Equity Logic

Objective of the Discipline

To realize aggressive growth in both directions using double-weighted ETFs that are directly or almost directly correlated to the Dow Jones Industrial Average, S&P 500, Russell 2000, or the NASDAQ. This is a Market-Based Strategy that can also take advantage of downside moves in the Market by buying double-short ETFs when defined Market channels call for it. This strategy will use the broad observations of management in conjunction with the channels defined by management to attempt to achieve its goal.

Description of the Strategy

This strategy relies on the prowess of our Management to identify market cycles. Markets offer tradable ranges on a regular basis and this strategy attempts to take advantage of those ranges using double-weighted ETFs. The allocation is divided into four segments, each representing 25% of the Portfolio. For example, if one Position is allocated, the strategy will allocate approximately 25% of the available cash for investment to that Position. This strategy does not use margin, but the ETFs are double- weighted, and that means the strategy will be more volatile than traditional investment strategies.

If the Market is deemed to be poised to increase, this strategy will allocate Positions to the long side of the Market, and if the Market is deemed poised to decline the strategy will allocate to the short side, but the strategy will never actually short anything. As a result, so long as the strategy is deemed suitable to the risk tolerance and investment objectives of the client, this strategy is also something that can be used in IRAs.

Rules Associated With the Strategy

• Identify current Market cycles and channels.
• Determine expected market direction.
• Develop an allocation strategy.
• Define an exit strategy.
• Engage the strategy.
• Re-apply the process after exiting.

Risk Controls and Assessments

The risk controls associated with this strategy are not 'tight' risk controls, nor are they traditional stop losses. Instead, this strategy is designed to take action near a level of inflection, and if that level of inflection begins to break in a direction opposite the deployed Position, the manager will consider selling the position. On the other hand, management may opt to control Position allocations in such a way as to allow the Strategy to average in around a given inflection level. However, in either case, any Position will be sold if it has lost more than 10%, regardless of the allocation of other Positions. This is considered an extreme, and risk control measures are expected to be tighter than that given the proximity between the entries and inflection, but this strategy will not hold a loss of more than 10% in any single Position as an over-riding measure of risk control.