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Many thanks to the supportive people who have worked for me, with me and in spite of me over the years. In particular:

My Lifetime Partner, SandiMy Son Bill for whom and with whom this is published for my 3 Grandaughters, Holly, April and Summer.

W.H. Ford

COPYRIGHT 1993-2010 PITBULL INVESTOR LLC

THIS DOCUMENT IS PROVIDED FOR THE EXPRESS PURPOSE OF DISCLOSING A PROPRIETARY INVESTMENT SELECTION AND MONITORING P ROCESS WHICH IS THE COPYRIGHT MATERIAL OF IF CORPORATION. IT IS NOT TO BE AN ENDORSEMENT OR OFFERING OF ANY STOCK FOR PURCHAS E. IT IS MEANT TO BE AN EDUCATIONAL GUIDE ONLY, WHICH MUST B E TEMPERED BY THE INVESTMENT EXPERIENCE AND INDEPENDENT DECISION MAKING PROCESS OF THE READER.

PITBULL INVESTOR LLC, ITS OFFICERS, DIRECTORS OR EM PLOYEES ARE IN NO WAY LIABLE FOR THE USE OF THIS MATERIAL BY OTHER S IN INVESTING OR TRADING IN INVESTMENT VEHICLES UTILIZING THE PRI NCIPLES DISCLOSED HEREIN.

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THE PAST RESULTS OF ANY TRADING OR INVESTMENT SYSTE M ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE.

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TABLE OF CONTENTS

Forward- THE ETF BULLY 3

CHAPTER 1:

First...Let’s Define an ETF 6

Why ETFs? 8

ONe Step Further 9

CHAPTER 2:

How We Generate The Signals 9

A New Dynamic Volume Trend Indicator 13

Collecting The Information 14

If You Really Want To Do It Yourself 15

So How Do We Trade These Signals 16

Breaking It Down 16

Now In Detail 17

CHAPTER 3:

Single ETF Share Trading 19

Double Share or ULTRA Share Trading 19

CHAPTER 4

A Few Words About Options 20

How About This “Best-In-Class” Buying? 23

CHAPTER 5

Testing Procedures and Performance 26

PINGIE.COM Trade Notification Setup 29

Wealth Lab Analysis 30-END

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FORWARD

THE ETF BULLY

PROXY TRADING EXCHANGE TRADED FUNDSIn this manual we are going to show you how our ETF trading

system works, from the generation of the signals to the best techniques to optimize your your trading to maximize profits and balance risk.

There are over 900 Exchange Traded Fund (ETF) vehicles available for investment as I write this and more are being added every day. Just this morning 3 new TRIPLE funds were added. In other words,,... they strive to return 3 times the underlying index move ON A DAILY BASIS!. Pay attention to the word “DAILY”. This is where most folks go wrong on some of these new ETFs because they believe they can use them for position trading. i.e. buying a triple ETF on the DOW because you expect the DOW to go up 15 % over the next 2 months.

They are soon disappointed to learn that an ETF that superbly matches an index with 3 x daily gains, fails miserably to return 3 times on a longer term investment.

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The answer lies in the selection of the right ETFs to trade, because THEY ARE NOT ALL CREATED EQUALLY.

We are not all day-traders. If we were, these double and triple ETFs would be a natural, but to maximize or even profit from them you have to be good...I mean really good at extremely short term predictions and few of us are.

I traded SP500 futures (large contract) successfully for 3 years, but it was far from easy. I was good at it , but it epitomized Vegas High-Roller gambling at its worst.

The big boys use these ETFs primarily as short term hedge vehicles against large baskets of stocks. This is the reason they were created and for that purpose can’t be beat. This is why you see trading volumes of 50 to 250 million shares a day on the most widely followed issues. This is no “Mom and Pop” operation.

Our goals here will be simple.

1. Safety-(Little risk for reasonable rewards)

2. Protection of Capital

3. Mechanical Switching based on strong repeatable principles

4. The ability to trade in ANY market...Bull, Bear and Sideways

5. Develop a process to maximize trading through the use of options, but vastly simplified from what you probably do now. In every case we will be BUYING calls even in Bear Markets because of the flexibility of using inverse ETFs...lots more about this later.

In fact you will find that there are at least 4 different ways to make these trades, allowing you to find a comfort level of risk with commensurate returns giving you possibility of gain multiples over any other trading system you have ever seen.

All of this will be done on a step by step basis:

1: How the signals are generated (The mechanics behind what we do everyday to bring these signals to you.). You could do these yourself, but you will soon discover that it is a lot of work, more than most are willing to put into it and we have the experience and computing power to deliver them to you within 30 minutes of market close each day.

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2. Beyond the basic buy and sell signals, we tell you what instruments you should be trading to maximize the returns.

This includes Single, Double ETFs where appropriate and options on each for those who want to get even more leverage.

3. Best-In-Class Investing

A whole new way to trade the ETFs or ANY sector which will generally deliver at least 30% more than the underlying ETF by buying individual stocks or options on stocks.

From 2002 through 2007, buying equities or call options on equities seemed to be the way to go.

When times got tough and we saw a broad-based market decline with no place to hide most investors sat by helplessly watching their retirement investments degrade by up to 40%

That’s because they had no way to capitalize on a bear market. That is the beauty of what ETFs offer...a simple way to trade basic stocks in any kind of a market with our goal of maintaining a 100% mechanical selection process.

What you will see detailed here are the resultant system improvements of over 4 years of back testing and 2 years of real -time trading. Halfway through the process the double index inverse funds appeared and as they gained liquidity it required a complete restructuring of the system to take into account the extraordinary opportunities available for leverage, but also gaining an understanding of the pitfalls and using them to our advantage. That’s why it has taken so long to bring this system to market.

As a first time “Pitbull”, I would like to welcome you to our exclusive membership group and encourage your feedback. The art of system development is an on-going process and the best ideas for improvement come from our members.

Enjoy the manual and don’t feel like you are in isolation. The first six weeks after you receive this manual you will be given access to our internet services, including the http://www.etfbully.com website.

By all means, use this period to learn the skills and if you have questions don’t hesitate to give us a call. We want you as a member of our Pitbull Club for life and are here to help you. We’ve heard most of the questions before, so if you don’t see the answer in these pages, give us a shout.

Have fun and “Funds” investing.Henry

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FIRST LET’S DEFINE WHAT AN ETF IS

A basic ETF is an artificial index created to EXACTLY mimic the underlying basket of stocks. That’s why transaction costs are minimal. There is no management fee. Price fluctuates just as the underlying does. As an example, if we look at the DOW -30 stocks, they are represented by an ETF with DIA as its symbol. The DOW is unique in that it is an average, on a price weighted basis of 30 industrial stocks. Most all of the other indexes that have become ETFs are Capitalization weighted, which can have little relevance on true price change.

From a simplistic standpoint If you were to buy all of the stocks in the DOW-30 and average their gains and losses then at the end of the day you would come out with a composite price equaling the sum of all of the individual parts. Divide that by 100 and put it on an exchange and you now have the DIA which can be traded like a stock. Here as an example is part of the constituent list for the DIA and the price weighting given to each stock in making up the Index.

The Dow consists of just 30 stocks, making it one of the least diversified indices around. It is calculated officially on a price-weighted basis like the one below.

In other words, stocks with higher prices are given a greater weighting in the index than lower-priced stocks (regardless of each company's actual size). The calculation behind the actual Dow value you see reported on TV and in the newspaper is quite

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complex, but essentially it is derived by summing up the prices of all 30 member stocks and then dividing that figure by a “magic number.” In an effort to maintain the index's continuity, this divisor changes over time to reflect changes in the Dow's 30 component stocks.

Because the index is price weighted as opposed to market cap weighted, some of the largest firms in the world--including General Electric (GE), Microsoft (MSFT) and Pfizer (PFE)--actually have less of an impact on the Dow's performance than some of the smallest members, several of which happen to sport higher share prices. Because of this, the Dow may not accurately reflect the true impact that these giant corporate behemoths have on the overall market.

Now if you were to instead look at a capitalization weighted index the picture would be quite different.

Both of these methods have obvious draw backs and in testing of over 500 ETFs and their components I find that for timing purposes we are far better off using EQUAL WEIGHTING where every stock has the same influence on the reconstructed index. More on the reasons for this later on when I talk about the construction of signals.

The same is not exactly true for Double and Triple ETFs products. They must use futures, options and other hedge vehicles to attempt to make multiples of the underlying on a very short term (1 day) basis as their goal. Some are better than others and have

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become very efficient even over an extended period of time, but not all ETFs are create equal. Just because an ETF SAYS it is a Double or Triple Index does not mean it will work close to that way for anything but daytrading. These must be constantly evaluated for their efficiency in translating the underlying ETF direction and dynamics...More about this later on as well.

In selecting the ETFs to trade as proxies we have done exhaustive time testing to insure their continued performance. As other products come on the market we will add those to our trading stable as appropriate.

Below is some generic information courtesy of Masterdata.com , an excellent source of data for ETFs. Their service runs about $30 a month for anyone who wants to get into the nuts and bolts of ETFs and their underlying indices.

Why ETFs?

For investors and leading financial advisors, ETFs have become an essential portfolio building tool for numerous reasons. Here's just a few:

Lower Expenses: ETF expense ratios and other built in financial costs are consistently lower versus actively managed mutual funds.

Tax Efficiency: ETFs are renowned for their low portfolio turnover which generally translates into infrequent tax distributions.

Financial Flexibility: ETFs offer intraday liquidity, which means they can be bought or sold when the financial markets are open for business.

Consistent Market Performance: ETFs linked to major market indexes routinely outperform most of Wall Street's actively managed funds.

Mass Appeal: Whether you're a short term investor looking to hedge or a long term investor that wants to diversify, ETFs are powerful investment tools for all types of investors.

Because most indexes and ETFs are not similarly equal weighted, a possible conflict presents itself. For example, using a capital weighted index like the S&P 500 Index with equal weighted composite breadth data could potentially be akin to comparing "apples and oranges".

To address this issue, we recalculate all followed indexes and ETFs as equal weight.

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The process of recalculating each index and ETF as equal weight developed into a much larger project than one might anticipate from the idea's initial conception.

The result of this work is very intriguing. While the overall chart patterns remain basically the same, price moves are generally smoother. A large price move in a heavily weighted component does not overly impact the index or ETF value unless other components experience similar movement. From a technical analysis point of view, equal weighting might be considered the ideal weighting methodology for composites.

ONE STEP FURTHERFor most, that should be sufficient but here at ETFbully.com we

take things one step further in implementing what we feel is an important advance in trend indication.

All ETFs are broken down into their components and then each component of an index or ETF carries exactly the same weight as the next. If 316 components of the S&P 500 Index increase in price for the day with more buying occurring at the ASK price as opposed to the BID price then we can calculate the advancing issues with their commensurate volume accurately instead of simply looking at whether prices were up or down at the end of the day and assigning the whole days volume to that direction as most “On-balance-Volume” systems do. In the latter case substantial errors creep in when there has been rampant selling all day but a rally in the last 5 minutes flips the index marginally positive. This is a technique we have used for years..we believe exclusively, to eliminate the basic problems of all on-balance-volume indicators.

It is a massive undertaking and occupies a server all by itself to handle the data, but we have found it worth the effort. and use it for our PCI crash index as well as other trend predicting elements of our systems.

CHAPTER 2

HOW WE GENERATE THE SIGNALS and why we don’t use traditional technical

indicators

In the last chapter I hinted at some of the things we do that are “different” in approach than most technical traders using traditional indicators. Now I will lay out step by step what we do to generate these signals and why most traditional methods fail. The problems with technical indicators are generic and the reason most folks fail.

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Product Used in Arctic Research Project

I had the idea to “trade” stocks back in 1971 (co-incidentally on the day that I started my first Electronics Company).

Now, for those too young to know (or too old to remember), commissions at that time on a simple purchase and sale of just 100 shares of any priced stock would run you up to $350 each way. Pretty difficult (and most would say crazy) if you said you wanted to buy a stock...hold it for a couple of months (not days) and then sell it again.

Fortunately I had a mentor who was a floor trader who let me trade through his account where the transaction costs were in cents rather than hundreds of dollars, so I had an advantage few outside of the exchange floors could enjoy and it let me “play” in ways that would be impossible in an era of true “Buy and Hold” which was the only sensible way for rational people to approach the markets. There were no options, Mutual Funds, Hedge funds or even Institutional traders the way we envision them today. Institutions were entities like NYU or the Catholic Church, who after buying up most of lower Manhattan had to invest their riches that remained. They would buy stock...Not for the next 5, 10 or 15 years like most investors, but for the next 25, 50 or 100 years. It was a very different time.

Times have changed. The field is level and transactions are performed in microseconds through even the least expensive trading house.

Back in 1971 I traded moving averages and pivot numbers (secret sauce only floor traders new about). Nothing more than logical trading range support and resistance. But following simple protocols you could make a ton of money because nobody else was doing it.

Times have changed with respect to technical indicators as well. A typical trading platform will have 240 different gadgets we can use to take different swipes at the same data to try to beat the other guy.

If you think about it, 40 years later and we still don’t have the single Holy Grail of indicators that would turn on that green light or speak to you in a soft computer female voice (or male depending on your proclivities) telling you that it was ‘Time to buy Motorola”.

Larry Williams has filled at least 3 books with 60 or so oscillators for trading....Shouldn’t there be “just one” by now?

The answer is that technical study by itself doesn’t do it. It took me 25 of my 38 years investing to figure that out. Let’s face it. We only have three basic elements to work with and everyone is

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looking at the same data. we have Price, Time and Volume.

Everyone scrambles to put their name to a proprietary indicator that attempts to manipulate these elements in a slightly different way to produce a result slightly different from the next guy.

The basic failure of all of these systems is simple (but it took 25 years to discover it). THEY ALL USE MOVING AVERAGES. ..

You will see standard deviations (using averages and called Bollinger Bands), MACD, Stochastics, Wilder’s Parabolics, Triple smoothed exponentials, Aroons and Keltner Channels.

The neophyte knows that moving averages are a “gotcha”. If they are too short you get whipsawed and if they are too long you get left in the dust, missing the market turn.

If we as neophytes know this, then why do traders with 35 years experience insist on trying to make them work? Now don’t get me wrong ...they do work...as a matter of fact they ALL work. THEY JUST DON’T WORK ALL OF THE TIME’ and that is where the real expertise lies. Knowing when to use them (in long trend, or when overbought or oversold etc). and avoiding them in periods of flat markets...Well guess what? The Markets are flat 40% of the time. Are you willing to count on a tool that is going to be wrong 40% of the time? But the more intelligent folks are the more likely to gravitate back to them because “There just must be a way to make them work THIS time”.

For the last 18 years I have avoided moving averages like the plague just for that reason. Sure I look at Stochastics (my own secret sauce, a 5,3,3) but only when I am watching for a trend change and I want confirmation. I don’t use Candlesticks anymore even though I studied them for over a year.

I try to look for those areas that are not being monitored by other folks because that is what, for me makes the difference. I don’t want to run with the pack. THE PACK IS INVARIABLY WRONG!.

Which gets us down to what I do use and why this system is different that any other.

1 .I start with ”OPTIONABLE” stocks, options, indexes etc . and I advise you do the same (whether you trade opt ions or not!)

It has been shown that optionable stocks have more investor interest which equates to a better trading vehicle. Generally their prices are more stable and display more investor confidence. By

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using this simple cull we reduce the pool to about 3000 stocks and by nature find stocks that are more liquid. Surprisingly, the average price of a stock with options is just $18.58 vs stocks with no options averaging $30.60. THE VOLUME however tells a different story, with optionable stocks beating non-optionable by 18 to 1. Optionable stocks have an average of 2,2 Mil shares per day and non-optionable just 119,000.

2. I look at ETFs (which are really just proxies) for their components as a basket of stocks, but these “baskets” have some basic problems we will discuss later.

A. The ETFs and Indexes today are a mish-mash. As I explained earlier, we have Price Weighted, Market Capitalization Weighted or Equal Weighted. The only sensible way to treat these (IMHO) is EQUAL WEIGHTED. We are trying to look for a sector move which means an incremental move spread across all of the stocks. Any other type of weighting disguises this. So, if we are looking at the SP500 every stock has a 1/500 weight whether it is priced at $4 or $400. While the index may be moved by a few big cap weighted or price weighted stocks, by removing all weighting we get to see what the undercurrent is across the entire gamut of stocks.

3. I look at “On-Balance” volume for the individual stock components that make up the entire ETF.

Now this is easier said than done. Joe Granville, the father of “On balance Volume” wouldn’t like what I have done to his grand baby, or maybe he would, but here is where he started:

Joe Granville introduced the On Balance Volume (OBV) indicator in his 1963 book, Granville's New Key to Stock Market Profits. This was one of the first and most popular indicators to measure positive and negative volume flow. The concept behind the indicator: volume precedes price. OBV is a simple indicator that adds a period's volume when the close is up and subtracts the period's volume when the close is down. A cumulative total of the volume additions and subtractions forms the OBV line. This line can then be compared with the price chart of the underlying security to look for divergences or confirmation.

CalculationAs stated above, OBV is calculated by adding the day's volume

to a running cumulative total when the security's price closes up, and subtracts the volume when it closes down.

For example, if today the closing price is greater than yesterday's closing price, then the new OBV = Yesterday's OBV + Today's Volume

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If today the closing price is less than yesterday's closing price, then the new OBV = Yesterday's OBV - Today's Volume

If today the closing price is equal to yesterday's closing price, then the new OBV = Yesterday's OBV.

Now the intent is to attempt to ferret out where the buying and selling pressure is, but its weaknesses are obvious. If we have a strong rally day with huge volume, but in the last 15 minutes a selloff occurs and the index we are monitoring goes just slightly negative, then ALL of that volume gets assigned to the negative side of the ledger. Conversely, if we had a real high volume downer and in the last minutes turned slightly positive, all of that volume would be assigned to the positive side of the ledger.

It doesn’t take long to lose track of the true importance of the underlying structure of these potential signals.

Here is the way that I approached it to ameliorate those problems:.

A NEW DYNAMIC VOLUME TREND INDICATOR

I look at EVERY SINGLE STOCK INDIVIDUALLY THAT MAKES UP THE CONSTITUENT LIST OF THE ETF.

That means for the SP500 I keep a running total throughout the day as to whether there was more buying than selling going on. EVERY SINGLE TRADE TICK BY TICK.

Now your first question might be how do I know whether there was more buying pressure than selling pressure on a single transaction? I evaluate the Bid Price and the Ask Price of the trade and if the sale went off closer to the ASK price, then the sellers were willing to hold out for higher price and buyers were willing to pay extra to insure they got those shares. Conversely, if the sale went off at the bid price, then it was the sellers who were willing to move their prices down toward the buyers who were in control, able to force the hand of the sellers to reduce their price.

That then establishes either a positive or negative tick volume which, like Granville’s original idea allowed us to set up with great confidence a more precise measure of where the real power is all day long. With the Buyers or with the Sellers?

Now, at the end of the day we can look at a “losing” day, but we know that “On-Balance’ it was actually a bullish or bearish move for the majority of stock. At that point we simply do a cumulative summation for the next 13 sessions and at the end of that time we now have a pretty good idea of what percentage of stocks are

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advancing ON hidden power or failing despite rising prices. This then allows us to find what I call the “Stealth” Accumulation or Distribution that I have used for many years successfully with the Pitbull Crash Index, or PCI.

At the end of the day I know out of 500 stocks in the SP500 how many are on positive footing (greater than 50% with more real accumulation) and how many are on a negative stance.Using this synthetic On-balance line (really a misnomer, but I can’t think of anything cleverly presumptuous enough ........maybe “The Henry Ford ETF Constituent Power Ratio”), I end up with a high confidence level of trend in play or in flux. I am happy to reap the rewards of the product, whatever it is called rather than to go down into infamy like Joe.

Notice that this is all done without the use of moving averages...Those who have mentored with me know that I absolutely have the greatest of disdain for any indicator using moving averages (meaning all of them) as a primary decision making tool.

Collecting the information.

I do everything in Microsoft Excel. I have been a proponent and Aficionado (if that’s possible) of spreadsheets since the first VisiCalc programs appeared on Apple Computers in the early 80’s. If you can’t do it in Excel it’s not worth doing. I go deep into the bowels and use VBA programming language and macros which most folks don’t even know are there, but they probably have no desire to anyway.

I then collect the information from a DDE source of tick information. You can sign up with Comstock, Reuters, Quotes Plus, E-signal etc and pour the trade information into a spreadsheet on a real time basis and there are numerous commercial programs that will let you collect this information.

By the time we get to about 5 hours into the market day, I have a pretty good idea of what the end of the day result will be, irrespective of price. That is why most of the time I will be able to take a glance and know what the end result will be on market close. There is normally enough of an imbalance that it would be virtually impossible for the dynamics to change so much in the last hour and a half of trading to change the signal at that point.

Seeing as how I have been collecting this information over the previous 13 trading days I also know where each company within the ETF sits in terms of the its positive or negative trend. When it switches from Positive to Negative balance (more than 50% on a negative trend), we then have a sell signal for that ETF and visa- versa.

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IF YOU REALLY INSIST ON DOING IT YOURSELF

A poor man’s approach which won’t have the accuracy but will serve you very well would be to subscribe to an excellent ETF based service at www.Masterdata.com. They are probably the only commercial supplier of ETF constituent data on the internet and update over 545 ETFs on an hourly basis throughout the day. They also provide advancing volume and declining volume by use of a different formula and provide Equal weight closing prices as well as about 40 other measures that you would find fascinating. Each ETF is presented in an Excel file and they have a daily, weekly and monthly file for all 545 ETFs they cover.

They do a superb job with their data and all for the low price of just $30 a month.

While doing a traditional On-Balance-Volume ala Joe Granville won’t provide the accuracy of the signals done they way I do it, You will get very close to the same results that I get.

They have a trend indicator for presumed direction, but it really isn’t very good. They have been threatening to come out with their own switching trade system for a couple of years, but so far no show.

If you are going to go into this much detail you really should take their raw data and do your own analysis. You will find my simple technique to be much more profitable.

Since the “hooks” are there to use their data directly in your spreadsheets, you too can be a system developer par-excellence without having to get into the bowels of Excel programming.

This in its elegance a very straightforward and easy to implement system . It has not been done before because too many folks feel that they have to use the traditional indicators or they are not true “market technicians’. You wouldn’t be able to sell a “Trade Station” type platform without all of its bells and whistles. Practitioners feel warm and fuzzy about having hundreds of indicators to choose from and support their biases. I know there are subscribers of our services who will not be satisfied with these signals, but will want to apply a MACD or Stochastic Process as “confirmation” before buying in, thus destroying the dynamics of the timeliness.. I know it already and can name at least a dozen who will try right off the top of my head. They have a higher IQ than most and just can’t help themselves.

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SO HOW DO WE TRADE THESE SIGNALS?

There are at least 5 different ways we can trade the ETF signals. You can pick a method that suits your temperament for risk/reward and Ulcer Index. Here are the basics.

1. Trade the underlying ETF (Buying when bullish, Shorting when bearish)die. Buy or Short the SPY

2. Buy the proxy for the underlying ETF (Like the the SSO double ETF when bullish or the SDS when bearish)

3. Buy options on the underlying ETF (Calls on the SPY when Bullish, or Puts on the SPY when bearish).

4. Buy options on the Double Index when present.....not all Double ETFs have options yet. (Buy Calls on the SSO when Bullish or Calls on the SDS when Bearish). Because the double ETFs cover both sides of the market, we will always be buying CALL options for the direction we are trading. (We will help here by actually providing the option for you to buy in the daily trading signals).

5. Trade the ‘Best-In-Show” stocks in the individual component lists. Everyday we rank all of the component stocks within the ETF by its performance against the underlying index. ice. for the SP500 we call the SPY “zero” and then rank all 500 stocks by their recent performance. Usually this means that you can find individual stocks that are outperforming by 8-15%. IF you are right on the direction of the ETF, these stocks are the primary drivers for that gain and therefore will consistently give you better gains. They are optionable of course, and so your profit potential increases remarkably for just a little extra work. I like to choose the top 3 (to spread the risk). More on this later with examples.

That’s it....those who like to trade covered calls or butterfly spreads can let your imagination soar, but life it already too complicated and I would rather not pay the “insurance” cost of using these addiitional schemes.

BREAKING IT DOWN

Let’s walk through the whole process....3 Steps

(At this point I am going to assume that you have decided to forgo the development of your own tick-by-tick collection platform and you are going to use our signals. If not ...feel free. It took us a couple of years to get it right. but some folks just like to do it themselves.

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1. Watch for signals notifications after 3:30 PM Ea stern (or use our text/email/RSS service to notify you). You can trade the next morning if you can’t see or trade during the day, b ut you will lose some advantage in returns.

2. Buy or Short the underlying (or buy calls/puts), or buy the Double or Double Inverse ETF (or buy calls/Puts on the doubles-PREFERRED).

3. Hold that position until you receive a signal to reverse.

Note that there are no “Cash” positions. An ETF is either “Bullish” or Bearish”. If you are only comfortable playing to the upside, then only trade when “Bullish” and go to cash for that ETF when they are “Bearish”. There are no stops since this is a “flip-flop” system. Before even seeing the system I have had those that said, “can’t we use a stop”, or “There are a few 1 day trades...can’t we just make a 3 day rule before switching?” WELL....how would you know which trades were just beginning a 30 day rally or were really only good for 3 days...meaning you would be getting in on the day you should be getting out. If you want to limit the trades..Only buy when bullish...You can check out the analysis in the last pages of the appendix which shows both the fixed investment and cumulative investment factor of Long or Short only trades. Pick your poison...and profit level.

NOW IN DETAIL1. Every day at around 3:30 Market Time (Eastern), we will send out

an alert as to the status of where we believe signals will be by the end of the trading day. This is done by posting in a blog at http://etfbull.blogspot.com that broadcasts an RSS message.

For you techies out there there are any number of “feed readers” that can take the url “http://etfbull.blogspot.com/feeds/posts/default ” and automatically update.

There are also services out there that for no charge will send you an email and/or text message to your “Blackberry” or similar device.

We use Pingie.com because of the currently available free services it is the fastest usually delivering email immediately and text messages within 2 minutes of our update. I am sure that in the future there will be more of these and if we see any better we will let you know on the front page of the site at www.etfbully.com.

That message will give you a shorthand notice that there has or has not been a change in signals and which ETF has changed, ice. “ETF SIGNAL FOR 6.19.09 REVERSE SMH TO SHORT (Buy SSG)TO SEE CURRENT SIGNALS: HTTP://www.etfbull.com/esignals.p hp”.

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When you visit the signals page this is a typical display::Notice that on this day there was 1 new “Switch”. The DIA signaled

it was time for a reversal.

2. Depending upon your choice of poison you would either BUY the ETF or options on the ETF or the suggested alternative double shares or their options. In this case, the DDM is the double ETF for the DOW Industrials.

Notice that we give you the suggested option. This is chosen by our options engine at www.stockoptionsignals.com and is the best trading choice at the time of the signal. For current pricing if you click on the option symbol you will be taken to Yahoo for 20 minute delayed bid/ask pricing. For order placement of course you want to consult your trading platform for the latest up to date pricing. The purpose is to get you in the ball park.

If you want to see what the ‘Signal” ETF is doing click on the name of the ETF in the second column and you will be taken to a 1 year chart.

It is important to note that for some trades we will recommend trading a different vehicle than the one that gave the signal. This is because the signal ETFs have been chosen for their predictive value...not necessarily for their trading potential.

Here is a list of what we recommend to trade:

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Single ETF Share Trading

Dow Industrials-Use the DIA (put/call options available)

SP500-Use the SPY (put/call options available)

Banking Index-Use the KBE (put/call options available)

Nasdaq Tech Index-Use the QQQQ (put/call options available)

Oil Index-Trade the XOI (put/call options available)

Gold -We use the HUI for our signals but trade GLD (put/call options available)

Semiconductors-Trade the SMH (put/call options available)

Real Estate-Trade the IYR (put/call options available)

Materials-Trade the XLB (put/call options available)

Double share or ULTRA share trading

Dow IndustrialsBullish-Trade the DDM (CALL options available)Bearish-Trade the DXD (CALL options available)

SP500Bullish-Trade the SSO (CALL options available)Bearish-Trade the SDS (CALL options available)

Banking IndexBullish-Trade the UGY (CALL options available)Bearish-Trade the SKF (CALL options available)

Oil IndexBullish-Trade the DXO (NO OPTIONS AVAILABLE YET)*Bearish-Trade the DTO (NO OPTIONS AVAILABLE YET)*

GoldBullish-Trade the DGP (NO OPTIONS AVAILABLE YET)*Bearish-Trade the DZZ (NO OPTIONS AVAILABLE YET)*

SemiconductorsBullish-Trade the USD (CALL options available)Bearish-Trade the SSG (CALL options available)

Real EstateBullish-Trade the URE (CALL options available)Bearish-Trade the SRS (CALL options available)

* As and when options are available on these double indexes we will list them or change the tradable product.

3. Hold the position until a reversal signal is given

DO IT AGAIN A COUPLE OF HUNDRED MORE TIMES !

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A FEW WORDS ABOUT OPTIONS

On the signals page you will see two columns of options to the right of the profit and loss columns.

The first Options column is for the underlying (in the example the DIA shows an option “BQDLA” . This is an option for a December 79 CALL and by clicking on the symbol itself you get the current bid/ask price. (Available 20 minutes delayed, so if buying you have to check with your broker anyway, but it does get you in the ballpark).

When you click on an options symbol you will get a display like the one below that shows you the current (20 minute delayed) options Bid/Ask price. We have gone to a lot of trouble to find this best option for you, using our proprietary OptionsMizer engine that knows the way we like to trade (more on that below). You also get to see the current price of the underlying ETF over in the box on the right of the page.

If you are trading the underlying then you will need to buy a PUT if bearish and the proper symbol will automatically be provided to you by the signals page.

Note that on some issues like the HUI and the XOI, the option will not be on the underlying ETF, but rather on another ETF which uses the predictability of the signal ETF, but actually gets better gains. This may be happen for a number or reasons, liquidity, lack of options, or just better performance in our testing. If we need to change these vehicles the appropriate option will be presented. As an example for the HUI we actually trade the GLD ETF. Both have options, but the GLD perform better, so we provide the appropriate GLD Call or Put when needed. This is the results of years of testing to find not only the best predictor, but the best performer for a given sector.

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Our preferred method of trading is to use the second column which is options on the DOUBLE INDEXES. While the 2X don’t always perform double the 1X index, they do generally perform better (I have comparison tables in the appendix).

Again, you can click on the symbol and it will give you the latest 20 minute delayed bid/ask prices.

There are a number of other strategies we are exploring and once we have the hard data I will share them with you for those that really enjoy digging into the nuts and bolts. For now just keep it simple and let’s make some money.

For those who have not traded options before, some words of caution and encouragement.

I have not traded an equity in probably 15 years now. Done properly I believe that options actually carry less risk than the underlying stock.

There are dozens of options courses you can take that run anywhere from $1500 to $7500 that all basically teach you the same thing...How to lose your money less slowly.

By the time newbies reach 6 months 93% will never trade an option again, giving up their dreams of easy riches.

Of course we will still be around, and in a game that has 93% losers that means 7% of traders are keeping all the money...THAT’S WHERE WE WANT TO BE!!!.

So what goes wrong?

Initially everyone is obsessed with the fair value of the option as it approaches expiration. You are taught to look for “cheap” mispriced options that will hopefully double their money in the last 3 weeks.

And so you plunge for 10 contracts of Acme Rubber that is out of the money with 3 weeks to run. At 35 cents each, that equates to $350 to control the equivalent of 1000 shares of stock.

Three weeks go by and your mispriced option is now worth 70 cents on expiration day. You doubled your money and now you kick yourself for not buying $7500 or $10,000 worth.

The only problem is that will be the last time you will be “lucky enough”, or “talented enough” to pick a winner and

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just like first time Vegas gamblers you never win again.

I could care less if an option is mispriced. I don’t want to hold it to expiration...I only want to ‘Rent” it for a while and then I want to sell it to somebody else so THEY can hold it to expiration.

I buy options that are at least 3-4 months away from expiration and I will NEVER hold it closer than 1 month to expiration. I do this even if I only expect to be in the trade for a month. I have to pay a premium to buy it this many months away, but I will get most or all of the premium back when I sell it to the next sucker. By renting the stock by buying options this way I am just using the option as a “proxy” for the stock and I get to get the gains without the obligation. My risk is totally limited to my investment.

The number one mistake folks make in buying options (outside of buying too close to expirations so they are forced to liquidate or take a total loss) is investing too much in the option.

When you get a chance look at the Wealth Lab study on the last pages of this book and understand that these returns are on the equities WITHOUT the use of options.

let’s say that I was going to buy $10,000 of each ETF. If I bought all 9 ETFs that would be a total of $90,000.

Now let’s say that instead I took just $9000 or 10% of that capital and invested it in options to control the same number of ETF shares.

If I lost every single position through some fluke of bad luck or maybe Goldman Sachs declaring bankruptcy I would lose a total of $9000. If I used a 10% stop on the $90,000 equity position I would lose $9000...a wash, but I only risked 10% of my capital to do it and live for another day.

By buying far into the future you get the majority if not all of your premium back AND you get the gains you were looking for without the risk.

Most people look at daily options fluctuations and get strange beasts crawling around in the pit of their stomach. BUT...If you evaluate your losses in terms of the fraction you have invested there is no reason to lose sleep. A position that you invested 10% ($1000) of what you would have put into the equity ($10,000) that loses 30% on the option really cost you just 30% of $1000 or $300. (read that again and say

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it real fast 5 times). That means I would have actually lost just 3% of my total available capital. I can do that all day....DO NOT OVERINVEST! Buy enough to return to you what you would expect to make on a stock-only purchase. There is enough compounded leverage in the system to make everything you need. (again...look at the profit analysis at the end of the book, both compounded and non-compounded)

If that all makes your head swim and you don’t want to ‘Leap” into options then just note the bid/ask price when you buy the underlying and track what your potential profit/loss would be if you traded options. You will soon become a believer.

HOW ABOUT THIS BEST-OF-CLASS BUYING?

What is it, how can I find it , what can I do with it and why?

Let’s say that we get a signal to BUY from HUI. We know that there are 15 stocks within the HUI so this “Basket” allows us to spread the risk among 15 stocks so we can’t get into too much trouble.

The problem is that we have bought into the mediocrity of the index. while we have some hot performers (leading the pack) we also know that there is probably a dog or two in there as well and that is going to degrade our overall performance.

The question always is, or at least always use to be for me, 'How do I pick the best stock within a sector to purchase'

Intuitively I know that in a sector that has 18-30 stocks typically, you have some superstars and you have some dogs. What we want to find out is typically, how have the individual stocks performed when the sector has been rallying and pick the best of those stocks. If we buy the entire sector, which is certainly easier, then we are buying the dumbed down version that includes the "dogs" as well, thus lowering the returns the average.

Out of 20 stocks within the ETF you probably have a half dozen that are the real barn-burners that are responsible for most of the gains. Back in November 2007 the Nasdaq Tech index was up 26% for the year. 76% of the gains in that 100 stock index were from just 4 stocks (AAPL, GOOG, AMZN and RIMM). That means that if you bought the QQQQ you had at least 3/4 of the stocks that were underperforming and pulling down the performance of the ETF.

So how do you find those AAPL,GOOG, AMZN and RIMM stocks when the market is telling you momentum is to the upside? I use to teach my mentoring students a technique for comparison charting, guesswork: I have a video and written writeup on doing this manually, and if you would like it drop me a line and I will forward it to you.

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But I think you will like this tool a little better as I developed it specifically for this system but it can be used for any of the sectors. and it is simpler and even faster.

By clicking on the “Components” link at the top of the report page you will be presented with a table like the one below for each of the ETFs we are following.

On the right hand side I have listed all of the stocks in the ETF in alphabetical order including the name of the index. This makes it easy to look up a specific stocks, such as MON in the SP500 and see where it ranks as compared to all of the others. (More about this in a minute).

On the left however I have listed all of the same stocks, but this time ranked from that with the best momentum score to worst. In the list above notice that the ETF itself has a rank of “Zero” and it is in 11th place. We always use this as our benchmark and you can see that there are 8 stocks underperfoming the ETF and 10 stocks besting it. The top 3 are each above 10% while the bottom 3 range from -3 to -7.7%.

I want to spread the risk, so I would buy NVLS, KLAC and AMKR.

Any one stock can always run into trouble, so I have always opted to buy 2 or 3 of the best and if one gets into trouble (like in the Pharmaceuticals with a drug trial or law suit) the others benefit as they take up the slack and investor pool.

An example that describes this with clarity comes from the PPH group. Pharmaceutical companies are notorious for suing each other over alleged patent infringements. Pfizer sues Merck and Merck drops 12%. Lilly doesn't get FDA approval because a new trial study gave 15% of patients cat-scratch-fever....Lilly drops 15%. If you bought the

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top 3 holdings the two you keep will probably make up for the one you lost and with options it gets even sweeter. DID I SAY OPTION?

YEP...You will notice that there are diamond shaped devices in the column next to the ranks on the left hand side. By clicking on the appropriate diamond you are going to be taken to our OptionsMizer engine and we will give you the best options to buy RIGHT NOW!. (Note...the best option might change every day, so don’t expect to see the same option listed there that you bought the previous day).

I still advocate buying more than one of the leaders in no matter what sector you may trade as there are always the occasional slips and if you put all your eggs in one basket you lose all the eggs ....particularly if you play options. But if just one of your 3 slips, the others will usually pick up the slack with even better performance.

How are these stocks ranked you say? We look over the last 10,15,20 and 30 days and weight the gains in each of those ranges with the heaviest weighting to the last 10 days and then halve the gains for each successive period. Add them all together and then rank each stock against the index...It is as simple as that. You generally will see 15% better gains using the “Best-In-Class” stocks as opposed to simply buying the ETF.

This system normally is too volatile to chase and there is not any time to wait for a confirmation. You will notice in the closed trades list that the average trade length is about 12 days, but there are quite a few trades that only last 1-4 days. Right now we are in an across the board decline which is market driven, not sector, so without doing some underlying analysis it would be counterproductive. The idea was to provide folks a completely mechanical vehicle. If you have the skillset to reliably forecast market trend you could pick and choose which signals to take and when, but for most that defeats the proposition of removing emotion from trading.

The usual legal stuff our attorneys make us say:The financial markets are risky. Investing is risky. Past performance does not

guarantee future performance. The foregoing has been prepared solely for informational and

educational purposes and is not a solicitation, or an offer to buy or sell any security.

Opinions are based on historical research and data believed reliable, but there is no

guarantee that future results will be profitable.

Pitbull Investor LLC, W.H. Ford or their assigns do not represent themselves as acting

in the position of an investment advisor or investment manager for funds that are not under

their direct control and fiduciary responsibility.

ON THESE NEXT FEW PAGES YOU CAN FIND EXAMPLES OF TA BLES YOU WILL

FIND ON THE SITE UPDATED NIGHTLY AS WELL AS AN INDE PENDENT WEALTH LAB

STUDY:

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TESTING PROCEDURES AND PERFORMANCE

Below is a box score of recent performance since early 2007. Note that these gains are computed from just the signals given on the basic ETF, not the double indices or the options on either. You can find an up to date table on the site

which you can access at any time. We picked the period from January of 2007 so that it would encompass a raging bull market until November 2007 when the market began its horrific slide leading into the recovery rally off of the bottom that began in March of 2009. In back testing we have data going back to 1993 for some of the ETFs, but we settled on January of 2007 because we had data on the ones we currently have going back through that period. Our out of sample data development was made on the QQQ and the SPY going back to the early 90’s.

All of the ETFs use the same algorithm. There has been no optimization or “custom tailoring” from one ETF to the other.

Development was done on a fixed set of SP500 data because that is what I am most familiar with, having day traded the SP500 large contract for years. For the sample data I used from '93 through April 2008 so that I would have 3 bull markets and 2 good bear markets with lots of flat spots which you all know are the hardest to trade. The trades were not optimized for that period.

Once I was happy with the results I ran the system on

sp500 data going back to 1966...4 years before I started as a trader/systems developer. Only then did I run it against the other 8 ETFs you see WITHOUT any modification or compensation for the sector being traded. I only took the

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history for the rest of the ETFs back to 2007 because that was the first time there were viable and tradable ETFs for across the board "apples to apples" with sufficient volume.

I myself only trade options and so the selections had to be

optionable. That is why you see the ETFs with only optionable proxies like the QID/QLD etc. In general, whether you trade options or not you are better off with an optionable instrument since there is more interest and liquidity.

I will add more ETFs as they become viable. The BRICs

are of particular interest, but there are no vehicles which meet my standard yet.

I will be making many more changes to the system and I

encourage your comments and criticism. I have been doing this (trading system development) since 1971 and even though I retired at 47 I have a passion for it and put in more hours than I ever did. Please let me know things you might like to see added and I will add to my "to do" project list if they are most useful to all.

I have about the only historical database for options and

have collected over 10 years of strike by strike bide/ask prices for every option written. I collect them into my database at the rate of about 330,000 strikes a day and can look up any date in the history in seconds.

Open to suggestions and comments. You can sign up for 'Pingie" trade alerts for free on the site and receive emails or text messages when we have new signals change.

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The following pages represent studies done both in-house and by others to get a flavor for the performance goals.

This first table is a summary comparison of Buy & Hold vs Buying and Shorting the SPY vs Buying the SSO and SDS on position switches and the last two columns represent options returns. There is minimal difference between the 1X and 2X options, but the 2 X options were on average about 1/2 the price. For the period of this study we limited ourselves to the period going back to November 2007 when the first double index options were available with sufficient liquidity to become reasonable trading vehicles.

On the next page we have a typical historical trade record from the site starting in January of 2007. This is kept current daily and a box score is located at the top. Rather than list all of the histories we will give an example of the SPY and you can check on the website for all of the others.

Notice at the top we have a box score that shows that over the period the gains for the SPY traded long were 77% and traded short were 131%. These are NOT the double index funds nor options trades.

83% if long trades were profitable73% of short trades were profitableThe Gain for Longs only were 77.9%The Gains for Shorts only were 131.9%Total Gain then for 80 trades was 254% for the period.

Immediately following is a Wealth Lab analysis of ALL of the ETF trades for all sectors.

This study was actually made for an online trading group and when I discovered it I wrote the author Kevin Sheehan for permission to publish it.

It is actually a much more detailed report with trade by trade analysis which is far too big for this document. For those interested email me at pbinvestor@gmail.com and I will be happy to forward you a copy.

Warm regards and have Funds trading!

Henry Ford

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Here is the setup for PINGIE.COM to make sure that you get your 30 minute heads up for end of the day trading.

Note: You must enter your Email and A PHONE NUMBEReven if you don’t use text messenging. You can select

once you register how you would like to be notified.

Their system is smart enough to know whether or not a phone number is capable of text messaging and will not call you.

Make sure you enter our RSS address exactly as shown in the example below.

We have tested a half dozen of these free notification systems and while this one doesn’t have as many features as others, it usually delivers messages within 2 minutes of my sending out the alert. Other competing products have taken anywhere from 20 minutes to an hour. If I do find a better , more reliable and more fullfeatured service in the future you will be given instructions on the web site for the new source.

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