Trade Alert - July 30, 2006

Model Portfolio Allocation Changes- This Week

Models Turn Bullish ... Once Again

Against an increasingly bearish backdrop (including a new war in the Middle East), the stock market staged a surprising recovery in the past two weeks. The recovery was strong enough for our models to reverse the bearish signal from two weeks ago that caused us to reduce allocations to the market. This weekend, the models have moved back to a moderately bullish posture in stocks and also triggered a new BUY signal for bonds.

Longer Term 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 also 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. Since the market has now been able to recover from two separate excursions below the 1245 support level, the bullish case has been strengthened. But even though the models have turned moderately bullish again, we are increasingly skeptical of this market and wary of the risks. Our longer-term indicators that measure the underlying balance between supply and demand in the stock market have shown very little improvement. And the new war in the Middle East has heightened uncertainties.

See-Saw Market: If you are frustrated by the models' reversal of a signal issued just two weeks ago, reducing allocations and now increasing them again, remember that the fundamental principal behind the models' logic is risk management. They are quick to reduce allocations when the market shows signs of falling out of a sustained bullish trend. But they also follow the market's movement closely and are quick to respond positively to a new bullish trend. This back-and-forth trading may seem inefficient at times and result in selling near the bottom of short-term corrections. But this inefficiency in the short run is more than made up for in the long run by the models' ability to lock into the longer-term trends early. It helps to ensure that the portfolio capitalizes fully upon each significant bullish uptrend and avoids significant loss during the downturns.

If the market doesn't follow-through here on the recent recovery and rolls over into a renewed downtrend, the models will reduce allocations again to protect the portfolios.

Changes in the Performance Xtender : This model has triggered an increase in the allocation to Large Cap stock funds from 40% to 80% of the portfolio. It has also triggered a BUY signal in the Real Estate sector fund for the remaining 20% of the portfolio .

Changes in the Max Xtender: This model triggered an increase in exposure to LargeCap stocks from 50% of the portfolio up to a leveraged position of 1.5 to 1.

Note on Real Estate Sector Fund: This type of fund invests in a diversified portfolio of Real Estate Investment Trust (REIT) stocks. Most of these stocks are very well capitalized and sport investment grade bond ratings. As a group they hold commercial real estate interests covering areas such as office buildings, apartments, retail malls, commercial warehouses and hotels.

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
INCREASE LargeCaps	40%	RYZAX	40%	BLPIX	40%	SPY
BUY Real Estate Fund	20%	RYHRX	15%	REPIX	20%	IYR
Corporate Bonds, or Money Market	Exit the money market fund position. ProFunds investors should have a small 5% position remaining in money market funds.

New Model Portfolio Allocations	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
LargeCap Stock Fund	80%	RYZAX	80%	BLPIX	80%	SPY
Real Estate Fund	20%	RYHRX	15%	REPIX	20%	IYR
Corporate Bonds, or Money Market	Money Market Funds: 0% (ProFunds investors only: 5%)

'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
BUY Lev'd LargeCap	50%	RYTNX	50%	ULPIX	100%	SPY
Corporate Bonds, or Money Market	ETF Investors: Note that the SPY position should now be leveraged 1.5 to 1.

New Model Portfolio Allocations	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
UnLev'd LargeCaps	50%	RYZAX	50%	BLPIX	150%	SPY
Lev'd LargeCaps	50%	RYTNX	50%	ULPIX	-
Corporate Bonds, or Money Market	.