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

Market Update

Stocks resumed their march forward this first week of the year as the rally that started in March 2009 shows no sign of abating. Having enjoyed their holiday break, investors returned to the market in cheery mood Monday, pushing the Nasdaq Composite 1.7% higher, as buyers stepped in on news that the ISM index of manufacturing activity rose for the fifth straight month. A spike in the price of oil and other commodities also enticed market participants to buy. The major averages did not budge much during the next two sessions amid conflicting economic news: if housing data proved disappointing with a 16% drop in pending home sales for November, factory orders rose by a better-than-expected 1.1%. Despite relative weakness for the tech sector and weak jobless claims data, stocks managed to post modest gains Thursday as the S&P 500 rose 0.4%. Ahead of Friday's session, the Labor Department released the latest employment report: if revised data showed that the economy actually added jobs in November, 85,000 payrolls were cut last month, far more than the 8,000 analysts were expecting, while the unemployment rate remained steady at 10%. Investors took the mixed news in stride as early weakness was quickly overcome to send all main indexes higher by day's end, with the S&P 500 finishing at its highest level since September of last year.

The Russell 2000 (IWM), S&P 500 (SPY) and Nasdaq 100 (QQQQ) respectively gained 3.33%, 2.81% and 1.75% 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 again outperformed its U.S. counterparts this week with a 4.93% gain. The portfolio consists of the 5 top-ranked world ETFs as of January 1, which marked the beginning of the current 4-week holding period.

Our current Buy signal remains in effect.

Trend Timing School

2009 Year in review

What to say about such a dramatic couple of years? We began 2009 with concerns that the world might be falling into a global depression. Unprecedented government and central bank intervention has set that scenario aside for now paving the way for a resumption of global economic growth. Though only a few months ago, the world seemed to be in the midst of dramatic change, we have been reminded of the old saying: the more things change, the more they remain the same. What's the same? The ups and downs of the stock market cycle (and the human behavior associated with it)! After the dust has settled a bit, the market now looks like it just went through another verse in its usual song cycle, plunging as a vicious recession took hold only to recover in equally dramatic fashion as the upcycle began anew.

The graphics below from Fidelity Investments show key milestones when coming out of a recession. Thusfar, we are right on track, right around the average. Adding to this "typical" recession recovery behavior of the economy is typical recession recovery behavior of the stock market. The market has followed a well-worn pattern of exiting from a recession with a powerhouse gain early in the cycle.

Chart 1: Cyclical recovery timeline

Source: FactSet; NBER (Averages Based on 10 Recessions Since 1948. "Stocks" and "Earnings" are based on the S&P 500 Index. "Corporate Yields" are based on yield data for Baa rated long-term bonds from Moody's Investor Services).

Equity market rallies that reached a new one-year high following a decline of more than 20% (such a decline is the definition of a bear market) have in the past been very strong. As the table below depicts, the current rally off the March 2009 lows with an advance of about 56% is actually on the lower end of the spectrum. In fact the average rally off lows since 1948 has been about 111%.

Table 1: Historical bear market declines and subsequent appreciation

Year (bottom)	1949	1957	1962	1966	1970	1974	1978
Decline	46%	24%	28%	24%	37%	50%	20%
Appreciation	221%	74%	70%	48%	75%	78%	64%

Year (bottom)	1982	1987	1990	1998	2002	2009	Average
Decline	29%	36%	20%	22%	51%	57%	34%
Appreciation	233%	71%	289%	68%	102%	56%	111%

Does this mean that we are in for a repeat and can expect an additional 50% rise before the rally is over? Well, however helpful market history may be, we have no way to know for sure and no one else does. Instead of trying to make predictions, we will simply keep doing what we have always done, that is follow what our unemotional timing model tells us. Should the market's price and volume action indicate that the rally is fizzling, you will be the first to know as our model will promptly issue a Cash or Sell signal.

Going back to 2009, how did TimingCube fare last year? We are pleased to report that our strategies performed very well across the board, showing remarkable consistency as is shown in Table 2 below.

Table 2: TimingCube 2009 returns

	2009 returns (%)
	World	U.S.
		Nasdaq 100	Russell 2000	S&P 500

Long & Short 31.06 35.06 34.69 29.18 Long Only 31.06 35.06 34.69 29.18 Buy & Hold 29.66 54.61 27.19 26.06

The first thing to note is that 2009 results were identical for the "Long and Short" and "Long Only" strategies. This is due to the fact that we only had Buy and Cash signals last year and therefore never held a short position. The best result for our timing strategies was achieved with the Nasdaq 100 ETF (QQQQ) . It returned 35.06% last year, while the "worst" result was obtained using the S&P 500 ETF (SPY) , with a gain of "only" 29.18%. Except for the Nasdaq 100 ETF, which had an incredible year, our timing strategies allowed us to outperform Buy and Hold investors again in 2009. They did so with much less volatility, as we completely avoided the severe decline of the first two months and were able to jump back into the market after the worst had passed thanks to our April 2 Buy signal. We have remained long since then (except for a brief cash period in November), and therefore safely captured most of the ongoing rally's performance.

We will finish by pointing out that we vastly outperformed the market during the last 2-year period. As an illustration, our "Long and Short" strategy returned 28.18% from January 1, 2008 to December 31, 2009 using the Russell 2000 ETF (IWM) as the trading vehicle, while Buy and Hold investors lost 16.11% of their capital during the same period. As you know, the ability to sidestep devastating bear market declines while taking advantage of strong market rallies is what our TimingCube service is all about.

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: I did not receive some of your e-mail notifications. Why?

Ever so often, a subscriber will contact us to report that he/she did not receive our latest Weekly Update notification or signal change e-mails. While we can ensure that our e-mails are sent to all subscribers (and they definitely are), we unfortunately have no way to guarantee that these e-mails will be properly delivered. If you do not receive our e-mails, the most likely explanation is that they are wrongly filtered out by your ISP or your e-mail software. Because of increased junk mail traffic, many ISPs have tightened their spam filtering techniques. As a result, some perfectly valid e-mails such as ours are sometimes filtered out and simply discarded by mistake. We of course do not spam, but because we send our e-mail messages to many people simultaneously, your ISP might wrongly assume that we do and get rid of the messages. If you are in this situation we would advise that, in addition to the usual precautionary steps we recommend below, you contact your ISP directly to correct the problem. In particular, you can ask them to whitelist our sending e-mail addresses (see below) and domain name (timingcube.com).

If you have an "unwanted mail" or "bulk" folder of some kind, you might want to check its contents to see if our message was not stored in it by mistake because of some over-zealous anti-spam filtering. One of the most effective ways to prevent this from happening is to include friendly e-mail addresses in your address book. The three addresses from which TimingCube sends e-mails are:

• info@timingcube.com
• sales@timingcube.com
• support@timingcube.com

Please use the "Test e-mail" feature from the top of the "My Profile" page to check the communication channel between you and us.

Warm wishes and until next week.

The TimingCube Staff