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

Market Update

Stocks returned to their losing ways this week. After closing with minor losses Monday, the main averages managed to post gains on rising volume the next day despite the fact that the afternoon release of the last Fed meeting expressed a cautionary tone. The central bankers expect GDP to decline in 2009 as the outlook for the economy remains weak. They also warned that the unemployment rate could rise all year. Payroll processing firm ADP said Wednesday that private employers slashed almost 700,000 jobs in December. The negative news combined with a revenue warning from Intel and the announcement by Alcoa that it will suppress 15,000 jobs to send stocks sharply lower, with both the Nasdaq composite and the S&P 500 dropping over 3% by day's end. Several major retailers such as Wal-Mart, Costco and Sears Holding reported disappointing December sales Thursday. Investors decided to shrug off the news as the market was able to stabilize, with the Nasdaq Composite even gaining 1.1%. Weakness returned in earnest Friday, however, following a weak employment report: the economy destroyed 524,000 nonfarm payrolls in December, bringing the total number of jobs lost in 2008 to 2.6 million, the worst since 1945. As for the unemployment rate, it now stands at 7.2%, its highest level since 1993. Stocks fell heavily as a result, the Nasdaq Composite losing 2.8% on the day to cap a negative week.

The Nasdaq 100 (QQQQ) , S&P 500 (SPY) and Russell 2000 (IWM) respectively lost 3.09%, 4.16% and 4.16% over the 5-day span. All 3 ETFs have now crossed back below their 50-day exponential moving averages (EMAs) and remain located well under their 200-day EMAs.

For its part, our World portfolio posted a 4.35% loss this week. The portfolio consists of the 5 top-ranked world ETFs as of January 2, 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

2008 Year in review

2008 was a year few investors had ever witnessed before. Not since 1931 has the Dow Jones Industrial Average suffered such a decline. Never in the history of the Nasdaq Composite Index has such a drop occurred. It was a historic year that brought to an end investment banking as we know it, saw commodity prices collapse with stunning rapidity, and witnessed America's once-proud automobile industry stand on the brink of bankruptcy. Here is a picture of the 2008 investing season featuring the massive 25% stock market crash in September. When Treasury Bonds are the best performing asset class, you know that things are out of whack.

Chart 1: Performance of different asset classes in 2008



The market crash leaves the S&P 500 having given up ALL of its gains from the 2003-2007 bull run and having lost an amazing 28% over the past ten years - delivering a "lost" decade in stocks.

Chart 2: Ten years of S&P 500 (under)performance



With stocks back to the vicinity of their prior lows (from 2002) and the government pulling out all the stops to support the economy and financial system, investors wonder whether the carnage has stopped. The economy is in a seeming freefall, unemployment is quickly headed to double digit levels, and the government is being asked to provide emergency funding to innumerable industries. Can it get much worse? Yes, it can. And it likely will in 2009. But it is very possible that the stock market will rebound even while the economy continues deteriorating. Looking at the 2002-2003 trough during the prior bear market, you can see the tremendous swings in the market as it struggled to find a bottom. The market can easily move 15-20% back and forth during these volatile periods making for further investing challenges.

Going back to 2008, there was simply no place to hide for equity investors last year. All geographies suffered massive losses. Given the dismal context for stocks, how did TimingCube fare in 2008? We are pleased to report that both our "Long Only" and "Long and Short" strategies markedly outperformed Buy and Hold. This is true for the 3 main U.S. index ETFs we follow and for our World approach, which seeks to invest in the top-ranked ETFs. As you can see in Table 1 below, the best result was achieved using the "Long and Short" strategy with the Russell 2000 ETF (IWM). It returned -4.83% last year vs -34.05% for Buy and Hold investors. The worst result was obtained following the "Long Only" strategy with our World approach. Still, the -20.81% return for 2008 was much better than the -55.56% loss achieved following the World "Buy and Rebalance" strategy, which seeks to be invested at all times and is conceptually equivalent to Buy and Hold. The fact that the 2008 results for the World approach were bested by those obtained with domestic ETFs clearly shows that the carnage in stocks was truly global last year and that foreign investors suffered even greater losses than we did in the U.S.

Table 1: TimingCube 2008 returns

	2008 returns (%)
	World	U.S.
		Nasdaq 100	Russell 2000	S&P 500

Long & Short -16.45 -7.14 -4.83 -9.75 Long Only -20.81 -11.98 -6.76 -12.28 Buy & Hold -55.56 -41.75 -34.05 -36.79

The key to successful investing rests first and foremost in NOT LOSING substantial sums during bear markets. By preventing those losses, investors can easily outperform the market over time. It is this clear fact that renders Buy and Hold investing not only a bad idea, but one that is almost absurd in retrospect. Thanks to our September 4, 2008 Cash signal, we were able to avoid the tremendous one-month plunge that followed and help protect our subscribers' assets. We received numerous e-mails from subscribers expressing gratitude for being safely in cash while most investors all over the world were losing their shirt. Yet, we cannot be completely satisfied with our 2008 results because we could have done even better. Had our September Cash signal be issued as a Sell instead, we would have posted positive returns for the year. It did not happen because by early September, internal readings within our Model showed the market to be too oversold to warrant a Sell signal and a Cash was issued instead. We have learned from this and made the necessary adjustments to our Model to ensure that it properly reacts to similar market conditions in the future. Please note that the markets finished the year almost where they were on October 10. This shows that despite all the quick ups and downs and heavy volatility, staying in cash was indeed the smartest decision throughout the fourth quarter of last year.

To finish up our coverage of 2008, we want to mention the excellent results achieved by the MTA Wealth Builder service that our sister company MARKETTREND Advisors, a full-service SEC-registered money management firm, launched on April 1, 2008.

MTA Wealth Builder is an ETF money management strategy that aims to make money in both up and down markets with less than half the market risk. To achieve that goal, MARKETTREND Advisors uses our ETFTide service as the starting point to select the best-performing asset classes, and provides additional protection through proprietary hedging techniques (including shorting during bear markets) to reduce volatility and drawdowns. The strategy vastly outperformed the S&P 500 in each of the last three quarters of 2008, returning 10.5% over the period while the S&P 500 lost 31.7%.

Table 2: MTA Wealth Builder 2008 returns

Strategy	Q2 '08	Q3 '08	Q4 '08	Total
MTA Wealth Builder	4.7%	-4.3%	10.2%	10.5%
S&P 500	-3.2%	-9.0%	-22.5%	-31.7%

If you are interested in having MARKETTREND Advisors manage part of your portfolio with the MTA Wealth Builder service, please use the information below to contact them and request more information. Should you decide to go ahead, they will waive the management fee for the first 3 months.

MARKETTREND Advisors
Phone: (512) 255-8722
Fax: (512) 255-8732
E-mail: info@MarketTrendAdvisors.com
Website: www.markettrendadvisors.com

FAQ of the Week

Question: What are the differences between TimingCube and ETFTide?

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