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

Market Update

The major indexes see-sawed during this holiday-shortened week to end up little changed overall. Stocks gapped up at the open Tuesday but steadily reversed to finish lower as oil prices closed above $100 a barrel for the first time. Such record levels raise concerns about renewed inflationary pressures and may weaken consumer sentiment, therefore adding to the headwinds the economy is currently facing. Market action on Wednesday was a mirror image of that of the previous day: stocks opened lower but managed to rebound to close with decent gains, despite consumer inflation data that came in slightly higher than anticipated with a CPI reading of 0.4% for January. Following an analyst's upgrade of Cisco and a bullish earnings forecast by Research In Motion, tech stocks gave the market a lift at the open Thursday but the morning rally was derailed by a weak economic report: the Philly Fed manufacturing index fell to -24 in January, a level that shows contraction of manufacturing activity in the New York region. With the report rekindling recession fears, the S&P 500 lost 1.3% on the day. With stocks on their way to post significant losses Friday, the major averages reversed once again to instead finish the day with small gains. The turnaround came late in the session and was caused by a report indicating that a bail-out plan for troubled bond insurer Ambac is imminent. The news triggered a sudden rally in financial stocks that spilled over to the overall market.

The Nasdaq 100 and Russell 2000 posted respective losses of 0.39% and 0.87% on the week, while the S&P 500 gained 0.23%. All three indexes remain located below both their 50-day and 200-day Exponential Moving Averages (EMAs).

For its part, our World Index Ranking underperformed its U.S. counterparts this week with a loss of 1.36%. The portfolio consists of the 5 top-ranked world indexes as of February 1, which marked the beginning of the current 4-week holding period. 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 for all the details.

Our current Sell signal remains in effect.

Trend Timing School

The human factor

In last week's Trend Timing School article we mentioned that the tools we use, such as trend following and shorting, by reducing our real market risk help us keep our emotions in check, and in turn allow us to stick with our wealth building plan for the long run. This brings us today to this frequently neglected but most important aspect of successful investing: the human factor.

As investors we often tend to focus on the news, the economic outlook, trying to figure out what the market is going to do and what the best investment might be. Yet, study after study has demonstrated that the most important investment success factor is not having the optimum strategy, perfectly timed signals, or selecting the best investments, but rather how consistently you implement your strategy and how long you stick to it.

The root of the problem is that we are emotional and sensitive creatures. Everyday we are flooded with news and information, and we get exposed to the opinions of many. Friends, co-workers, cab drivers and TV talking heads all tell us what they believe the market is going to do and why, and what the best investment is. Our entire upbringing and education trains us to seek answers and direction. It turns out that, however analytical, educated and informed our approach is, our opinions and decisions are frequently influenced by our emotions. Most of us have trouble balancing the two main emotions involved in investing: greed and fear. In investing, it is well known that emotions are your worst enemy, unless you use them as contrary indicators.

Individual investors are notorious for their emotional trading tendencies, for "chasing performance", strategy hopping, buying when the going is good (prices are high) and selling when the going gets tough (prices are low).

A landmark 1994 study by Morningstar, followed by many similar ones since then, demonstrated that individual investors lose money on even the best mutual funds. It showed that while the average growth stock fund gained 12.5% per year over the study's 5 year period, the average investor in those same funds lost 2.2% per year. Why such a huge difference? Because of human psychology and the fact that people are highly emotional creatures, most investors cannot bring themselves to simply buy low and sell high. These findings also underscore the fact that there are very few buy and hold investors, because most end-up getting jerked in and out of the markets at the worst possible times.

A founding principle of TimingCube is that we can all be better investors and make fewer bad decisions if we take a less subjective approach to investing. We firmly believe in the merits of a mechanical system in large part for removing emotions from the equation. Our approach is 100% mechanical, rigorously unemotional, and leaves no room for analysis or interpretation of data or news events. Opinions and rationalizations, however educated and inspired they may be, play no part in determining the market trend. The market and our directional model tell us what the trend is. During Buy signals, the momentum model points to the strongest markets to be in. At all times we know exactly on which side of the market and in which investment we should be. Eliminating emotions from the decision process to determine what to invest in and when is 50% of the battle.

The other key success factor is reliable implementation over the long term. With any trend following system, even one which trades as infrequently as ours does, one must be able to monitor the signals and trade in a timely fashion. Backtesting clearly shows how dramatically performance drops off if the recommendations are not followed promptly or accurately. You can only win if you participate.

We firmly believe that the biggest risk most investors face is the missed opportunity of achieving their life's wealth building dreams. Too many do not have the discipline, are afraid to start investing, fall off the wagon, or constantly chase the next best investment advice. From years of experience we know that most investors find it a lot easier to stick with an investment program for the long run and resist the temptation we all have at times to second-guess and outsmart the system when they gain a better understanding of the stock market, the Trend Timing approach and philosophy, as well as the emotional pitfalls they are likely to encounter along the way. Accordingly, providing you, our subscribers, with unbiased mechanical guidance, education, tools and the emotional support system that helps you remain firmly committed is our first and foremost priority. And while it takes discipline and practice to turn off our emotions and opinions about what the market will be or should be doing, adopting and consistently implementing the mechanical strategy can provide real peace of mind.

We understand that there are circumstances which might prevent you from staying on top of the signals from time to time, such as traveling or being away from the Internet and e-mail for prolonged periods of time. Maybe you do not want the responsibility of monitoring and trading, or you lack the commitment, confidence, courage, decisiveness or discipline to follow the system. For anyone afflicted with one or more of these symptoms, help is available as explained in the FAQ of the Week below.

FAQ of the Week

Question: What if I lack the commitment, confidence, courage, decisiveness, dependability or time to follow the system?

Although the TimingCube system is simple to implement and requires very little trading, there are a million things which can get in the way of actually doing it. But if you do not follow the trends faithfully over the long term, you are exposed to the vagaries of the market, and if you do not seek the strongest world markets you are unlikely to achieve superior returns over the long term.

Maybe you elected to "watch" for a while, before you decide to jump in and commit your funds. Or maybe you started but got stung by some losses when Sell signals failed to develop into larger corrections. You missed the last signal, or like many of us, you simply procrastinate. There are many excuses and even valid reasons for sitting on the sidelines or worse, being long the market in what could be the beginning of a major downturn, but the bottom line is that as long as you remain un-committed to the strategy you are exposed and you are not reaping the potential benefits of your subscription.

If you find yourself in such a situation or if you do not feel you are quite ready for the do-it-yourself approach, our friends, the professionals at MARKETTREND Advisors can take care of the heavy lifting for you with a managed account. MARKETTREND Advisors is a full service investment advisory firm serving individual investors and they specialize in implementing the TimingCube strategies, amongst others. Should you become a client of theirs, your TimingCube subscription becomes complimentary and remains free for as long as you are a MARKETTREND Advisors client.

You can find all the details about MarketTrend investing and managed accounts by going directly to their Web site at www.MarketTrendAdvisors.com or by contacting them at:

MarketTrend Advisors, Ltd.
3720 Gattis School Road #800-214
Round Rock, TX 78664

Phone: (512) 255-8722
Fax: (512) 255-8732
E-mail: info@MarketTrendAdvisors.com

Business hours: Monday through Friday 8:00am to 5:00pm Central Standard Time

Warm wishes and until next week.

The TimingCube Staff