January 13, 2023: We recommend the following trades in our Model Fund Portfolio:

• Exit the Direxion Daily S&P 500 Bear 1X ETF (symbol: SPDN).

The decisively negative message from our technical indicators over the past year helped us to avoid the majority of bear market losses in 2022.  Yet, we have new and potentially bullish technical developments that have emerged to start 2023.

First, a Breadth Thrust has been triggered, as advancing stocks have outnumbered declining stocks on the NYSE by more than a 2:1 ratio over the past 10 trading days. Additionally, the bullish Selling Vacuum component of our Negative Leadership Composite (NLC) has materialized for the first time since 2021 – although it has yet to cross its +20 signal level. Historically, stock market returns following the combination of these two bullish signals have been quite strong. As a result, we are exiting the Direxion Daily S&P 500 Bear 1X ETF (symbol: SPDN).

While we remain cognizant of the risks in this market, these important changes to the weight of the evidence warrant careful consideration.  After today’s trade to remove the inverse index fund position the Model Fund Portfolio has an invested allocation of 50% with defensive sector positioning, and the remainder of the portfolio (50%) is held in short-term Treasurys or a money market fund.