It is a well documented fact that the stock market performs better from November to May than it does during the rest of the year. A significant part of this performance is the much heralded year-end rally. Will we have a year-end rally this year?

The year-end rally has become so entrenched on Wall Street that it often is spoken of as a sure thing. Of course, it's not. However, it has happened seven times out of the last ten years, so the odds are in favor of it happening again. But when is it more likely to happen? It appears that the odds of a year-end rally increase substantially when the market hits a bottom in September or October. Our Market Timing graph shows that year-end rallies occurred in 1998, 1999, 2001 and 2002 after September/October lows. In 1996, the Price of the VectorVest Composite bottomed on July 26th and the ensuing rally, wobbly as it was, carried through to February 14, 1997. The Bull market rally of 2003 began from a March 12th low and sailed clear through to March 5, 2004. Last year, the year-end rally was launched from an interim October low which was actually part of a major rally started from an August bottom.

After a great eight month rally, there was no year-end rally in 1995, as the market fell from September into the final week of January 1996. In 1997, the market peaked on 10/10/97 and failed to rally into the year-end, due to the Asian Currency Crises. The Bear market appeared in 2000 and attempts at a year-end rally were consistently defeated by acrimony over the Bush/Gore Presidential election.

So here we are on October 21, 2005 looking at what appears to be an October bottom. If this is true, we should be contemplating a year-end rally. So what makes me think the market appears to be making a bottom? First of all, our Market Timing Indicator, MTI, hit 0.59 on 10/13/05. It had not been that low since 05/20/04, just as the market was beginning a summer rally. The low prior to that was 0.61 on 03/12/03, the day before the awesome Bull market rally of 2003 began. In fact, the only time the MTI has spent more than a week below 0.60 was during the low points of the Bear market of 2000-2002. It was also encouraging for me to see the MTI not go below 0.60 yesterday, Thursday, the 20th, even though the Price of V V C closed lower than it did on Thursday, the 13th.

Another encouraging sign of a bottom, as indicated in last week's Strategy Section, was that the Buy, Sell Ratio, BSR, went below 0.20 on 10/13/05. This event always indicates that the market is oversold and near a bottom. Finally, the Primary Wave, (see Views 06/04/2004), turned to Up last Wednesday, the 19th. While yesterday's sell-off made the Primary Wave turn to Dn again and even though today's rally wasn't strong enough to move the Primary Wave to an Up signal, I believe it's a good bet that we are embarking upon a Year-End Rally.

THE AUTOTESTER IS ONLINE.
I first wrote about the AutoTester on November 19, 2004. The AutoTester is a wonderful tool that makes back-testing a piece of cake. When it was released last January, it could, unfortunately, be used only with our desktop software, VectorVest ProGraphics v6.0. Now, I'm happy to say, it is available on the internet with VectorVest OnLine.

If you're into back-testing and want to see how well the AutoTester works, you may see a demonstration at The VectorVest University. Simply go to www.vectorvest.com/vvuniversity. Once you have logged on, click on the box labeled "Recorded Classes." Click on "Introduction to the AutoTester" at the bottom of the list of classes and you're on your way.

Incidentally, if you have not attended The VectorVest University, please do. You will be delighted with the quality of the courses and I'm sure you will also enjoy seeing The AutoTester OnLine.