V2 Model January 5, CHANGE

Hello:

RECAP

A mixed market turned into a weak market on Wednesday after the FOMC Minutes highlighted a more aggressive stance on policy normalization. The Nasdaq Composite and Russell 2000 both dropped 3.3%, the S&P 500 dropped 1.9%, and the Dow Jones Industrial Average dropped 1.1% after setting an all-time high in early action. V2 is down a bit over 6% to start the year.

The V2 Model with our long allocation was down significantly today. The TQQQ Ratio has crossed. The SOXL and UPRO Ratios have NOT crossed but they had a significant loss in momentum. As such we will make two changes during the session tomorrow. We will sell TQQQ and SOXL.

On the positive side of the ledger: The VIX stayed below 20 and nearly all long-term uptrends are intact. We will be watching carefully to see this is one-time volatility or if the market morphs into a full-on correction. That might give us the opportunity to go short. We will also review all potential holdings that benefit from rising interest rates.

CHANGES

Sell TQQQ

Sell SOXL

V2 ALLOCATION

UPRO (35%)

CASH (65%)

NOTES

This is not the way we hoped to start the new year. We have known for many months that the evolution in interest rates would have an impact on us. But our plan and methods do not change. If this type of volatility makes you nervous or stresses you out, I would suggest you decrease your overall investment allocation to V2.

PLAN

Our plan going forward. Market trends may change and they may change rapidly. We will stay nimble and be vigilant to changes in either direction. We will follow the math.

Chris

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