October 25, 2022: We are recommending the following changes…

• Exit the 2% position in the Materials Select Sector SPDR ETF (symbol: XLB).

The rally of the past several days has carried our Pressure Factor to the second-most overbought reading of the past decade at +96. In addition, while this rally may appear “strong” on the surface, internal market breadth and leadership is remarkably narrow.  As an example, there were over 300 new yearly lows on the NYSE yesterday, and over 400 on the NASDAQ Exchange!

Based on these developments and the evidence presented in last Friday’s issue of InvesTech Research, we believe the bear market is still intact, and the risk of a sharp sell-off has increased. Consequently, we are incrementally increasing our defenses with this change in the Model Fund Portfolio. Today’s trade brings the Model Fund Portfolio to a “net” invested allocation of just 38% (50% long positions and 12% in an inverse index ETF). The remainder of the portfolio (38%) is held in short-term Treasurys or a money market fund.