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

Market Update

After last Friday's drop caused by a much weaker-than-expected jobs report, many on Wall Street expected the sell-off to resume in earnest this week. The opposite happened, as stocks managed to recover all of last week's losses and then some. Following last Friday's weakness, the major indexes started Monday by moving lower but were able to stabilize and reverse course to close either flat or with minor losses on the day. Following their European counterparts, stocks posted solid gains Tuesday, with the Nasdaq Composite jumping 1.5%. Despite higher oil prices and weakness in the semiconductor arena, markets held their own to remain largely unchanged Wednesday. Bullish news on General Motors and McDonald's boosted large cap issues and helped stocks post more gains Thursday. Following a disappointing retail sales report, all major indexes opened lower Friday but then proved their resilience by moving back up to close in positive territory. Trading volume was light all week, in part due to the Jewish Rosh Hashana holiday and the fact that many investors simply chose to stay put, waiting for the Fed's decision on interest rates next week.

The Nasdaq 100 and S&P 500 respectively gained 2.17% and 2.11% on the week. Both indexes are now located above their respective 50-day and 200-day exponential moving averages (EMAs). As for the Russell 2000 , it posted a 0.99% weekly gain. The index remains below its 200-day EMA and is therefore still lagging.

For its part, our World Index Ranking portfolio underperformed its US counterparts this week as it gained a modest 0.20%. The portfolio consists of the 5 top-ranked world indexes as of August 17, 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.

Our current Buy signal remains in effect.

Trend Timing School

Celebrating one year of World Index Ranking

To mark the 1 year anniversary of the World Index Ranking, which falls officially on the 15^th of September, we largely dedicate today's Trend Timing School article to the system and a review of its first year track record.

The primary motivation for developing and adding the World Index Ranking system to our service was to participate in the strongest world markets, regardless of geography. For those not yet familiar with the momentum based World Index Ranking system and its strategies, they all revolve around the notion of buying and upgrading the strongest world markets based on the relative strength of their indexes. There are currently 27 separate broad market indexes in the ranking (7 of which are U.S. markets), and we focus on the top 5. Upgrading takes place every 4 weeks by rebalancing the 5 portfolio ETF positions to match the top 5 markets in the latest ranking. This is the basic World Index Ranking Buy and Rebalance strategy which is always fully invested and completely ignores the timing model. When overlaying the basic momentum approach with the TimingCube strategies we obtain the World Index Ranking Long Only and Long and Short strategies. For a detailed review of the system and its strategies, please read "World Index Ranking".

As we add a full year of live track record to our backtested performance numbers we have a good pretext to assess how we did. To do so we refer to the 1 year performance table below which compares the three World Index Ranking strategies with U.S. indexes in both timed strategies and with buy and hold. Since the 1 year stretch has for the most part been a continuation of the now nearly 5 year old bull market in equities, Long Only and Long and Short timing strategies have clearly underperformed. The two whipsaws experienced by our Model this year did not help either. For the three U.S. indexes, the timing strategies resulted in losses which lagged buy and hold. Owing mostly to the strength of the markets targeted by the World Index Ranking, even with the Long Only and Long and Short strategies and their ill fated signals, the top 5 world markets substantially outperformed their U.S. counterparts with gains of 18.26% and 9.83% respectively. In this generally bullish environment the uncontested winner has been the World Index Ranking Buy and Rebalance strategy with a 1 year gain of 28.79%.

World Index Ranking 1 year performance comparison*

	Long Only	Long & Short	Buy & Rebalance	Buy & Hold
World Index Ranking  Top 5	18.26%	9.83%	28.79%	na
Nasdaq 100	6.34%	-0.91%	na	22.57%
Russell 2000	-6.05%	-14.59%	na	7.41%
S&P 500	0.37%	-4.68%	na	12.47%
* From the open on 9/18/2006 to the close on 9/14/2007

For those who believe that published results can never quite be achieved by the individual subscriber because of commissions and trading delays, we have good news. Recently, the U.S. dollar kindly chipped-in for higher real gains than what we publish. Since we actually invest in ETFs and not the indexes themselves, our positions experience the exchange rate fluctuations of the respective currencies versus the U.S. dollar. In the past year, the U.S. Dollar Index lost 7.6%, which has translated into similar extra gains for the International ETFs, as compared to the indexes tracked in our results. Some currencies did even better. For example, since the Brazilian Bovespa Index has been an almost permanent fixture of our Top 5 portfolio this past year, we note that the Brazilian Real has gained 12% against the U.S. dollar, and thus added to the Brazilian ETF's already juicy returns.

The second objective for the World Index Ranking service is diversification. The initial angle was to provide International diversification for our previously U.S. centered strategies, but our research indicated that the momentum based approach also provided welcome strategy diversification, as was confirmed with this past year's strong returns of the World Index Ranking Buy and Rebalance strategy as compared to those produced by timing the U.S. indexes.

Just as we never recommended investing everything in long and short timing strategies, we are not now saying you should drop all timing strategies in favor of buying and rebalancing the World Index Ranking. Diversification is the key word. The weakness of momentum strategies is that when markets turn down, their holdings will suffer as well. Our testing for the bear market years of 2001 and 2002 shows the World Index Ranking Buy and Rebalance strategy lost 1.29% and 12.05% respectively, as compared to -12.97% and -23.26% for the S&P 500. Despite doing better than a buy and hold strategy during the bear market, being diversified with a portion of our portfolio following a Long and Short timing strategy would perform substantially better.

Together with our plea for diversification, we would be remiss not to mention the fact that International investing does provide additional challenges and risks, and we highly recommend reading "What are the risks of international investing?".

FAQ of the Week

Question: Where can I find historical trades?

We frequently get this question from curious subscribers wanting to know past trades and positions for the World Index Ranking. This information can be found on the "Results" page, in the "Performance with World Index Ranking" section. At the bottom of the section, right below the "Yearly returns", click the "Historical Rankings" button for all the rankings of every period back to 12/15/2000.

The table does not list the actual trades, but it lists the Top 5 positions (and all the other ones as well) for every 4 week rebalance period. It lets you reconstruct the results of our sample portfolio. Some like to "cut and paste" this information into a spreadsheet to analyze. Daily and weekly historical price data can be obtained from Yahoo! Finance (it is their ticker symbols we use to designate the indexes), or any other data provider. Others like to study which indexes led the pack at what times, how frequently and for how long. Yet others like to identify the weak markets at the bottom of the rankings, or the ones making large moves, up or down, from week to week. All the information is there for you to analyze.

Warm wishes and until next week.

The TimingCube Staff