S T R A T E G I S T   F O R E C A S T

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Grail System Portfolios (PORTSTAT)(additional protections)

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When using the Grail System Portfolios (or any other mixture of stocks in the ‘buy’ state), there are additional things that you can do to minimize drawdown (although at the expense of some annualized gain):

(1) Use the LONG% allocation implied by the Hedging Vectors to control the amount of money at risk – with the balance held safely in cash. Although the Grail System Portfolios already incorporate their own forms of protection, it can never hurt to be over-protected. Certainly, the use of margin should be stringently limited when we are in an overall QQQQ ‘sell’ state.

(2) Only invest when our QQQQ signal is in the ‘buy’ state. This is an ultra-safe measure, and will naturally greatly reduce the annualized gain that can be achieved.

(3) Although it is still experimental, the best way to reduce drawdown in a margin-enabled account may be to make use of the new Portfolio Equivalent Equity report (PORTCORR.TXT). The information contained in this report “may” enable a large portfolio to quickly be made market-neutral by setting up 3-4 protective ‘shorts’ for the duration of the day using available margin funds. Again, all such shorts should be covered prior to the Close.

(4) Remember that the 50 portfolios contained in the PORTSTAT report are subdivided into 4 classes which progressively grow more conservative: (1) “H” portfolios (those that 'short' QQQQ), (2) “N” (normal) portfolios, (3) “C” (conservative) portfolios, and (4) “E” (ETF-only) portfolios. It is recommended that new users start with the “C” or “E” portfolios, and then only advance to the more volatile (and higher-performing) portfolios as they gain experience with this system. The “C” and “E” portfolios are especially recommended when a rally is just beginning ... or has peaked and seems to be losing momentum.