The EWS or Early Warning System development was commenced back in the mid 1990s by Frank Lardino.  The system uses ETFs or exchange traded funds and standard mutual funds also known as open-end funds.  The system runs a database screen and a proprietary algorithm every two months to try to determine the best 2 ETF funds and the 2 best open-end mutual funds.

The system is designed to try to deal with excess volatility and risk. That has increased in the markets due to hedge funds and rapid automated trading.  The system does this by reallocating every two months and also by analyzing the data to try determine money flow direction by large institutions and hedge funds.  Research determined that reallocation every quarter or less frequent was not optimal nor was monthly reallocation.  In some cases, positions can be held as long as four months.

As of 7-31-2009 Year to Date:

EWS ETF Model                                 +25.7%

EWS Open-End Funds Model            +10.5%

S&P 500 Index                                    +9.3%

Dow 30 Index                                      +4.5%

The ETF or exchange traded fund EWS model continues to lead the field.  The EWS ETF model has outperformed the S&P 500 Index 2.76 to 1 or almost my three to 1.  The EWS ETF model has outperformed the Dow 30 Index 5.71 to 1 or almost 6 to 1.   The next EWS model switch will be 9-1-2009.