Figure 3 displays weekly new 52-week highs minus new 52-week lows ($NYHL). It shows $NYHL's trough near -2400 issues during the second week of October 2008, when security liquidations by investors peaked. It was also when investors began to fear that a $700 billion government bailout for financial institutions might not prevent a severe recession, exasperating credit defaults and asset deflation. Last week, as the S&P 500 fell 10% below its prior trough, the $NYHL never fell below -800. The moving average convergence/divergence indicator (MACD) was also nowhere near the levels seen near last November's lows.

Point Of The Week

The point of the week is this: The markets have most likely made intermediate-term bottoms on March 9 that may take the $SPX back to the 850-950 price level over the next couple of months. Figure 4 supports our decision to embrace more beta (selling inverse ETFs) over the past few weeks. It shows that the market was recently at the nadir of its 12-day price channel. This oversold condition often is followed by an immediate rally back to the channel's midpoint at 1087. Although we do not expect it, a 1087 price is more likely if the market continues to gain strength after some backing and filling over the next 12 months. Our aim is to add back short positions near 850 or when the $SPX rises 27% above its last low. So far, it has climbed 13.5%, which is halfway to our initial target.

Model Portfolio: The Arrow Insight (AI) 75-50 Portfolio Long/Short Exchange-Traded Funds (ETFs) & Closed End Funds (CEFs)

AI's Axiom: "Capturing desired source returns while avoiding unwanted beta and limiting default risk."

Primary Objective: 75% of the market's (S&P 500 Index) positive and 50% of its negative returns over 12-month periods. This profile drives the model's strategic allocation and tactical trades.

Secondary Objective: The portfolio satisfies a need to employ a capital originally allocated to hedge funds into a proxy but without their baggage (excessive fees, limited transparency, illiquidity and high business risk). Consequently, AI 75/50 has an absolute return objective consistent with meeting our primary objective over 36-month rolling time periods.

Summary Objectives: AI 75/50 first seeks capital appreciation while attempting to provide positive returns over all 36-month time horizons since the portfolio's inception date on March 19, 2004. The portfolio also attempts to best the returns of the S&P 500 Index (S&P) and The Hedge Fund Research (HFR) Investable Global Index (HFRX) during these periods.

Recent Returns: Last week, we were up 3.5%.

As of March 13, 2009, month-to-date (MTD) we are up 1.0% while year-to-date (YTD) up 2.1%. Returns for the last three calendar years were -2.2% in 2008, 8.8% in 2007 and 18.3% in 2006. Since the portfolio's inception, the cumulative return has been 45.7% (Figure 8).

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