Signal Type	Trade Date	Return since issued
		World	U.S.
			Nasdaq 100 (QQQQ) Russell 2000 (IWM) S&P 500 (SPY)

Market Update

Stocks posted modest gains this first week of the year, with the notable exception of the tech sector that outperformed thanks to a rebound in semiconductors. Returning from the Holidays, investors pushed stocks higher Monday after the latest ISM report showed that manufacturing activity expanded last month while construction spending topped estimates. The S&P 500 gained 1.1% on the day. Stocks opened the next session higher but quickly fell into negative territory before recovering a portion of their losses after the release of the minutes of the Federal Reserve's last meeting, leaving the Nasdaq Composite with a 0.4% daily loss. Ahead of Wednesday's open, ADP released its private December employment report, which was much better than expected. Combined with a solid reading for the ISM index of service activity, the news helped stocks move higher, yielding the S&P 500 a 0.5% gain. The next session proved to be a quiet one in which equities remained little changed as investors adopted a wait-and-see attitude ahead of Friday's employment report. Before the opening bell Friday, the Labor Department reported that the economy only added 103,000 jobs in December, a figure that fell short of expectations and largely negated ADP's report. As for the unemployment rate, it dropped to 9.4% from 9.8%, but this was in part attributed to people stopping their job search. The disappointing news resulted in a negative day for stocks, even though early losses were trimmed by day's end, leaving the Nasdaq Composite 0.25% lower.

The Russell 2000 (IWM), S&P 500 (SPY) and Nasdaq 100 (QQQQ) respectively gained 0.36%, 1.11% and 2.59% over the five-day span. All three ETFs remain located above both their 50-day and 200-day exponential moving averages (EMAs).

For its part, our World portfolio posted a 0.64% loss this week. The portfolio consists of the 5 top-ranked world ETFs as of December 31, which marked the beginning of the current 4-week holding period. Please note that since we now have an active Cash signal, the World 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 ETFs, as the strategy calls for staying invested at all times. Please go to the "Our Service" page for all the details.

Our current Cash signal remains in effect.

Trend Timing School

2010 Year in review

Investors spent the first eight months of 2010 trying to sort out whether the U.S. economy was really recovering or not, and whether the European Central Bank would be successful coming to the rescue of Greece, Ireland, Portugal, et al. Once the Federal Reserve announced their 2^nd round of "quantitative easing" - dubbed QE2 - in late August markets concluded that all was well and worked money back into stocks pushing indexes to decent returns for the year overall. High yield bonds beat stocks for the second year running while gold, silver, and other metals were standout performers. The bond market generally was the belle-of-the-ball until November. That month's Fed meeting produced a statement expressing continued determination to keep interest rates low and providing specifics on the QE2 implementation - $600 Billion worth of U.S. Treasury bond purchases. That move was read by market players as the Fed playing the last card in their hand, which could only mean a new deck of higher interest rate cards was next in line. Bond investors sold, with particular vengeance heaped upon municipal bonds as the popular Build America Bond program failed to get extended leaving the traditional muni bond market to have to provide all future supply (and to request higher rates as compensation for the favor). Investors endured a heart-stopping "flash crash" on May 6^th when some of the folks who were supposed to provide liquidity to the markets chose to stop playing, at least for a few brief moments, leaving all of us to think our stock quote machines had suddenly lost their minds. Sanity was quickly restored. But it took several months for investors to regain their composure as fears of a Eurodebt meltdown and double-dip recession kept heavy clouds hovering overhead. Come late August the skies cleared and the market moved higher until year end.

Within that context, how did TimingCube perform last year? Well, the least we can say is that 2010 proved to be a challenging one for our service, which resulted in disappointing results for our strategies as is shown in the table below.

TimingCube 2010 returns

	2010 returns (%)
	U.S.			World
	Nasdaq 100	Russell 2000	S&P 500

Long Only Long & Short -8.92 -8.35 -8.25 -17.41 Buy & Hold 18.42 25.20 13.64 6.20

Please note that 2010 results were identical for the "Long Only" and "Long and Short" strategies. This is due to the fact that we only had Buy and Cash signals last year and therefore never held a short position.

After two years of outperformance, which allowed us to avoid the 2008 bear market and achieve returns in excess of 30% in 2009, we clearly missed the market's gains last year to instead finish with losses across the board. What happened? As it turns out, the market action we experienced in 2010 is the most difficult kind our Model can face. The reason is that our Model is based on trend following and can therefore only react to a trend change after it has already started. With the many significant twists and turns the market took last year, we experienced several whipsaws as our Model attempted to capture trend changes that only proved fleeting. Despite last year's disappointing results, it is important to keep things in perspective: our 3-year performance is significantly better than that obtained with Buy and Hold across all our strategies. As an illustration, our "Long and Short" strategy returned 19.06% from January 1, 2008 to December 31, 2010 using the Russell 2000 ETF (IWM) as the trading vehicle, while Buy and Hold investors only gained 6.46% during the same period.

Trying to draw lessons from what happened last year, is there something we can do to improve performance going forward? The answer is an emphatic yes!
We are just about to complete a project that started more than a year ago, following numerous requests from subscribers. This enterprise is the implementation of an alternate timing Model that generates more frequent signals than our current one, to more readily take advantage of corrective phases and bear markets. We are currently in the process of overhauling our Web site to make room for this new timing Model, which will coexist with our current one. There will be no extra charge for this new feature as it will become an integral part of our service. As a subscriber, you will be able to choose between our current "classic" Model, which sports excellent long-term results with minimal trading, and our new Model, which trades more frequently but provides for much improved results. The new Model is designed to trade Nasdaq 100-based vehicles such as the QQQQ ETF. It returned over 40% in 2010 using QQQQ as the trading vehicle with no leverage, more than doubling the Buy and Hold return. The redesigned TimingCube Web site that includes the new timing Model will be available before the end of the first quarter. Please stay tuned for more information as we move closer to the launch of this exciting new feature.

To finish, we would like to contrast the disappointing TimingCube results of last year with the solid ones obtained with our TradeGuru and ETFTide services. Our 10-stock TradeGuru Folio A gained 22.23% in 2010, while our ETFTide portfolio (which consists of five ETFs) returned 16.26%. Both services complement TimingCube nicely as they approach the market from a different angle and therefore provide good portfolio diversification.

As we start a new year, we want to take this opportunity to thank you for your business and hope to continue serving your investing needs for many years to come.

FAQ of the Week

Question: How do TimingCube and ETFTide compare?

Even though there are similarities between ETFTide and the TimingCube World approach, the two services are very different in strategy and market focus, which makes them highly complementary and favorable targets for strategy diversification.

We will not attempt to fully explain the ETFTide service here, for that you should take a tour of the www.etftide.com Web site, but we will contrast the key characteristics of the two systems using the table below.

Comparison of TimingCube and ETFTide

	TimingCube U.S.	TimingCube World	ETFTide
Market focus	Broad, diversified and correlated U.S. equity ETFs	Broad, diversified and correlated U.S. and World equity ETFs	None (All major markets, asset classes, industry sectors, types, and geographies)
Geography	U.S.	U.S./World	U.S./World/Regions
Strategy	Trend following	Trend following plus momentum	Momentum
Market side	Long/Short or Long only	Long/Short or Long only	Long only
Investment vehicles	Market idexes via ETFs, mutual funds, options	Market indexes via ETFs, mutual funds, options	ETFs
Trading frequency	3-5x per year	15-18x per year	12x per year

As we know, the TimingCube system is based on timing the stock market as a whole with a trend following strategy. The market focus is on broad, diversified and correlated stock market ETFs, and with the assistance of the World ETF Ranking service, has expanded from strictly U.S to World markets. In sharp contrast, the ETFTide system encompasses all major markets and asset classes (not just equities), industry sectors, types and geographies.

Yes, when World equity markets are in strong rallies and exhibit the strongest momentum of all ETF investments, some geographies can be flagged by both the World ETF Ranking and ETFTide. When other market segments are strongest, such as energy or utilities for example, ETFTide has the many specialized ETFs to turn to (it incorporates nearly 112 separate ETF categories versus 31 for the World ETF Ranking).

The differences become even more acute during equity downturns, when TimingCube uses Short or Cash signals to exit equity markets (or bet against them), while ETFTide remains fully invested but, purely as a function of their respective strength, will tend to rotate to more defensive ETFs such as precious metals, bonds or currency funds.

Warm wishes and until next week.

The TimingCube Staff