TimingCube - 2005 year in review - 2005 winners, best ETF, best sector ETF, best international ETF, inverted yield curve

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Signal Update

Current Signal Performance as of

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

Cumulative Returns since First TimingCube Live Signal () as of

Index	Long Only	Long Only with Margin	Long & Short	Long & Short with Margin	Buy & Hold
Nasdaq 100
Russell 2000
S&P 500
QQQQ

Note: QQQQ returns are included for continuity sake.

Market Update

Since our last update right before the holidays, the markets had two radically different weeks. The shortened holiday week was expected to be the traditional low volume Santa Claus rally, but instead it delivered the worst single week performance in months. That week the yield curve inverted (see FAQ of the Week below) for the first time since 2000 and many, fearing this was a signal for an upcoming economic slowdown, cut their positions. December and the year 2005 ended in a sell-off which undid any gains acquired in the recent breakouts, a fitting conclusion for a year that saw the U.S. stock markets range bound and making even less headway than in 2004.

As the New Year got started, just as many investors took the absence of year-end rally and the fact that many indicators had breached their support levels as evidence of a market that is rolling over, many feared it might well repeat the severe 2005 January losses. Then, when least expected, the markets jolted everyone back to reality with a sharp advance which went much further than merely erasing last week's losses. The U.S. and the major world markets got a big boost when the Federal Reserve Board meeting summary seemed to indicate nearing the end of their rate hikes. Yet somehow, it seemed that there was much more to the bullish sentiment than interest rates. The advance carried through every single session, including Friday in the face of sharply higher oil prices, with multiple indices closing at levels not seen since May 2001. The rally saw broad industry participation but leadership came from the large cap technology companies in the Nasdaq 100 , another stark contrast with 2005. As expected, volume was much higher than the previous holiday week, and well above average.

For the week, the Nasdaq 100 vaulted 5.46%, followed by the Russell 200 and S&P 500 which posted very respectable gains of 3.89% and 2.98% respectively. A good start to 2006! The week's bullish action went to reinforce our Model's Buy state.

Trend Timing School

2005 year in review

For investors focusing primarily on the broad U.S. stock market, 2005 was a year to forget. The market stayed tightly range bound with little amplitude and little trading, which resulted in even lower performance than 2004. In contrast to the single digit gains in the U.S., almost all world markets advanced at a brisk pace delivering handsome rewards to diversified investors.

The 2005 at a glance table below clearly shows market rotation in progress with last years best strategy, Long Only, relegated to last and Long and Short with Margin regaining the top spot it frequently occupies. In the U.S., the Mid Cap S&P 400 was clearly the winner while many-times top dog Nasdaq 100 took the fall and ended up last. On the international front, Brazil took the honors while last year's winner, Hong Kong, trailed the field. On the U.S. sector front, the overall winner is the Energy , with a whopping 72.88% return with Long and Short (and 177.42% when adding margin!), and the losers were Healthcare and Real Estate.

2005 at a glance

Number of signals	4
Best strategy	Long & Short with Margin
Worst strategy	Long Only
Best U.S. index	Mid Cap S&P 400 (^MID)
Worst U.S. index	Nasdaq 100 (^NDX)
Best international ETF	Brazil (EWZ)
Worst international ETF	Hong Kong (EWH)
Best Sector ETF	Energy (XLE)
Worst Sector ETF	Healthcare (IYH)

For the actual results we have grouped by type and ranked the results of the major ETFs we track in the table below. The first thing that jumps out at you is the amount of green, and the size of the World Markets gains. Brazil returned 66.07% with the Long and Short strategy (147.83% with Margin). Admittedly, showing the performance of all these ETFs across our four strategies is misleading because there is no practical way to short some of them. While most ETFs can in principle be shorted, because of low liquidity your broker is likely to have none to loan you, and not many are optionable. Yet, for the majority of funds, even the Long Only strategy improves returns substantially over simple buy and hold, demonstrating the high levels of correlation between our signals and world markets.

The sector funds generally do not correlate with the broad market or our signals. They are listed for comparison's sake only and are not intended to trade with the TimingCube signal.

2005 ETF Performance rankings

U.S. Markets
Ticker	Fund Type	Long Only	Long Only with Margin	Long & Short	Long & Short with Margin	Buy & Hold
MDY	Mid Cap S&P 400	14.84	30.36	17.40	36.14	12.28
IWM	Small Cap Russell 2000	7.55	14.38	10.28	20.05	4.67
VTI	Wilshire 5000	5.91	11.56	6.40	12.57	5.39
SPY	Large Cap S&P 500	5.16	10.06	5.52	10.79	4.78
DIA	Large Cap Dow Jones Industrials	3.20	6.23	4.82	9.48	1.47
QQQQ	Large Cap Nasdaq 100	0.60	-0.43	-0.27	-2.22	1.40

World Markets
Ticker	Fund Type	Long Only	Long Only with Margin	Long & Short	Long & Short with Margin	Buy & Hold
EWZ	Brazil	60.40	131.44	66.07	147.83	54.74
ILF	Latin America	57.01	123.56	57.48	124.55	56.31
EWW	Mexico	52.17	112.24	57.47	127.36	46.96
EWC	Canada	39.72	86.77	51.09	117.69	28.75
EEM	Emerging markets	41.87	90.87	48.22	108.09	35.63
EWJ	Japan	36.51	77.42	47.37	106.10	25.99
EWA	Australia	29.42	63.44	41.58	94.62	17.64
EFA	Europe, Australia, and Far East	24.00	50.54	32.88	72.46	15.39
EWQ	France	21.91	46.03	32.69	72.36	11.57
EPP	Pacific ex-Japan	23.48	49.85	32.46	72.00	14.80
IEV	Europe	20.19	42.24	29.10	63.68	11.57
EWG	Germany	18.98	38.61	28.42	60.98	9.84
FXI	China	20.81	43.18	26.87	57.64	14.86
EWU	UK	13.78	28.21	19.82	42.01	7.88
EWH	Hong Kong	5.45	10.53	3.27	5.88	7.56

Industry Sectors Note that individual industry sectors are generally not well correlated with the broad market or the TimingCube signal
Ticker	Fund Type	Long Only	Long Only with Margin	Long & Short	Long & Short with Margin	Buy & Hold
XLE	Energy	57.01	129.86	72.88	177.42	41.90
GLD	Gold	29.40	63.24	37.38	83.66	21.66
IYM	Basic Materials	13.66	26.87	22.71	47.10	4.61
IDU	Utilities	15.15	31.52	16.96	35.50	13.21
SMH	Semiconductor	10.69	20.70	10.59	20.41	10.70
IYJ	Industrial	6.29	12.42	8.18	16.31	4.31
IYC	Consumer Services	0.55	0.77	3.70	7.02	-2.68
IYF	Financial	4.18	7.31	2.67	4.17	5.65
IYW	Technology	1.96	2.10	1.65	1.36	2.17
IYK	Consumer Goods	0.66	1.21	0.24	0.35	1.06
IYZ	Telecommunications	-3.62	-7.73	-1.38	-3.42	-5.83
IYR	Real Estate	0.73	0.08	-6.10	-13.42	7.60
IYH	Healthcare	1.19	2.02	-6.29	-13.00	8.74