The Second Place Winner of the VectorVest 2008 Bear Market Beaters Contest is Mr. Eugene Blyar from Greenville, Alabama. Mr. Blyar has been a subscriber for a little over three years now and his strategy is named Blyar's Bottom Feeders/BMB. It showed a gain of 27.59% from November 1, 2007 through March 7, 2008. That's very good compared to the 13.06% loss in the Price of the VectorVest Composite over the same time period.

The most striking thing about Eugene's strategy is that it uses an approach which is the completely the opposite of the one used by Richard Leclercq, last week's Third Place Winner. Eugene's strategy sorts stocks by RV/RT Desc., which is a bottom fishing sort that places the most undervalued, most beaten down stocks at the top of your screen. Richard's strategy sorts stocks by RT*CI Desc., which is a high momentum sort. It places the hottest stocks with the most consistently rising prices at the top of your screen. So Eugene is looking for dead cat bounces and Richard is looking for high fliers.

Another interesting comparison is that Blyar's Bottom Feeders/BMB uses very tight Gain/Loss limits of 9% and 4% as the exit criteria while Richard's Rangers/BMB uses an extremely wide Gain/Loss range of 70% and 35%. It seems reasonable that a tight %G/L range would work well in a bottom fishing strategy while a wide %G/L range would suit a momentum strategy. Nevertheless, I wanted to make sure. So I ran Eugene's strategy with Richard's sort. The result was disastrous. The combination of buying high fliers with tight %G/L Stops lost money right from the beginning, and it was down 33.66% on March 7th. I then ran Eugene's strategy with Richard's exit criteria. This combination of buying beaten down stocks with a wide %G/L Stops combination also lost money, but not nearly as much...losing only 16.90%. So both Eugene and Richard were right in using the exit criteria they selected.

Another interesting point is that both Eugene and Richard used a %G/L ratio of 2.00 or greater. This fact is especially important in Eugene's strategy because the win/loss ratio was about 1/2. A major drawback that concerns me with Blyar's Bottom Feeders/BMB is that it generates an insane number of trades, like over 360 in just four months! I haven't had much time to work with Blyar's Bottom Feeders/BMB but I did try widening the %G/L spread. This change lowered the performance to a 17.57% gain, but the number of trades was reduced by about 50%.

In comparing these two strategies, Blyar's Bottom Feeders/BMB is clearly for very active traders who are happy with small gains. Richard's Rangers/BMB is for home run hitters who don't mind striking out from time to time. I find both strategies intriguing and will work with them as I go along. Meanwhile, Mr. Blyar will receive a $50.00 VectorVest Savings Certificate and a check for $1,500.00 for his Second Place Winning strategy, Blyar's Bottom Feeders/BMB.

SIGNS OF DANGER.
The percentage of Buys decreased in Monday's trading and so did the percentage of Sells. This is a sign that money rotated out of rising stocks and went into falling stocks. On Wednesday, the percentage of Buys went up and so did the percentage of Sells. This is a sign that money moved out of falling stocks and into rising stocks. At the same time money rotated out of our top rated, high VST stocks as evidenced by the losses they suffered. These phenomena of rotation, focusing and wide-spread profit taking on high VST stocks are all Signs of Danger.

P.S. For more information, see my essay of 12/13/96.

The 2008 Bear Beaters Contest, which was announced in my essay of March 7, 2008, was done on a day when the bears were having their way. After falling six times in the previous seven days, the Price of the VectorVest Composite had closed below its January 22nd low and nobody knew how far down it was going to go. Oooh me, it was a gloomy day indeed...if you were long.

Of course, you already should have been in cash or short your stocks. We signaled a Confirmed Dn on November 1, 2007 and the next day we suggested that you buy Contra ETFs. But some of you are obligated to stay long or just want to stay long all the time. So what should you do? Use Bear Market Beater Strategies. Unfortunately, the ones we created five years ago weren't working anymore. So we needed new ones, and now we have them. The new Bear Market Beater strategies were submitted, as required, by the end of the day of April 7, 2008 and we have now completed our analysis of the results.

The Third Place Winner is Richard Leclercq, a subscriber from Lancaster, PA. Although we didn't ask him, he is obviously a quick study. Our records show he attended the Philadelphia Investment Clinic held on October 5, 2007 and logged on to VectorVest for the first time that very same day. From the way he organized his entry, he appears to be a logical, meticulous individual. In any case, he was not intimidated by the daunting list of rules spelled out in my March 7th essay and he created a great strategy.

Richard's strategy captured the single most important trait a great Bear Market Beater strategy should have. It is the ability to find stocks with outstanding price growth persistence. In the VectorVest system, these stocks are identified by high Comfort Index, CI, ratings. In my opinion, high CI stocks have the best chance of going up in both good times and bad. If they do happen to go down in a sell-off, they also have the resilience to bounce back strongly when the market rallys. To give his top ranked stocks a kicker, Richard sorted them by RT*CI. Momma mia! He's finding the hottest stocks with the best price growth persistence.

Richard's strategy, which we named "Richard's Rangers/BMB," produced positive results from November 1, 2007 to the end of March 7, 2008 to the tune of 15.56% with seven winners and four losers. That's not bad compared to a 13.06% drop in the Price of the V V C. In order to check Richard's strategy for robustness, we also ran it from January 3, 2007 to yesterday's close. It showed a gain of 38.75% with 16 winners and 8 losers. Not bad!

Richard will receive a $50.00 VectorVest Savings Certificate and a check for $500.00 for his Third Place Winning strategy: "Richard's Rangers/BMB."

P.S. Please read this week's Strategy of the Week or visit the VectorVest University to learn more about this great strategy. See if you can tell why we're calling it "Richard's Rangers/BMB."

We have received the entries to the 2008 Bear Market Beaters Contest and hope to announce the Third Place Winner on April 18, 2008.

A WINNING FORMULA.
Two weeks ago, on March 28, 2008 to be specific, I wrote an essay called "Riding-the-Wave Made Easy." The technique described therein sounded so good, I decided to use it in managing the Model Portfolio. So far, it hasn't worked very well and several problems became apparent. Needless to say, I'm not going to use it anymore.

The major problem with the strategy I tried is that trying to manage the portfolio on an end-of-day basis led to a host of problems. Take the evening of March 31st, for example. Since the Primary Wave went from Up to Dn on that day, I was required to sell my long positions at the open and go short at the open on the next day. Unfortunately, the market went up instead of down on April Fool's Day, and the Model Portfolio got creamed. Not only that, but the market went up so much that day, the Primary Wave went from Dn to Up. Happily, I covered my shorts at the open on April 2nd and went long with Top VST stocks.

By this time, it was clear that there were tremendous disadvantages to Riding-the-Wave on an end-of-day basis. Not only did I have to decide to go long or short before the market opened, but I had to decide what strategy to use. I had learned, long ago, to wait until I saw what the market was actually doing before jumping in and I had spelled out in some detail in my essay of December 23, 2005 exactly how to find the best strategy to use. So I went long with Top VST stocks on April 2nd and crossed my fingers. Fortunately, these stocks performed quite well. All but one, Kirby, KEX, made money. I would have kicked Kirby out as soon as it lost 5%, but the strategy did not use any portfolio management during a wave, which was another problem.

After four wishy-washy days of trading, the market tanked on Wednesday, April 9th and the Primary Wave went from Up to Dn. So I had to sell my longs at Thursday's open and was also supposed to go short. But I didn't do that since I had said in Wednesday's Views that I wouldn't go short unless the market was heading lower. As you might expect, the market went higher. So there I was in cash when I should have retained the right on Wednesday night not to sell my longs.

OK, after the drubbing the market took today, thanks to GE, I don't feel so bad. So what am I going to do now? Well, I'm going to wait until the Primary Wave goes to Up again; then I'll go long on a day the market is moving higher. I'm going to stay long until the Primary Wave goes to Dn, but I doubt that I'll entertain the idea of going short while the MTI and BSR are trending higher.

In a nutshell, I'm going back to what worked for the last three plus years. There's no need to mess with A Winning Formula.

P.S. We're going to work on developing an end-of-day procedure that resolves the problems cited above.

BIGGEST BARGAINS.
The biggest companies in the world didn't get to be that without outstanding management. It's not a bad idea to buy some of these guys when the market rallies from a steep bottom. Mr. Gordon White will show us how in this week's "Strategy of the Week." For further demonstration of this strategy, please see VectorVest University.

There are only three days left to get your entries in to our Bear Market Beaters Contest. All you have to do is send in a long only strategy that conforms to the rules spelled out in my March 7, 2008 essay. The First Place Winner will receive a check for $2,500.00, Second Place Winner, $1,500.00 and Third Place Winner, $500.00. All acceptable entrants will receive a $50.00 VectorVest Savings Certificate.

HOW TO MASTER THE MARKET.
FINALLY IT'S HERE! Dr. DiLiddo's classic presentation on "How to Master the Market" is now available on CD. You could read a hundred books, attend a thousand lectures and watch CNBC for a million hours and you would not get the knowledge, wisdom and insight wrapped-up in these five great presentations:

1. How the Stock Market Works.
2. What Causes Bull and Bear Markets.
3. How to Pick Stocks.
4. How to Time the Market.
5. How to Manage Your Portfolio for Consistent Profits.

To order Dr. DiLiddo's classic CD on "How to Master the Market" for only $95.00, call 1-888-658-7638 or visit https://www.vectorvest.com/store/orderitem.aspx?x=czNMTHAzQlJTZjBjUGRXTUp3SjhBZz09

THE CANARY SINGS AGAIN.
At last, we finally got the Confirmed Up signal yesterday that we have been looking for. And, once again, our market timing indicators performed magnificently.

Starting with the Confirmed Down signal we got on November 1, 2007, which was only 3.0% below the July high of $31.44 per share, the Price of the VectorVest Composite went down, down, until it closed at a low of $26.60 on January 22, 2008. At this point, each of our other key indicators, the RT, (Relative Timing), BSR, (Buy/Sell Ratio), and MTI, (Market Timing Indicator), each hit downturn lows.

Although the Price of the VectorVest Composite rallied from the January 22nd low, it subsequently fell to a lower low of $26.53 per share on March 7, 2008. The RT, BSR and MTI all stayed above their January 22nd lows. This phenomenon is called a bullish divergence and was discussed that very day by VectorVest in its Strategy commentary. Here's what we said, "This formation is typical of important market bottoms and was vividly apparent in the August and October 2002 low points. So hang in there folks, things may be looking up soon."

Indeed they were. The BSR, affectionately called the Canary, demonstrated its unique analytical capabilities once again by presenting another bullish divergence on the lower Price lows of March 10, 2008 and March 17, 2008. It went up while its colleagues, the RT and MTI, did not. This bullish signal, at the very bottom of the panic sell-off, was an incredible feat. The BSR closed above 1.00 yesterday for the first time since October 31, 2007 and The Canary Sings Again.