Trade Alert - July 16, 2006

Recommended Portfolio Allocation Changes- This Week

Models Reduce Allocations to Stocks

The market's recent rally attempt has failed with the S&P 500 index closing back below the critical support level at 1245 before it could close above 1290 which would have given us positive confirmation of the previous, bullish "failed breakdown" signal on June 29th. This development negates the potentially bullish signal and portends further downside in the coming weeks.

The deterioration of the market's internal condition, as measured by a battery of statistical indicators, has also triggered another reduction by our models of US stock market allocations. The models first started to dial back risk and reduce allocations in mid-April before the market's peak in May. Now the models are taking the second step and becoming even more defensive.

Bearish Warnings: Our longer-term analysis of the market's condition has been increasingly cautious in recent months because of the steady deterioration in a battery of technical indicators that gauge the underlying health of the market. If you have been following this newsletter, you know that we have been concerned about the potential for a new bear market to begin soon. We have recently discussed the importance of the 1245 support level on the S&P 500 index in terms of signaling whether the bull market is still in force or whether a bear market may be beginning. So at this juncture, we will be watching to see if the market can quickly recover and stage another break back above 1245 or whether last week's breakdown below 1245 will be sustained. If the breakdown is sustained, we will be much more concerned that a new bear market could already be in force.

Changes in the Growth Portfolio: This model is reducing risk through a 50% reduction of its previous 2/3rds allocation in LargeCap stocks. The proceeds will be invested in money market funds. As a result, the portfolio's exposure to the stock market has been reduced to 33%.

Changes in the Conservative Portfolio: This model has already reduced its stock market exposure to 34%. At this point in time, the model is going completely to cash with an outright sale of the remaining 34% LargeCap allocation. As a result the model is now 100% in money market funds.

Recommended Portfolio Allocations

Model Portfolio Details

The tables below provide the percentage allocation details and mutual fund ticker symbols for investors following the Model Portfolios by using funds from either of the Rydex Investments or ProFunds mutual fund companies -- or alternatively, investors using exchange traded funds (ETFs).

'Conservative Portfolio'

(A model portfolio that invests selectively in stock market index funds, a bond fund or money market funds, depending on current market trends for each type of investment. The allocation mix is designed to minimize potential losses while capturing most of the upside appreciation during strong, bull market conditions.)

Recommended Changes for this week	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
SELL LargeCap Fund	34%	RYZAX	34%	BLPIX	34%	SPY
Corporate Bonds, or Money Market Funds	Invest proceeds of sale in money market funds.

New Recommended Portfolio Allocations	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
-	-	-	-	-	-	-
Corporate Bonds, or Money Market Funds	100% MONEY MARKET FUNDS

'Growth Portfolio'

(A model portfolio that invests selectively in stock market index funds, a bond fund or money market funds, depending on current market trends for each type of investment. The allocation mix is designed to avoid significant losses during bear markets and also beat the market during bull markets.)

Recommended Changes for this week	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
REDUCE LargeCaps	33%	RYZAX	33%	BLPIX	33%	SPY
Corporate Bonds, or Money Market Funds	Sell 1/2 of the 66% largecap allocation to reduce it to 33% and reinvest sale proceeds in a Money Market fund.

New Recommended Portfolio Allocations	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
LargeCap Stock Fund	33%	RYZAX	33%	BLPIX	33%	SPY
Corporate Bonds, or Money Market Funds	67% MONEY MARKET FUNDS