The ULTRA Timer Report

In the last report we laid out a complex correction scenario and then it all happened in an afternoon. Ever since the 3% SPX drop, the market has been all over the news and the reasons for it have been analyzed to death. Over the weekend I saw many soft predictions of a Monday crash, the beginning of a bear market, etc.

Not once did I see a talking head say simply that the market was due for a correction, the SPX dropped out of a channel and the normal downside objective of that channel break happened in one day because it was so obvious.

On 02/14/07 we said, "we'll go 100% cash ... hoping to buy back in at S1 or get lucky if the SPX takes S1 out in a big down day." That's pretty much what happened. We simply put ourselves in the position to get lucky.

The Monday crash scenario that was talked up so much over the weekend now appears to have not occurred. We believe that this correction will follow a pattern similar to that of May 2006 when,

A similar scenario would have the SPX attempting to retest S1 but coming up short following R? to around 1425 and then retesting the lows probably taking them out finally bottoming at some point between 1300-1330.

Therefore, our plan is to sell to 100% cash at any SPX close above 1420 hoping to buy back in lower.

We believe that the final bottom of the 2007 correction will occur near one of these two support lines (1300-1330).

As you can see the NDX corrected far more than the SPX in the April 2006 correction and that will probably occur again.

There's a gap overhead just off the top that we believe will fill in 2007 but quite a bit of downside in the NDX will probably occur before that gap eventually fills.

NDX-RS will probably bounce off S3 as the market bounces this week. But in the next leg of the correction we expect S3 to fail implying more weakness in the NDX compared to the SPX.

The RUT has been holding up very well but in the second leg of this correction the RUT will probably drop to S1.

RUT-RS has been relatively strong but RUT-RS has now dropped below a short-term support line S3.

For our funds not controlled by mechanical methods, we're currently 100% long SPX related funds purchased at SPX 1399. Per the statements in the SPX section above, we'll sell to 100% cash at the next close above 1425. If we don't get that bounce soon, we'll probably sell out at the first bounce at a loss hoping to repurchase at lower levels.

We are being patient with the XAU waiting for a buy opportunity near 120. We believe we'll get that opportunity as the stock market corrects. We also believe that R1 will eventually be overcome filling the May 2006 gap. If R1 is overcome to the upside a move to 180 would be implied.

Once the XAU drops below 125, we'll begin to accumulate the mining stocks that make up the XAU.

For a while we've been calling for a drop in TN to around 3.60 (O). Now it appears that a Head-and-Shoulders Top (HST) may be forming in TN. If NL is taken out, it will be a second indicator implying a drop to O at 3.6. The first indication being the drop out of the S1/R1 channel. We still believe that TN will eventually drop to 3.60.

In the 01/02/07 report we stated, "We expect S4 to fail implying a further drop to S2 at which point rates should begin to drop again and we'll therefore become buyers of GBT. GBT can be traded via the ETF whose symbol is TLT on Yahoo."

This occurred exactly and we expect TLT to rise significantly as TN drops to 3.60.

ULTRA Recommended Strategy Risk

We still expect SPX gains in 2007 to approach 20% and therefore recommend that aggressive strategies designed to capture and improve upon those gains should be utilized by investors willing to take on risk.

We continue to believe that as your annual return goals increase, your odds of high drawdowns increase, and your overall odds of attaining those goals decrease. Investors should use great caution when following strategies that seek to return 30% (or more) annually. And NEVER risk all your money on ANY single system or strategy EVER.

As we've said before, the strategies below are examples of extremely conservative strategies. We believe most investors should be more aggressive considering the bullish long-term chart patterns that are dictating this market.

ULTRA URS STRATEGIES

Our URS STRATEGIES are down -1.3% with a maximum drawdown of -2.9% compare to their benchmarks which are -2.0% with a -5.5% drawdown.

URS Strategy Descriptions are HERE.

ULTRA EASY STRATEGIES

Our EASY STRATEGIES are currently 67% invested and are down -1.2% for 2007 with a maximum drawdown of -3.3% compared to the SPX which is down -2.2% with a maximum drawdown of -5.0%.

EASY Strategy Descriptions are HERE.