Signal Type	Trade Date	Index	Return since issued
		Nasdaq 100
		Russell 2000
		S&P 500

Market Update

Stocks fell hard on increasing volume this holiday-shortened week, causing our Model to issue a Sell signal after the close Friday. With many traders still away for New Year's Eve, Monday's session saw the major indexes post modest losses, therefore continuing the negative trend that started in the middle of last week. The selling accelerated on heavy trade Wednesday, which marked the first trading session of 2008. Stocks were hit by surging oil prices and an ISM index for December showing that manufacturing activity contracted last month. Stocks tried to rebound Thursday but relinquished their modest gains to close mostly unchanged. Heavy selling resumed in earnest Friday after the December employment report showed weaker-than-expected job growth and an increase in the unemployment rate: the economy only added 18,000 nonfarm payrolls last month, much less than the 70,000 gain economists had expected and the unemployment rate jumped to 5.0% versus the anticipated 4.8% reading. With such weak numbers raising fears that the economy may be on the verge of a recession, stocks fell across the board on increased volume. Technology stocks were also hit by JP Morgan's downgrade of Intel. Increased selling pressure and the overall worsening of the market tone over the past several sessions caused our Model to issue a Sell signal after the close on Friday. It should be noted that the Nasdaq Composite closed the week well below its long-term 200-day exponential moving average (EMA) and that it has now undercut its November low, painting a technical picture that has worsened significantly.

For the week, the Nasdaq 100, Russell 2000 and S&P 500 posted respective losses of 6.81%, 6.50% and 4.52%. All three indexes are now located below their 200-day EMA.

For its part, our World Index Ranking portfolio outperformed its U.S. counterparts this week with a loss of only 0.36%. The portfolio consists of the 5 top-ranked world indexes as of December 7, which marked the beginning of the current 4-week holding period. The World Index Ranking portfolio is being rebalanced today, as the current 4-week holding period is now over. Please note that since we now have an active Sell signal, the World Index Ranking approach calls for selling your holdings if you follow the "Long Only" or "Long and Short" strategy. Only if you follow the "Buy and Rebalance" strategy should you remain invested in the top 5 indexes, as the strategy calls for staying invested at all times. Please go to our "Strategies" page or read the FAQ below for all the details.

We now have a Sell signal in effect.

Trend Timing School

2007 year in review

First and foremost, all of us at TimingCube would like to thank you our subscribers from the bottom of our hearts for making all of it possible. We understand now more than ever that investing is a continuous learning experience as well as a school of life in which planning diversified strategies is rewarded by discipline and patience. We are honored that you would consider our Trend Timing techniques and strategies to assist you in your wealth building endeavors.

The beginning of a new year always gives us a point in time to pause, look back and examine the year that was and assess the performance of our investment strategies. And as much as we are humbled by last year's sub-par performance of the timing signal, especially when applied to sub-par U.S. markets, we cannot bring ourselves to feel overly disappointed because it has been a great year for the World Index Ranking, especially with the "Buy and Rebalance" strategy. But before getting too far ahead of ourselves, let's review the 2007 stock markets which, in many respects were similar to the ones of 2006, with lackluster U.S. markets and booming International ones.

At home, the year was marred by a number of unexpected developments for the economy and the stock market, such as crude oil going through the roof and the subprime mortgage induced crisis. The Fed did their thing to stimulate the economy by generally pumping liquidity by all means possible and embarking on a rate reduction campaign. Looking at the 1 year performance of our reference U.S. indexes, the large technology stocks in the Nasdaq 100 index fared best in that environment by posting a gain of 18.67%, well ahead of any other broad U.S. market index. Other large cap indexes suffered from their higher exposure to financial stocks, as exemplified by the S&P 500 eking out just 3.53%. The big losers were small cap stocks, with the Russell 2000 posting a 2.75% loss for the year.

Nevertheless, as all attempted rallies failed to deliver substantial gains, and pullbacks never developed into more significant corrections and ended abruptly shy of the 10% mark, except possibly for the one we are currently in. The net effect was not good for our timing strategies, as can be seen in the 2007 results in Table 1 below. Our Model triggered two Sell signals; both ill fated as markets failed to turn lower. The "Long Only" and "Long and Short" strategies (2.63% and -4.37% respectively when using the Nasdaq 100) managed to under-perform buy and hold as well as most other strategies.

Table 1: 2007 TimingCube strategies performance

Service	TimingCube
Geography	Nasdaq 100		World Indexes
Investment	Stock market indexes
Strategy	Long Only	Long & Short	Long Only	Long & Short	Buy & Rebalance
Return %	2.63%	-4.37%	14.38%	6.22%	24.56%

On the International front, many emerging markets from Asia to Latin America have been on fire with growth rates several times that of the U.S. Despite chronic high volatility, their respective stock markets have done extremely well as indicated by the handsome 24.56% return of the World Index Ranking's "Buy and Rebalance" strategy.

The U.S. dollar decline has helped all of our World Index Ranking investments by losing 8.4% against the benchmark basket of currencies during 2007. Remember that when the U.S. dollar loses ground against a foreign currency, the ETF we use to invest in that country's stock market benefits from the exchange rate differential. In contrast, the indexes we use for our published results only measure the stock market performance, not the exchange rate fluctuations. This year the dollar decline helped substantially as the World Index Ranking "Buy and Rebalance" strategy actually returned 32.4% when measured with the ETFs instead of the 24.56% returned by the indexes.

In Table 2 below we contrast the TimingCube returns with alternate investment strategies including buying and holding our reference U.S. indexes, as well as the ETFTide and TradeGuru services.

Table 2: 2007 performance of alternate investments strategies

Service	ETFTide	TradeGuru		Reference Indexes
Geography	World ETFs	U.S.		U.S.
Investment	ETFs (all asset classes)	Individual stocks		Nasdaq 100	Russell 2000	S&P 500
Strategy	Buy & Rebalance	Folio A (Growth)	Folio B (Value)	Buy & Hold
Return %	38.31%	41.90%	-8.20%	18.67%	-2.75%	3.53%

The weak dollar's positive impact on International ETFs goes a long way to explain the difference in performance between our World Index Ranking strategy and ETFTide. Much of the remaining ETFTide advantage is attributable to FXI , the iShares FTSE/Xinhua China 25 Index fund, which has been the highest performing ETF of 2007, and in ETFTide's portfolio the entire year. As we elaborated on in "Why are Chinese and Russian markets not in the World Index Ranking?", our World Index Ranking does not include China or FXI because there is still no Chinese stock market index with a minimum of 5 years of reliable and publicly accessible data, and an available ETF which tracks that same index.

The results of the TradeGuru GuruFolios in Table 2 well illustrate one of the few radical departures from 2006, and that is the abrupt switch from value to growth stocks. The point of contrasting various investment strategies is to remind us of the importance of diversification in all its dimensions. We know that no single strategy, geography, sector or asset class will produce the top returns every year, and that not every signal will be correct. But we know that the combination of our Trend Timing and momentum strategies provides us the surest way we know to beat the averages over time. We are optimistic that our strategy and market diversification has us well positioned for the markets to come, and we wish you the best for 2008.

FAQ of the Week

Question: Please explain the World Index Ranking "Long and Short" strategy?

With tonight’s Sell signal, many subscribers having allocated some portion of their funds to the World Index Ranking "Long and Short" strategy are wondering how to implement the short segment. The way our system is designed, and the way our results are measured, is by going short the Nasdaq 100 index or QQQQ shares, or simply buying the inverse Nasdaq 100 ETF ticker symbol PSQ. The majority of world indexes cannot be shorted and they may not be good shorting candidates anyway.
 
Warm wishes and until next week.

The TimingCube Staff