Week of 4-6-2008

Timing Model = 4.5

100% long, 0% cash

Global allocation of long positions

MSCI EAFE Index 30%

MCCI Emerging Markets Index 30%

Russell 3000 Index - U.S. 40%

Top U.S. Sectors

U.S. Oil Equipment, Services & Distribution 5.0

U.S. Biotechnology 4.5

U.S. Oil & Gas 4.0

U.S. Semiconductor 3.0

Precious Metals 3.0

U.S. Basic Materials 3.0

U.S. Industrials 2.5

U.S. Real Estate 2.0

U.S. Leisure Goods 2.0

U.S. Technology 2.0

Top Intl. ETFs

S&P Latin America 40 Index Fund 3

MSCI Brazil Index Fund 3

MSCI Taiwan Index Fund 2

MSCI Mexico Index Fund 2

Strategy 3

Money Market 20.0%

Agriculture 20.0%

Precious Metals 20.0%

U.S. Long Bonds 20.0%

Industrial Materials 20.0%

Emerging Markets 0.0%

EAFE 0.0%

U.S. Large Cap 0.0%
U.S. Small Cap 0.0%
U.S. REITs 0.0%

Although the Value Line composite has breached it's 75 day moving average, giving notice of a possible trend reversal, the sentiment indicators are really the driving force behind the strength of my timing model. Sentiment indicators are most bullish when they are rising from the abyss of extreme pessimism, which we saw in early March. The question now is how long will this ascent last before we reverse course?

During the 2000-2003 bear market (above) we saw market recoveries lasting anywhere from one to three months. The 1973-1974 bear (below) produced rallies of similar duration. If you have a short/intermediate orientation, the key to playing these rallies is to be very nimble and execute on your timing indicators quickly. If your orientation is long term, you should be aware the indexes can perform well up to three months, even in the nastiest bear markets.