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October 3, 2010. Last week saw a high-level corrective process, where prices gave little ground but the market internals rebalanced considerably after the September advance. The Model Line hooked down a bit in the week, but remained at a high and positive level. With this corrective action, our mean-reverting short-term overlay came very close to increasing its market exposure to maximum long, and it is quite likely that this will occur this coming week. Clients will be advised by e-mail. Due to travel, I will not be able to update the website and charts next weekend (Oct. 9-10). Bill will stay in touch on a daily basis as usual. These commentaries will resume on the weekend of October 16-17 (wek). September 25, 2010. The KP Trend Model is again solidly positive, although the equities markets have shown no extended trends for the year so far. For example, the 200-day moving average for the S&P has been remarkably flat at around the 1100 level, give or take five points, for six months. While a long trendless period does not guarantee an imminent trending episode, that has been the historical precedent. The current trend is positive and the short-term indicators are neutral. September 18, 2010. The internal data were positive every day last week, not enthusiastically so (as for example at the March, 2009 liftoff) but positive nonetheless. The Model line has now pulled comfortably up and away from the "zero" line, which means that it would take more than a few down days to reverse the Model's bullish anlysis of the underlying trend. The oscillators are still generally overbought and thus continue to suggest less than a full commitment to the long side. September 12, 2010. As discussed in our e-mail updates during the week, the KP Trend Model shifted to positive on Friday, September 10, as the charts demonstrate. On a swing basis (2-3 week time horizon), the equity markets remain overbought and vulnerable to a near-term pullback. Since the Model line will remain in the neutral zone this week, we will monitor the new signal closely. Equity markets have experienced considerable day-to-day volatility in recent months, but the underlying trend has been very flat, generating a series of short-holding period signals which, by the nature of the process, are likely to result in small losses. Such small losses are the "price" extracted by a sophisticated trend identification discipline which – in the long run – generates long positive tails and truncates negative tails in our investment return patterns. That is the basic value proposition of our approach and it is illustrated by this chart . September 4, 2010. Despite the three-day rally at the end of last week, our Model remains negative / hedged. The short-term studies have become overextended (overbought), suggesting some weakness immediately ahead in the post-holiday week. However, any further strength from these levels would be quite likely to lead to a shift to a positive status. We will keep clients closely apprised. August 29, 2010. The Trend Model remains negative. The past week was quite volatile and our KP-2 Oscillator reflected that.

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