There are CORE FACTORS that determine the long-term trend and value of stocks.

The CORE FACTORS consist of several economic and financial market indicators.

Long-term relationships between stocks and the CORE FACTORS may be analyzed using statistical techniques.

The model generates a long-term Trend Value for the S&P 500 INDEX and compares that to the current, actual market value of the S&P 500 INDEX. *

While daily news affects short-term and intermediate-term market trends, the daily news is only important in this model if it is expected to have a meaningful effect on the long-term trend and level of the CORE FACTORS and the Trend Value of the S&P 500 INDEX.

When the Model output indicates that the ACTUAL S&P 500 INDEX is significantly above (rich) or below (cheap) the Model Trend Value, a rebalancing of asset weightings is implemented.

When the ACTUAL S&P 500 INDEX returns to a less significant difference from the Model Trend Value, the baseline-neutral asset allocation is reinstated.

The purpose is to instill discipline and remove emotions from the asset allocation rebalancing decision.

a) Stock weightings are reduced (i.e., some stocks are sold), and bond weightings increased when stocks appear to be over- valued or "rich".

b) Stock weightings are increased (i.e., some stocks are purchased), and bond weightings are decreased when stocks appear to be under-valued ("cheap").

c) Stock weightings are returned to baseline-neutral when stocks are in the Model Trend Value range.

This is not an active short-term trading model. There might be long periods, including several years, during which portfolios will remain in a baseline-neutral asset allocation. However, due to stock market volatility, there might be months or quarters in which several asset allocation rebalancing will be implemented.