Follow TimingCube » Follow TimingCube on Facebook Follow TimingCube on Twitter Follow TimingCube on LinkedIn
Turbo Model
Classic Model




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.

Back to the Top of the page


Market Update
After experiencing their first serious drop of the year last Friday, markets regained their winning ways and rebounded nicely this week. The Russell 2000 , which has already gained almost 9% this year, now sits at a new all-time high. Another influential benchmark, the SOX semiconductor index closed the week at a new 2-year high. Last week's scare was largely due to disappointing earnings reports from such companies as Yahoo! or Intel. Investors heard better news this week from tech bellwether Microsoft, which provided a solid earnings report on Thursday evening and issued positive comments for the current quarter. In fact, 63% of all S&P 500 companies that have already reported earnings for the past quarter have surpassed analysts' estimates. This helps put the high-profile misses of last week in perspective and explains why investors turned more positive this week and bid the markets higher on strong volume.

On the economic front, government data released Friday morning showed that GDP for the fourth quarter of 2005 only rose by 1.1%, the slowest pace since 2002. Investors largely shrugged off the news as a slowing economy might entice the Fed to stop raising interest rates sooner rather than later. Further, many economists are saying that last quarter's slowdown was just a bump in the road and that the economy is poised to get stronger in the current quarter.

The Russell 2000 and Nasdaq 100 closed the week 2.07% and 3.92% higher, respectively. As for the S&P 500, it posted a 1.76% gain. All three indices rest above both their respective 50-day and 200-day exponential moving averages (EMAs). Our Buy signal remains in effect.

Back to the Top of the page


Trend Timing School
Market and limit orders

It is when things are quiet that we should get organized and ready for the next signal, and part of this process is to know exactly when and how we are going to trade when the time comes. Selecting the type of order and the specific trading technique to apply are key ingredients to readiness. Because the type of orders you use and how you trade are highly dependent on the type of strategy you follow and the investment vehicles you use, investors following multiple services, such as the examples mentioned in our FAQ of the Week below, will greatly benefit from knowing the difference between market and limit orders and when to use which.

TimingCube subscribers know to expect new signal notification e-mails to be sent after the close of the market by 7:00 pm ET and to place their trades prior to the following open. Officially published open prices are what we use in all of our results and that is the price we all try to get. The issue arises from the fact that few investors ever get exactly the open price. To make matters worse, the risk of getting a price less favorable than the open increases depending on the investment vehicle and market conditions.

When purchasing large and highly liquid ETFs which track broad market indices, placing market orders before the market opens works pretty well. The market and daily volume of securities such as QQQQ and SPY are so huge that all the TimingCube driven trading has no noticeable effects on their price. Nevertheless, some investors refuse, as a matter of principle, to have such an exposure. The risk is that market orders waiting for the stock exchanges to open are sitting ducks and vulnerable to adverse events or news announcements which could cause prices to jump at the open (these price jumps are also called gaps) only to retreat later in the session. The risk of such surprises is generally larger for an individual stock than it is for a broad market index, but it increases substantially for illiquid investment vehicles be they stocks or ETFs. Some of the smaller international ETFs we discussed in the previous two issues of the Weekly Update certainly fall in this vulnerable category.

To alleviate the potential risk of being caught by an unfavorable gap at the open, we would recommend one of two things: 1) an alternate trading technique which, instead of having market orders going into the market open, would have you trade manually at/after the open or, 2) placing limit orders. With the first technique, with access to real-time quotes offered by many brokers you can monitor the action as the market opens to make sure there is no gap before you place your market order, or wait until the price pulls back from a gap. The shortcomings of this technique are the time it takes to implement and the risk of being stranded by a rising market (i.e. if instead of pulling back after a gap the market keeps on rising, you are left with a choice of not trading or trading at an even higher price).

Limit orders can offer a good alternative when trading individual stocks or thinly traded ETFs. Before the market opens you simply place a limit order with the limit set at say 1% above the previous closing price. This will get you close to the price you want, unless the security gaps up more than 1%. The drawbacks of limit orders are the higher costs most brokers charge and the risk of being stranded without the security by rising prices. This is not a big issue when following a stock picking system like TradeGuru because you can simply wait for another recommendation on another day, but when investing with the TimingCube system you certainly do not want to miss a signal, or you might be stuck on the wrong side of the trend for prolonged periods of time.

As usual, mutual funds march to their own drummer. Because they generally have only one price set every day at the close of the market, all traders that day will get the same exact price. Therefore, when entering or exiting a mutual fund position, placing a simple buy or sell order any time during the day prior to your broker's cut-off time for mutual fund trades should work just fine. When switching from one mutual fund to another within the same fund family, as you would do when trading the bull/bear index funds in the ProFunds or Rydex families, you get to use the special mutual fund exchange order. Without this exchange capability the entire transaction would involve two separate trades and span two consecutive days, with the sell of one fund the first day followed by the buy of the other fund on the second day.

Back to the Top of the page


FAQ of the Week
Question: Can I use TimingCube and TradeGuru together for diversification?

Yes. Because the TimingCube and TradeGuru systems are completely different and their recommendations are completely unrelated, they offer good strategy diversification to an investor using both. Since by and large they are not correlated, we view the two services as highly complementary, and having a portion of your portfolio dedicated to each should work well.

Some clever subscribers have been thinking of ways to mix the two with strategies such as buying TradeGuru stock recommendations during TimingCube Buy signals and not during Sell signals. Because the two systems are highly uncorrelated we do not recommend such approaches. It is true that during down markets, a large percentage of stocks will slump and accordingly, TradeGuru will find fewer new stock recommendations. Still, even during bear markets does it find profitable trades.

Warm wishes and until next week.

The TimingCube Staff

Back to the Top of the page


Follow TimingCube » Follow TimingCube on Facebook Follow TimingCube on Twitter Follow TimingCube on LinkedIn

   Turbo Model
   Results
 
   Classic Model
  
   Site Map
   Glossary

TimingCube® is a registered trademark of Fraser Partners, LLC.
Disclaimer/Terms of Use    Privacy Policy
©2001- Fraser Partners, LLC
  All Rights Reserved.