisis and solid corporate reports from several blue chip companies also contributed to Wall Street's bullish mood. Does this clear the way for a year-end rally?

Maybe yes and maybe no, solid corporate earnings reports are based on facts and rising earnings lead to higher stock prices. There's no doubt about that. But the Sarkozy, Merkel saga is based upon speculation and nobody knows what they are going to do. Indeed, their negotiations have been a source of uncertainty and the primary cause of extreme volatility in stock prices over the past several months. Time after time, hopes of a solution have been raised only to be crushed shortly thereafter.

Hopefully this little game will end soon. European leaders are scheduled to have a summit meeting on Sunday and another meeting no later than Wednesday. The good news is that they seem to have agreed on what they must do, i.e., save the European Union. Now they must agree on how to do it. This is the hard part, but they must get it done. We need to get back to investing on fundamentals and away from Headline Hysteria.

According to Hirsch's Stock Market Almanac, September is the worst performing month of the year and October, with its violent crashes, is reputed to be the cruelest month. October has a split personality and is also called a "Bear Killer" because it has turned the tide in 11-post WWII bear markets.

With a 8.18% drop in the Price of the VectorVest Composite, September certainly lived up to its reputation. Who will control October, Dr. Jekyll or Mr. Hyde?

Mr. Hyde appeared on the first trading day of October with a nasty $0.76 per share drop in the Price of the VVC and a 258.08 point drop in the Mighty Dow. He showed up again the next morning with a lower open and took the Price of the VVC to a 13-month low of $23.14 per share. Subsequently stock prices recovered from the day's low and a transformation began to occur. Late in the day Dr. Jekyll took full charge of the situation with a blistering $0.51 rally. Dr. Jekyll gave us two more beautiful up days before reverting to Mr. Hyde for the weekend of October 7th.

Dr. Jekyll has been in full charge this week except for a weak day yesterday. It's an awesome task, but can he hang on long enough to make this October another "Bear Killer" month? (The Price of the VVC fell 21.40% from May 2, 2011 to October 3, 2011.) Can he lead the charge to a rousing year-end rally?

Our data says he can. He did it from a $15.60 low on 10/09/98, an $18.67 low on 10/18/99, and a $13.21 low on 10/09/02, I'm betting he'll do it again. Who do you think will be the victor, Dr. Jekyll or Mr. Hyde?

P.S. Although we hit a homerun with the Directional Movement Indicators, DMI, last week, it's important to recognize that our standard Market Timing Indicators were key to making our buy decision on October 5th. The DMI is a wonderful tool for verifying follow-through when you want to place a trade, but it's vulnerable to whipsaws. Watch tonight's "Strategy of the Week" presentation to see what I mean.