The VectorVest RealTime Derby is such an in incredible tool that I want all of our subscribers to benefit from it even if you don't have it on your computer. That's why we began discussing the Daily Derby Winners in the Daily Color Guard Report shortly after releasing the VectorVest RealTime Derby last summer. We gave our first "Strategy of the Week", SOTW, presentation regarding Derby winners on October 9, 2009. It was called, "Winning with Weekly Winners."

That presentation was based on the idea that the Strategies which appear frequently among the top five Daily Derby Winners should produce good results...at least in the short-term. Mr. Glenn Tompkins, who gave the 10/09/09 SOTW presentation, illustrated this point quite well.

Over the last two weeks, we introduced the concept of betting on Derby Leaders, i.e., Strategies showing the biggest percent gain since the most recent appearance of a Red or Green light in the Price Column of the Color Guard. As noted in last week's essay, the five Strategies shown on February 12th performed extraordinarily well through Friday, February 19th. They also did well on Monday, February 22nd. Then the big down day came on Tuesday, February 23rd, and all five Strategies pulled back. They bounced back on Wednesday as the market recovered; then went on a roller-coaster ride yesterday. QuickTest shows that while all of these Strategies are still in the black, they are all down from last Friday.

Through it all, I carefully watched what the Derby was showing me. I noted the performance of the Daily Winners, the 5-Day Winners and the Derby Leaders. I saw the Daily Winners go from Bullish to Bearish as the market went from up days to down days. I saw the 5-Day Winners go from 100% Bullish to a mixture of Bullish and Bearish Strategies as the rally stalled. Finally, I saw the Derby Leaders steadfastly remain 100% Bullish although their performance eroded day-by-day.

Since I had learned not to chase the Daily Winners because they were too flighty, I elected to go with the Derby Leaders because they were steadier. But I wondered last week if I was I being stubborn and forgetting to "Let the trend be my friend?" I know I can't fight the market. When the Derby shows Bearish Strategies outperforming Bullish Strategies and I see Bearish Strategies among the 5-Day Winners, I have to pay attention. So I thought about Mr. Glenn's SOTW presentation, "Winning with Weekly Winners."

I had sort of forgotten about Mr. Glenn's SOTW because it seemed like too much work. But that was before the Tote Board was released, and gee, we were publishing the 5-Day Winners each Friday in the Views. So how much work is it to check the Friday Views and give Mr. Glenn's technique a try? Lazy as I am, I'd have to admit, it's not much work at all. Using the technique shown in this week's SOTW, the 5-Day Derby Winners can get you on track to Winning Big, The Easy Way.

WINNING BIG, THE EASY WAY.
You have to see this week's presentation. Mr. Jerry D'Ambrosio, Consultant and Instructor, will show us how easy it is to make money with the 5-Day Derby Winners. So join Mr. D'Ambrosio at the VectorVest University to see this week's excellent "Strategy of the Week" presentation: "Winning Big, The Easy Way."

P.S. Given the essay shown above and the results presented in this week's SOTW, we will be listing the top five 5-Day Derby Winners in the Daily Color Guard Report each night in lieu of the Derby Leaders. However, we will still be using the Enhanced ProTrader Market Timing Graph, EPMTG, to analyze the direction of market as shown in last week's SOTW presentation.

Exactly four months ago, on October 19, 2009, the Price of the VectorVest Composite closed at $23.61 per share. Yesterday it closed at $23.64 per share. During this four month period it hit a low Price of $22.03 and a high Price of $24.45. How does one make money in a flat, herky-jerky market?

Last week I said one needs to "see through the market's daily gyrations and stay with the prevalent trend." I then described a method of doing this by using the Enhanced ProTrader Market Timing Graph, EPMTG, and the Daily Color Guard. We also gave a "Strategy of the Week," SOTW, presentation which illustrated the efficacy of the technique. We also used the technique in last Friday's Views to explain exactly what to do should the market move higher, as we expected, on Tuesday and we suggested five Strategies to use for your stock selections.

Indeed, the market did open higher on Tuesday, February 16, 2010, and the stocks in the Strategies we had suggested took off like birds. At the end of the day, QuickTest Portfolios of the top 10 stocks from each of the five suggested Strategies showed an average gain of 3.78% with 45 winners and five losers. As of 12:15PM, today, February 19, 2010, these same five Portfolios are showing an average gain of 6.21% for an annualized rate of return of over 300%. Fantastic!

So what are Derby Leaders and how does one find them? Derby Leaders are the five Strategies which are showing the highest cummulative percent gains from the day the Color Guard gives a Red or Green Light in the Price Column to the end of the current day. The Color Guard showed a Green Light in the Price column last Friday, February 12th, so we reported the five Strategies with the highest percent gains for that day. On Tuesday, February 16, 2010, we reported the five Strategies with highest total percent gains for the two day (Friday to Tuesday) period. On Wednesday, we reported the five Strategies showing the highest total percent gains for the three day (Friday to Wednesday) period, and so on.

These Strategies are extremely easy to find since we give them to you in the Strategy section of the Daily Color Guard Report shown on the Home Page of VectorVest U.S., and in the Views of both VectorVest U.S. and VectorVest RealTime. Subscribers to VectorVest RealTime who have the Derby Tool can also check them out during the day by using the Tote Board.

We call these Strategies Derby Leaders because we want to differentiate them from the Daily Derby Winners, i.e., the Strategies with the best single day gains. Daily Derby Winners are great to use for finding "hot poppers," but I like to find Strategies that are producing winners on a consistent basis, day after day. Logically, one would think that the Strategies that have performed the best from the onset of an upturn or downturn would be the ones which are consistently producing winners. So we have been illustrating methods of identifying these Strategies. For example, you may refer to the SOTW presentations of 10/09/09, 10/30/09, 11/06/09, 11/27/09 and 02/12/10 to see how this technique has developed.

The results shown in these SOTW presentations as well as those that you will see in this week's SOTW presentation should encourage you to bet your money on Derby Leaders.

HOW TO USE DERBY LEADERS WITH CONFIDENCE.
Mr. Todd Shaffer, Instructor and Product Support Consultant, will be giving a very special presentation this week which will show you how to use the Enhanced ProTrader Market Timing Graph and Color Guard to know exactly when to enter an upwave or downwave and use the Derby Leaders. So join Mr. Shaffer at the VectorVest University to see this week's extremely important "Strategy of the Week" presentation: "How to Use Derby Leaders with Confidence."

P.S. The techniques shown in this week's SOTW presentation are so good that we will be using them in our Daily Color Guard Report videos.

Stock prices took off with a bang this year with huge gains on the first day of trading followed by five more consecutive up days. Only four times in the last 82 years has the S&P 500 Index started a year with five consecutive up days, let alone six consecutive up days. So there was no telling where the market was heading, but there are ways to get some clues.

According to the 2010 Stock Trader's Almanac's First Five-Day Indicator, the S&P 500 will end the year higher when the S&P 500 goes higher in the first five days of trading. The S&P 500 has gone up 31 times in the last 36 years and the S&P 500 has ended the year higher 86.1% of the time. The average gain for all 36 years is 13.7%. Not bad. So things were looking very good for 2010 after the first full week trading. But the S&P 500 went down on January 12th; then again on January 15th, and, my goodness, three more times on January 20th, 21st and 22nd; then two more times on January 26th and 28th. Now the delicious gain after the first six days is gone and the S&P 500 is even down from its December 31, 2009 close. So what's the market going to do now?

Well, let's see. The Stock Trader's Almanac says the January Five-Day Indicator has a spotty record - almost a contrary indicator in midterm election years. In the last 15 midterm years, only seven entire years followed the direction of the First-Five Days and only one of the last eight, 2006. The full-month January Barometer has a much better midterm record of 66.7% accurate. In other words, 10 of the last 15 midterm election years followed January's direction. Every down January on the S&P 500 since 1950, without exception, preceded a new or extended bear market, a flat market, or a 10% correction.

Wow, this doesn't sound good. What does it mean? First of all, it says that since the S&P 500 went up during the first five days of January, the Indicator (which is pretty unreliable and has acted like a contrary indicator in midterm elections) is pointing to a down year. Since the S&P 500 is down for the full month, there's a 66.7% chance that the S&P 500 will end the year lower than 2009's close of 1115.10. Moreover, the bear market will have been extended, or the market will have been flat or experienced a 10% correction, if the S&P 500 does close the year lower.

OK, so that's what the Stock Trader's Almanac says, but what do I think? Well I'm not quite that gloomy and the main reason is that S&P 500 Earnings have been rising and our trend indicator of S&P 500 Earnings, as shown in the Market Climate Graph, is about to go above 1.00. My belief is that stock prices will rise as long as earnings continue to go higher. Sure, we could have a 10% correction, but rising earnings will trump The January Barometer.

HOW TO TRADE CONTRA ETFS.
The market has been nasty lately, punishing stocks with good earnings as well as bad, so we finally caved in and started buying Contra ETFs. If you are not familiar with these stocks, you must see this week's "Strategy of the Week" video. Please join Mr. Todd Shaffer, Senior Instructor and Product Support Consultant, at the VectorVest University to see this week's very important presentation: "How to Trade Contra ETFs."

Last week I said that I wanted to take "a more flexible, natural course" to managing the Model Portfolios. This doesn't mean that we're going to discard all the rules and techniques we have used in the past, but with four portfolios, three prudent and one aggressive, being illustrated, it makes sense to focus more on the techniques Prudent and End-of-Day Investors could use in building and managing their portfolios as compared to those that Aggressive Investors and Traders might use. Here are the guidelines of how I plan to manage these portfolios:

WHEN TO BUY. VectorVest believes in buying rising stocks in rising markets, so we will continue to use the VectorVest Market Timing System for guidance on market direction. We will always plan to buy stocks long when the Primary Wave is Up. Occasionally, however, if we think a rally is imminent, we may plan to buy stocks long even when the Primary Wave is Dn.

Before the market opens, we will always check the stock Futures to see if the likely direction of stock prices is in agreement with our plan. If it is, we will proceed with our plan. If the direction of the Futures is not in agreement with our plan, we will wait to see what the market does at the Open. If the Futures indicate that the market is likely to make a big move contrary to our plan, we may abort the plan. End-of-Day Investors should check the Futures as close to the open as you can before placing your orders.

After the market opens, we will make a final assessment of market direction by waiting until the DJI, SPX, and IXIC are all higher than their previous day's close before buying any stocks long.

WHAT TO BUY. Whenever a new campaign is launched, we will recommend at least three Strategies which we deem appropriate for each portfolio. The reason for recommending more than one Strategy for each portfolio is to avoid a stampede into the stocks that a single Strategy would return.

Once we have decided to enter the market, we will select stocks from the top 10 stocks returned by the best performing Strategy, i.e., the one showing the best combination of percent price gain and percent winners. We will buy a stock only if its price is higher than its previous day's High. End-of-Day Investors may use "Buy-Stop-Limit" orders to emulate this technique. See my essay of December 24, 2009 on how to do this.

Although we have traditionally used model portfolios with 10 stock positions in them, we will build some portfolios with up to 20 stock positions because portfolios with 20 positions not only allow more diversification but they also allow the use of a 20% Stop-Loss instead of a 10% Stop-Loss without increasing single-stock risk. Moreover, portfolios with 20 stock, 20% Stop-Loss portfolios frequently perform better than 10 stock, 10% Stop-Loss portfolios.

WHEN TO SELL. Stop-Prices are the first line of defense on when to sell a stock. VectorVest gives a Stop-Price on every stock, every day. These are designed for Prudent Investors, not Traders. Even so, we generally will start out with a 10% Trailing Stop on new positions because we don't want to risk more than 1% of our portfolio value on any single stock position. We often will tighten our Stops when we see the market heading south, i.e., the Primary Wave turns from Up to Dn.

Traditionally, we have exited all long positions by the time the Price of the VectorVest Composite has given a C/Dn signal. We will continue this practice for the Riding-the-Wave and the Yellow Brick Road Portfolios. We will not feel compelled to exit all positions in the High Income and Premier Growth Stocks portfolios because we view these portfolios as suitable for less active investors. However, we will not violate the Stop-Loss criteria we have set for these portfolios.

WHEN TO GO SHORT. We will continue to go short in the Riding-the-Wave portfolio upon receiving a C/Dn signal. We may or may not go short in the Yellow Brick Road portfolio, depending upon market conditions. We will not go short in the High Income and Premier Growth Stocks portfolios.

I'm sure there's more I should have put into this essay, but we will learn what that is as we go forward, Managing the Model Portfolios.

LOW COST INSURANCE - THE COLLAR OPTION.
Many investors have racked up large unrealized profits in their stock portfolios recently, leading many of them to ask, "How can I protect these profits with the increasing uncertainty in the markets lately?" Please join Mr. David Thornton, Director of Sales and Marketing, at the VectorVest University to see this week's terrific "Strategy of the Week" presentation: "Low Cost Insurance - The Collar Option."