Trade Alert - December 24, 2006

Model Portfolio Allocation Changes- This Week

Models Turn Defensive After Fall Rally

After a fierce 5-month rally with hardly a minor correction, the market is finally showing signs of slowing momentum. The recent leadership of technology and smallcap stocks also broke down as both sectors under-performed largecap stocks in the past week.

There has also been renewed deterioration in most of the technical statistics followed by our models that gauge the underlying demand/supply condition of the market. While this fall's rally succeeded in erasing much of the very serious deterioration we had seen in these statistics earlier this year, some of these measures never fully recovered. And the past few weeks have not been favorable ... enough so that the models have triggered an anticipatory defensive reduction in stock market allocations.

Although our models are primarily trend-following, their logic allows for anticipatory moves under certain conditions. The last time we saw such a move from the models was April 10th of this year when the models ratcheted back allocations 3 weeks in advance of an intermediate high in the market, just preceding a major 3-month correction.

The Performance Xtender model has also triggered the sale of all three of its market sector positions -- Energy, Precious Metals and Real Estate. The model moved into these sector investments only 2 weeks ago on a simultaneous breakout in each sector from previous corrective sequences. Still trading in unison, all three sectors have suffered reversals and have been stopped out of their allocations in the portfolio.

We present a chart of the Energy sector below to show the recent reversal following the breakout above resistance set by the previous high in the corrective sequence (blue line). The reversal creates a "failed breakout" pattern that is typically very bearish and would suggest the initiation of another round of correction in the form of a sharp drop.

Portfolio Changes in the Performance Xtender: This model is selling its previous 10% allocations in each of three sector investments-- Energy stocks, Precious Metals stocks and Real Estate stocks (REITs). Sale proceeds will be invested in money market funds, reducing the overall stock market allocation to 70%.

Portfolio Changes in the Max Xtender: This model is selling 1/2 of its previous allocation in a leveraged LargeCap fund and creating a new 50% allocation in a standard, unleveraged LargeCap fund. The effect of this transaction is to reduce leverage from 2-to-1 to 1.5-to1.

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
SELL Energy stocks	10%	RYEIX	7%	ENPIX	10%	XLE
SELL Gold stocks	10%	RYPMX	7%	PMPIX	10%	GLD
SELL Real Estate	10%	RYHRX	7%	REPIX	10%	ICF
Corporate Bonds, or Money Market	Invest sale proceeds in money market funds.

New Model Portfolio Allocations	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
LargeCap Stock Fund	70%	RYZAX	70%	BLPIX	70%	SPY
Corporate Bonds, or Money Market	Money Market Funds: 30 %.

'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	50%	SPY
BUY LargeCap fund	50%	RYZAX	50%	BLPIX	-	-
Corporate Bonds, or Money Market	ETF investors should sell 1/4 of their SPY position to reduce the leverage factor to 1.5 to 1-

New Model Portfolio Allocations	Rydex Funds		ProFunds		ETFs
	Allocation	Ticker	Allocation	Ticker	Allocation	Ticker
Lev'd LargeCaps	50%	RYTNX	50%	ULPIX	150%	SPY
UnLev'd LargeCaps	50%	RYZAX	50%	BLPIX	-	-
Corporate Bonds, or Money Market	ETF Investors: Note that the SPY position should be leveraged 1.5 to 1.