The Bulls stampeded on Wall Street yesterday, driving stock prices sharply higher on news of the Commerce Department's GDP report of 3.5% annual growth. Hurray, the recession is over...or is it?

The Bulls had a right to celebrate yesterday's GDP report. An expanding economy means jobs, higher earnings, a sustainable bull market and, indeed, a return to happier days. But some analysts say the GDP report was as phony as a three dollar bill. Be that as it may. The things I watch are earnings, inflation and interest rates. If the economy is on the road to recovery, it will be reflected by these factors. The Investment Climate shown below shows that the Trend Indicators for inflation and interest rates are favorable. The problem is earnings. What is going on with earnings?

Thomson Reuters, a leading data provider, says that with half the companies having reported, an astounding 81% have exceeded expectations. So what? Any CFO can low-ball a forecast; then beat it hands down. Let's turn to our trusty VectorVest database to see what we can learn. Let's open the S&P 500 WatchList and look at the average EPS for all the stocks in the S&P 500. As of yesterday, it was $2.26 per share. When I go back exactly one year, I see that it was $3.27 per share. Two years ago, very close to the S&P 500's all-time high, it was $3.70 per share. So the current EPS is still 39% lower than it was two years ago. That's not good.

When I look at an All-Weekly, Standard Graph of the S&P 500 average data, I can see that EPS literally fell off a cliff in September 2008 and hit bottom at $1.70 per share in March 2009. But it has been climbing higher over the last few months and that's good. However, it looks like it will take years to reach its former high. Indeed it will, but that's not the issue. The issue is the trend. This information is shown each week in the Investment Climate section of these Views. It is also shown graphically in the Market Climate Graph. As long as the S&P 500 EPS continues to rise, I am content to believe that we are on The Road to Recovery.

BEST PERFORMING STRATEGIES.
If you have been reading the Daily Views or watching the Daily Color Guard Report, you may have noticed how the Best Performing Strategies have shifted from predominately Bullish in early October to a mix of Bullish and Bearish in mid-October to predominately Bearish in late October. On Wednesday, October 21st, the five Best Performing Strategies were all Bearish. Which Strategy has performed the best since then? How well could you have done had you gone short with any of those Strategies? Mr. Glenn Tompkins, Manager of Internal Training, has all the answers. So join Mr. Tompkins at the VectorVest University to see this week's "Strategy of the Week" presentation: "Best Performing Strategies."

On February 13, 2009, I wrote an essay called, "Another Day at the Races." I had developed a technique of buying or shorting fast moving stocks in fast moving strategies, so I detailed how I tracked the performance of nine strategies, five bullish and four bearish, from the market's Open at 9:30 AM to its Close at 4:00 PM. In my mind, it was like going to a racetrack and watching the horses run. It was great fun and often quite profitable, so we created the VectorVest RealTime Derby.

The VectorVest RealTime Derby tracks and displays the performance of over 175 VectorVest Strategies from the time the market opens to the time it closes. With this tool, I could easily see which strategies or stocks I wanted to trade on any given day. Not only that, but I could see internal market action like never before. Take today, for example: I could easily see that the opening rally of the major indexes wasn't going to last because the Derby showed Bearish strategies out-performing Bullish strategies. Sure enough, the major indexes turned lower shortly after 10:00 AM.

With the Derby providing a tremendous amount of valuable data each day, we now needed a way of storing and analyzing it. So our developers created the Tote Board. We are very proud to announce that the Tote Board is being released today to all VectorVest RealTime Derby Users at no extra charge.

Like the Tote Board at your favorite track, the VectorVest RealTime Tote Board stores the daily Derby results and provides useful statistical information on performance. Over a time period of your choice, it shows the total gain or loss of every strategy, the percentages of the winning days and trades, and the maximum draw down. This information makes it extremely easy, of course, to see which strategies have been the best or worst performers over the time period you selected.

As I look at the Tote Board right now, 2:32 PM, the best performing strategy over the last five days is Odd Fellows Short with a gain of 8.57%. It's made money in four of the last five days, which is tops for any strategy, and it's had 68% winning trades, which is second best. It also was listed as a Top-Five Performer in Tuesday's Color Guard, and it's already up 4.1% today. Should I go short with this strategy? I just might do that. Thanks guys for The Derby and The Tote Board.

PROTECTING PROFITS.
The Price of the VectorVest Composite has gone up 61.4% from the March 9th low to yesterday's close. If you have been fortunate enough to participate in this rally, you should realize it's not going to last forever. Even if you may not wish to sell any stocks right now, you should learn how to protect profits. Mr. Steve Chappell, our Director of Educational Services, will share his knowledge and experience in how to perform this delicate task. So join Mr. Chappell at the VectorVest University to see this week's "Strategy of the Week" presentation: "Protecting Profits."

Four weeks ago I began writing about a $500,000 retirement strategy for people in IRAs or 401Ks that would produce $50,000 per year of current income while maintaining the principal. I said that I would put $200,000 into relatively safe bond funds that were paying about 6% interest and then build three $100,000 stock portfolios with the remaining $300,000. Almost immediately we began receiving calls and emails asking about safe bond funds. That's not our particular field of expertise, but I didn't think it would be all that hard to find such funds, and it's not.

Just recently I went to my bank and put some money into a "Tax-Advantaged Municipal Closed End Portfolio," which is expected to pay about 6.9%. You should be able to do the same if you wish. If you don't want to do that, you can Google the term, "safe bond funds," and get nearly 900,000 hits. The top three listings should more than meet your needs. Of course you can always Google the term, "Pimco," and also receive a wealth of information.

If you don't want to go that route, you can always use VectorVest. Simply click on Viewers on the Main Menu Bar, click on Sector Viewer, click on ETFs, right click on the ETFs row, click on View Industries in Business Sector, sort By Industries Asc, click on ETFs(FixedInc\Other), right click on the ETFs(FixedInc\Other) row, click on View Stocks in Industry Group and sort by DY. You should see JNK at the top of the list with a DY of 12.29%. Overall, you should see nine ETFs with dividend yields of 6% or more. Pick your poison.

As you can see, even in the world of zero percent Federal Funds rates, you can still find Relatively Safe Bond Funds Paying 6%.

ATTENTION REALTIME USERS.
Have you run any searches using double crossovers? Try it, you'll love it. I've been experimenting with a search that finds stocks having a 20 day DPO crossing above zero and MACD crossing above the signal line within the last two days. The search also find stocks with Price greater than $1.00, AvgVol > 100000, and %PRC < 100. It is sorted by %PRC Desc. It has found some really big winners, and virtually all of the Quick Tests I have run, of which there have been many, have given positive results.

DON'S DIVIDEND DANDIES.
Would you like to buy stocks with the highest combinations of Dividend Yield and Earnings Yield? Then sort them by DY*EY. Ah, but there's more to it than that. Mr. Don Thornton, one of our best instructors, will show us the magic little twist that produces the best stocks with the highest DYs and EYs. So join Mr. Thornton at the VectorVest University to see this week's "Strategy of the Week" presentation: "Don's Dividend Dandies."

For the last three weeks I've been writing about a $500,000 retirement strategy for people in IRAs or 401Ks that would produce $50,000 per year of current income while maintaining the principal. I said that I would put $200,000 into relatively safe bond funds that were paying about 6% interest and then build three $100,000 stock portfolios with the remaining $300,000. Three new searches, which may be found in the UniSearch Tool located in the Strategy Group called, "Strategies - Retirement," were created which could be used to build these portfolios.

My biggest concern regarding the idea of managing stocks for current income is that of losing sight of capital preservation. In other words, you may become so intent on capturing a dividend payment that you end up holding stocks that should have been sold. Consequently, you will lose a lot more money than you could have possibly made in current income. Don't let that happen to you. Capital preservation should be your top priority. The first portfolio to build is the one comprised of optionable, high VST+YSG stocks.

Given current market conditions, I would do this by running the "High VST+YSG Stocks" search using the Options Rate of Return Tool, set for December Expiration, At the Money Calls, sorted by Option ARR. This search returned 19 Records, as of 10/08/09. BKE was at the top of the list, showing an Option Price of $3.96 per share and an Option ARR of 55.74%. At approximately 2:30 PM, Yahoo!Finance said the stock was down 78 cents and the option price was only $2.40 per share, lowering the ARR to 33.80%. These figures meet my criteria of trading only stocks with an Option Premium of at least $2.00 and an Option ARR of at least 25%, so I would consider buying it on an up move.


The next stock, GG, does not have a Dec option, so I looked at the Jan 40. It showed an option price of only $2.21 per share, which means the Time Value of the option, was only 40 cents. I don't like to trade anything with a Time Value less than $1.00, so I moved on down the list.

Finally, I got to CVS. It didn't have any Dec Options, but the Jan 35 premium was shown as $2.82 per share. This price gave an Option ARR of 28.44%, which is OK in my book. Its stock graph could be stronger, but I'd give this stock a shot.

As you can see, it's going to take a little effort to build this portfolio, but just take it a step at a time. Before you know it, you'll be dealing with some really good prospects. And don't stray too far from the criteria of trading only stocks with an Option Premium of at least $2.00 and an Option ARR of at least 25%. You also don't need to completely fill your first portfolio before starting on the second and third. Actually, it might be a good idea to start off with just two or three stocks in each portfolio so you can gain experience and become accustomed to Managing Your Retirement Stocks.

WINNING WITH WEEKLY WINNERS.
Several months ago we began delivering videos of the Daily Color Guard Report. Its primary function was to keep you abreast of the market. In this regard, we reported the daily winners, i.e., the best performing Strategies, of the VectorVest RealTime Derby. The idea was to inform you of the hottest strategies on a daily basis. Some of these strategies exploded even in a lackluster market. Which ones were they?

Mr. Glenn Tompkins, Manager of Internal Training, will show us how to identify these Strategies on a timely basis so you can jump on the fastest horses and ride them to the bank. So join Mr. Tompkins at the VectorVest University to see this week's "Strategy of the Week" presentation: "Winning with Weekly Winners."