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

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

Market Update

It has been a fairly quiet week, in which major indices did not move much. Markets jumped higher on Wednesday, buoyed by a better-than-expected earnings report from Cisco Systems. They kept climbing until Thursday afternoon, then reversed course after concerns regarding interest rates resurfaced following remarks by Chicago Fed President Michael Moskow. The negative tone spilled over to Friday's session as stocks kept moving lower before once again changing direction to finish the week on a positive note, helped by lower oil prices and a rebound in the Financial and Tech sectors. The earnings season is winding down and despite some very publicized disappointments, it has been a good one for Corporate America. About two thirds of the companies in the S&P 500 have surpassed analysts' estimates versus a 59% average since 1994.

Both the Nasdaq 100 and the S&P 500 were almost unchanged on the week. For once, the Russell 2000 did worse, finishing 0.98% lower. The S&P 500 and Russell 2000 both remain above their respective 50-day exponential moving averages (EMAs), while the Nasdaq 100 still rests below its own. All three indices are above their respective 200-day EMAs. Our Current Buy signal remains active.

Trend Timing School

Savings

We apologize in advance, to what we sincerely hope is the majority of our subscribers, to those who have been saving and continue to save a substantial portion of their earnings. We know that most Trend Timers are people that have decided to take control of their financial future and have undertaken a wealth building journey. However, with news of negative personal savings in the U.S. and record breaking trade and budget deficits, we feel obligated to get on our soap box and rave about, not just the benefits, but the absolute necessity of steady savings. And surprisingly, also warn against a much too frequently ignored dark side of savings.

Just last week the Commerce Department announced a 2005 savings rate of minus 0.5%, negative for the first time since the Great Depression. In fact, prior to 2005, Americans spent more than they earned for an entire year only twice, in 1932 and 1933. If you can't remember that far, these were not good years.

Low and declining savings rates are nothing new in the U.S. They have steadily declined from around 10% in the early eighties to now less than zero, while they have continuously increased in most of the other countries in the world. For example, savings are as high as 50% of income in China, 25% in India, 10 to 20% in European countries and 7% in Japan. With such wide disparities in savings it is hardly surprising that nearly every country in the world right now is a net lender, with almost all of those funds flowing to the biggest debtor of all times, the U.S.

Today, the U.S. Government announced that the trade deficit has hit an all-time high in 2005, yet it seems that the chronic overspending, budget deficits and spiraling national debt are being pitched as great and patriotic things for the economy and the country. We are led to believe that it is our civic duty to dip into our savings (if we have any), take a home equity loan or otherwise borrow to keep buying the big ticket items like the new car and big screen TV, or even some investment real estate.

There is a raging debate in economic and political circles as to which from the low savings rate or the trade and budget deficits is the cause and which the effect. Some warn that the negative savings rate will undermine the economy by removing the investment stimulus, but not before it takes down the stock market. It is not the risk of low savings ultimately affecting the stock market negatively that has us concerned; we have our Trend Timing Model to tell us when the markets have actually begun a new downtrend. No, what is highly worrisome to us, is the rapidly spreading mentality of "borrowing and debt are cool" and that "saving is nerdy and obsolete". After all, TimingCube is a wealth building system and we can never forget that the amount of wealth we accumulate is a function of three primary ingredients:

• How much we invest (our savings)
• What the investment returns, on average
• How long we save and invest

 As investors we mostly like to concentrate on the investment portion of the equation and ignore the part about saving. It is easy to feel that since things are a little tight, or because there is this next item to buy, that we will put off saving this year. Better next year, after we get the pay raise. Serious wealth building requires discipline in savings. A rock-bottom minimum savings rule, never ever to be broken, is 10% of your income, always. There have been studies made about the fact that however little you earn, you can always set 10% aside without great impact on your lifestyle. And of course the number gets cranked up when things improve.

Another aspect of maximizing your savings is to optimize their tax efficiency. If your personal tax situation allows you to make tax deductible contributions to retirement plans you should not hesitate. Depending on your tax rate it is like receiving 15% to 30% of every dollar set aside from Uncle Sam. Such deductions might still be possible for the 2005 tax year until April 15th so please check with a tax professional to be safe. Some have an employer sponsored retirement program like a 401(k) plan for which you should also attempt to maximize the deductions. The incentive is even higher if you are lucky enough to be in a plan where the employer matches your contributions. More free money.

Great! Now what about the dark side of savings? It is when we let precious funds erode in savings accounts or equivalent sub-inflation rate investments. Instead of making a large part of their cash assets work in the stock market or other investments, many active savers end up with large sums of cash stuck in a bunch of miscellaneous accounts at various banks, savings and loans, credit unions, or brokerage houses, earning at or near real inflation rates. Serious wealth building involves investing substantially all our serious money in strategies and vehicles that outperform the yearly loss in dollar buying power. It takes only an average yearly return of 15% to double our money in 5 years. At 0% it takes forever.

FAQ of the Week

Question: Why do you track the Nasdaq 100 and not the Composite?

The Nasdaq Composite index is a very broad market benchmark with about 3,500 stocks, large and small, domestic and international, and from many industry sectors but dominated by technology (52%). As such, this is the index that actually drives the TimingCube Model (read more about the Nasdaq Composite). In comparison the Nasdaq 100 index comprises the 100 largest stocks in the Composite, which makes it a lot more large-cap focused, and even more technology heavy (over 56%) than the Nasdaq Composite.

When it comes to which indices we invest in, and report results for, we selected the Nasdaq 100, Russell 2000 , and S&P 500 because they represented different slices of the market but also because they had large ETFs available for them (QQQQ , IWM , SPY ). Until the introduction of ONEQ in October 2003, the Nasdaq Composite did not have a corresponding ETF. Almost 2-1/2 years later, ONEQ is still much smaller and less traded than the other ones. It has about $127 million in assets, compared to $21 billion for QQQQ, and trades an average of 30,000 shares per day versus over 82 million for QQQQ (read more about QQQQ versus ONEQ). Note that, as explained in last week's Trend Timing School article, the liquidity of an index ETF is really the liquidity of all the companies in the index and therefore, ONEQ's low daily volume does not present a liquidity issue, but effectively makes it nearly impossible to short.

Warm wishes and until next week.

The TimingCube Staff