Trade Alert - July 16, 2006

Model 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 Performance Xtender : This model has triggered a reduction of the allocation in Large Cap stock funds from 80% to 40% of the portfolio. The remaining 60% stays in money market funds.

Changes in the Max Xtender: This model triggered a dramatic reduction in exposure from a 1.5 to 1 leveraged allocation in LargeCap stocks to 50%.

New Model 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).

'Performance Xtender'

(A model portfolio that invests selectively in stock market index funds, plus certain market sectors such as Energy, Gold and Real Estate, and in an Inverse Fund ("Bear Fund"), depending on current market trends for each type of investment. The allocation mix is designed to beat the market significantly during both bull and bear markets with only limited risk of volatility.)

Model Portfolio Changes for this week	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
REDUCE LargeCaps	40%	RYZAX	40%	BLPIX	40%	SPY
Corporate Bonds, or Money Market	Sell 1/2 of the LargeCap allocation and invest proceeds in a money market fund.

New Model Portfolio Allocations	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
LargeCap Stock Fund	40%	RYZAX	40%	BLPIX	40%	SPY
Corporate Bonds, or Money Market	Money Market Funds: 60%

'Max Xtender'

(A model portfolio that invests selectively in stock market index funds and in an Inverse Fund ("Bear Fund"), depending on current market trends for each type of investment. During strong market trends ... either bullish or bearish ... the model uses up to 2-to-1 leverage to magnify returns. The allocation mix is designed to beat the market substantially during both bull and bear markets but results in a relatively high risk of volatility.)

Model Portfolio Changes for this week	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
SELL Lev'd LargeCap	50%	RYTNX	50%	ULPIX	100%	SPY
Corporate Bonds, or Money Market	ETF Investors: Note that the previously 1.5 to 1 leveraged position should be reduced to a net 50% position. Sale proceeds should be invested in money market funds.

New Model Portfolio Allocations	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
UnLev'd LargeCaps	50%	RYZAX	50%	BLPIX	50%	SPY
Corporate Bonds, or Money Market	50% Money Market Funds.