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

Market Update

Building on last week's gains, all major indexes jumped higher Monday. The rally was carried by financials after JPMorgan Chase announced that it was raising its buyout offer for Bear Stearns from $2 to $10 a share. Tech stocks also posted strong gains on the day, sending the Nasdaq Composite 3% higher. Despite news that consumer confidence fell to a five-year low of 64.5, stocks managed to finish slightly higher Tuesday, therefore posting gains for the third consecutive day. On Wednesday, the Commerce Department announced that durable goods orders dropped 1.7% in February, where economists had expected a 0.8% rise. With new-home sales falling to their lowest level since 1995, ongoing concerns about an economic recession came back to the forefront, causing stocks to finish the session in the red. Stocks piled on more losses on heavier trade Thursday after Oracle reported disappointing sales and several commercial banks such as Citigroup and Bank of America were downgraded by analysts. Stocks finished the week on a down note as they dropped further Friday after major department store J.C. Penney issued a profit warning and a prominent analyst warned of dividend cuts and more losses to come in the banking sector.

The Nasdaq 100 and Russell 2000 posted respective gains of 0.89% and 0.26% on the week, while the S&P 500 lost 1.07%. All three indexes remain located below both their
50-day and 200-day Exponential Moving Averages (EMAs).

For its part, our World Index Ranking portfolio significantly outperformed its U.S. counterparts this week with a gain of 6.48%. The portfolio consists of the 5 top-ranked world indexes as of February 29, 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 for all the details.

Our current Sell signal remains in effect.

Trend Timing School

How to invest when starting mid-signal

Our mechanical Trend Timing Model gives us clear cut directions to enter the market with Buy signals, and for when to exit - or sell short - with Sell signals. As highlighted in the questions we receive from our subscriber, it seems like the most difficult aspect of our timing system is to decide when and how to invest between signals. This applies to both new subscribers starting some months after the previous signal was issued, and to the ones that for some reason failed to act when the signal came. Longer term Trend Timers on the other hand have been in step with the signal for some time and, if so lucky as to be at the receiving end of a tax refund check or a bonus, they would not hesitate to commit new money mid-signal.

When arriving mid stream, the natural tendency for many is to conclude that, because of the time elapsed since the previous signal, the next one must be near, and therefore we should wait. During a Buy signal we fear that we are near a top, that the market is overvalued, or we rationalize that since the signal has been active for so many months, the probabilities of a Sell signal being near are high; and vice-versa during a Sell signal, we fear that we are near a bottom and that a Buy will occur at anytime. Well, we are sorry to differ, but when - as now - we have a Sell signal during a bear market, we know that the predominant market force is bearish, that any rally is likely to be of a relatively short duration, and that the most likely next step is for the bear market to resume its downward movement. Please have a look to last Friday Trend Timing School "Time to Protect Yourself", for more details about the market actions during bear markets. A quick glance at the current Sell signal shows that during the two and a half months since it has been in force, we have experienced several rallies, between 4% and 8%, and none of them have proven to be trend changes so far. Instead, the one from late February was followed by a drop to a lower low, they may in fact represent good shorting opportunities.

We don't know when the next signal will come and, as always, we will let the market and the Model tell us when a trend change occurs. In the mean time we get in step with the current signal because if we don't, not only could we miss substantial profit opportunities, but more importantly, we risk waiting on the side lines so long that we lose patience and fall off the wagon before even trying.

All of this gets us back to the original subject of this editorial: Dollar Cost Averaging. This is a fancy term for a very simple and widely respected method of optimizing the investment entry and minimizing the downside risk. Instead of committing the entire amount we are prepared to invest in one single lump sump, we invest it in a series of smaller fixed dollar amounts over a period of time.

In the example below, a $10,000 sum can be invested upfront as a lump sum, for 1,000 shares of an inverse ETF at $10 each. Or, with Dollar Cost Averaging, the $10,000 is divided into 5 installments of $2,000 per week, for five weeks. There are three possible scenarios, the market goes nowhere and bounces around, the market goes down, or the market goes straight up. In the first two scenarios you are substantially ahead with Dollar Cost Averaging.

Note that we use an inverse ETF in this example to illustrate the current Sell signal, but dollar cost averaging can also be used during a Buy signal.

	Dollar Cost Averaging								Initial Lump Sum
						Ending Values after Week 5
	Week 1	Week 2	Week 3	Week 4	Week 5	Total Number of shares	Average cost	Value of investment	Value of investment
Market bounces around
Price	$10.00	$15.00	$10.00	$5.00	$10.00
Shares purchased	200	133	200	400	200	1133	$8.82	$11,330	$10,000
Market goes up (Inverse ETF price goes down)
Price	$10.00	$8.50	$7.50	$6.50	$5.00
Shares purchased	200	235	267	308	400	1410	$7.09	$7,050	$5,000
Market goes down (Inverse ETF price goes up)
Price	$10.00	$11.50	$12.50	$13.50	$15.00
Shares purchased	200	174	160	148	133	815	$12.26	$12,225	$15,000

Why is Dollar Cost Averaging so effective?

And in the end, if the risk still looks too ominous, nothing prevents you from setting your own stops at a tolerable percentage. Make sure you don't set them too tight or you might get stopped out too early. Remember that the Trend Timing philosophy can only help you build long term wealth if you adhere to it.

FAQ of the Week

Question: How Can I check the Signal over the phone?

Many of us spend at least some time during the year traveling or otherwise away from reliable e-mail or Internet service, yet needing to stay in touch with the signal without interruption. Some of our newest subscribers may not have discovered the various methods of accessing the signals via phone, and we will remedy this perilous situation right now.

Depending on the type of phone you have access to, there are three methods to get the signals:

Warm wishes and until next week.

The TimingCube Staff