What's new this week?

There has been another article in Frank Minssieux' trend-following column published in TheStreet.com. (Note that the list of past public mentions of TimingCube can be found on the "In the News" page).

 TheStreet.com
Beyond the Greenback - Read the article here
October 20, 2006
By Frank Minssieux
International exposure helps when the dollar dips.

Signal Update Current Signal Performance as of Signal Type Trade Date Index Return since issued Nasdaq 100 Russell 2000 S&P 500  Market Update This week saw the Dow Jones Industrial Average finish at its highest weekly close ever, above 12,000. The other main indexes seemed to mark a pause after three consecutive weeks of strong gains. On the economic front, the CPI (Consumer Price Index) for September was released Wednesday. It fell by 0.5%, more than the expected 0.3%, helped by lower energy costs over the past few months. The core CPI, which excludes food and energy prices rose a tame 0.2%, in line with expectations. Both numbers confirm the view that inflation is contained and that the Fed will not have to raise interest rates again this year. The earnings season is now in full swing and many high-profile companies have started reporting their third-quarter results. Intel, IBM and Apple pleased investors, but Motorola and Advanced Micro Devices issued disappointing reports. So did Caterpillar on Friday, as it also reduced its guidance for the full year. The negative news counterbalanced Google's stellar results released after the close Thursday, resulting in a flat weekly finish for the main indexes. The S&P 500 gained 0.22% on the week. The Russell 2000 was almost unchanged, while the Nasdaq 100 finished 1.02% lower. All three indexes still rest well above both their respective 50-day and 200-day exponential moving averages (EMAs). Our current Buy signal remains in effect.  Trend Timing School Getting with the program If you are a committed Trend Timer and are currently invested long per the current Buy signal, we commend you, and respectfully suggest you skip this article which is dedicated to those subscribers remaining on the sidelines. For the rest of us sideliners, we apologize in advance for the maybe somewhat moralizing tone of this commentary and hope it does not come across as patronizing (we certainly do not intend it to be). It is because we know from personal experience that our trend following method provides superior long term results, without the large downside risks of buy and hold, that we always make ourselves the advocates of a key Trend Timing principle: We will participate in all significant market moves, up or down The key word here is "participate". Participation involves resolve and steadfast commitment to execute the trades in a timely manner, without second guessing the signal. A major side effect of standing on the sidelines is that we cannot make money if we are not invested. Not only are we not making up for losses but we are losing ground to inflation, and losing precious time. There are various reasons for a subscriber to be on the sidelines. Maybe you are a new member and are trying to decide between getting started now and waiting for the next signal. Maybe, you missed the last signal for some reason or hesitated to pull the trigger. Many of us have been stunned and stung by the summer whipsaws and the attendant model revisions, and a loss of confidence in the overall approach or the signals is understandable. Sadly, once you are on the sidelines the path of least resistance is to continue doing nothing. The fear of losing money is a strong driver for people to just sit in cash and for some even to abandon the stock market altogether. The most serious drawback of not participating is that without any skin in the game, interest inevitably wanes, which leads to throwing in the towel and falling off the trend following bandwagon. You stand to lose much more than just the return on the current signal: your mental commitment and discipline. We know that there are alternative investment strategies, but we also know that many have proven inferior or even outright dangerous over the long term. The more significant risk of dropping out, in our view, is the abandonment of a systematic and unemotional investment approach. Mark Hulbert has frequently written about the consistency of long term winning systems, which despite temporary periods of underperformance are the more likely to return to leadership returns than not. We urge you to reconsider your current wait and see attitude. For those thinking "this signal is already two months old, it is too late to enter now so I will just wait until the next one", we luckily have the "dollar-cost averaging" method to reduce the risk of mid signal entry and by far the best way to get with the program. For details on this technique read "Dollar Cost Averaging explained". Of course we have a vested interest for you to stick with the program, but trust us to have your wealth building objectives first and foremost in our minds. Without them we do not exist. We know that achieving your financial goals critically depends on your continued and sustained participation in the market. Investing is not a spectator sport; you need to get your hands dirty to have a chance to win.  FAQ of the Week Question: Do leveraged ETFs suffer from negative compounding? We have long been aware of a shortcoming of leveraged bull/bear mutual funds which is called negative compounding. Some astute subscribers are wondering if the leveraged ETFs come with the same affliction. And the answer is: yes they do. Still, we should point out that we only recommend margin in moderation, and that the ETFs have a number of other advantages over their mutual fund counterparts such as not incurring the one day delay on trading, and lower expenses and fees. If you are curious about the negative compounding effect, the short version is that while these index funds generally achieve their daily performance objectives (double or double the inverse return of the index) very accurately, during trendless market phases when an index mostly bounces around, the leveraged funds will steadily lose ground and under perform their indexes. The flip side is that during trending markets the funds can substantially outperform their indexes. If you are interested for a more detailed explanation of negative compounding, please read "Why are the ProFunds and Rydex leveraged funds not always consistent with the index they track?". For those not familiar with the leveraged bull/bear ETFs, we first introduced them in "What are ProShares ETFs?" and "What is an UltraShort ETF?". Warm wishes and until next week. The TimingCube Staff