1.23.11

We are at an interesting juncture right now according to our agent-based measures. Again we use two measures. The first measure determines exit and entry points as well as which markets to overweight and underweight. The agent-based measure predicts short-term dynamics in the financial markets. The BFIA agent-based measure has crossed 1 for the first time since 2007. This means the US market is now fairly valued. In order to increase beyond one the US market must correct. We therefore predict short-term volatility ahead. In addition, looking back at our historical data the first time this measure hit 1 after the tech crisis was January 22, 2006. We believe we will see similar dynamics from that time period. This means that the US market will experience some downside volatility over the last week of January into the month of February. We have therefore closed all positions and will long a futures contract on the VIX. We are bullish on the US over the 2011 year including other markets such as Russia, Korea, South Africa, and Chile which are energy and commodity plays. Once the agent-based measure departs from the 2006 measure we will then close that position and continue to long the markets we favor as noted above. Let us see what happens this week and into February.