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

Market Update

Unlike many of their foreign counterparts, the major U.S. indexes added to their gains this week. Stocks rose Monday following the announcement of several mergers and news that political turmoil in Egypt was easing, yielding the S&P 500 a 0.8% gain. Investors decided to ignore news that China raised its interest rates Tuesday and pushed stocks higher again, with the S&P 500 tacking on another 0.4% on the day. After a modest retreat during the next session, stocks gapped lower at the open Thursday after Cisco Systems reported disappointing quarterly results. The weakness was short-lived, however, as stocks gradually recovered their losses to finish the session little changed. Friday saw the resolution of the Egyptian crisis as President Mubarak finally agreed to resign. The news gave stocks a boost, allowing the S&P 500 to finish the week with an additional 0.5% gain.

The S&P 500 (SPY), Nasdaq 100 (QQQQ) and Russell 2000 (IWM) respectively gained 1.49%, 1.85% and 2.75% over the five-day span. All three ETFs remain located above both their 50-day and 200-day exponential moving averages (EMAs).

As many foreign bourses suffered steep losses this week, our World portfolio posted a 3.99% loss over the five-day span. The portfolio consists of the 5 top-ranked world ETFs as of January 28, 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

Expansion of the TimingCube universe is almost upon us!

In our year-end review, we shared that a new Model was on the horizon. With this Weekly Update, we can report that we are now within one month of releasing this great addition to the TimingCube family. To build up to that release, we would like to begin sharing a few more details about the new Model. Perhaps the easiest way to consider the new Model is to provide a simple compare and contrast with our existing TimingCube Model.

First, we must reiterate that the existing Model, which has served us very well since 2001, will continue in its current form. We will begin referring to the existing Model as the Classic Model to distinguish it from the new Model, which will be called the Turbo Model. The two Models are completely different in terms of inputs and structure - there is little or no overlap between the two. Thus, you can allocate money to both Models as a form of "Model diversification."

The major difference between the two Models is the frequency of trading. The Classic Model trades, on average, 3-4 times each year as it seeks the intermediate trend of the market. The new Turbo Model averages 4 trades per month. However, that statistic is misleading because the Turbo Model really has two major built-in "modes": a slower, trend-following mode where a trade can last weeks or months, and a faster, active trading mode where trades can occur twice a week. There are triggers built into the Turbo Model to switch from the slower to the faster mode, with the main gate being market volatility. As volatility ramps higher, the Turbo Model is inclined to become more active as market swings become more pronounced. This active mode results in an ability to capture short bursts in the market, up or down, whether part of a larger market trend, or not. It is this quick twitch mode where performance gains can really pile up.

Another key difference in the two Models is the Cash signal - our Classic Model has one, our Turbo Model doesn't. Our Classic Model has a built-in 9% stop loss from the onset of a signal, shifting to a 15% stop loss as the signal gains. Our Turbo Model has no stop loss or Cash signal at all. Turbo is either Long or Short, never in Cash. Over the ten plus years of backtested performance, the Turbo Model has achieved an annualized return of over 70% with a maximum drawdown of 17%. We feel that is a very reasonable risk level given the tremendous potential for gains with Turbo.

A last major difference between Classic and Turbo is the use of the World Ranking system. This system has great benefit for users of our Classic Model. However, our Turbo Model does not use the World Ranking. The reason is that our Turbo Model is a "point" trading Model where we advise subscribers to trade only one or two major equity indexes. Given that the Classic Model typically has signals that can last many months, there is more benefit to trying to identify and focus your investment on the best performing areas of the market. World Rankings provide that guidance for where markets are hottest. Thus, with Classic, you gain from both the signal as well as from what index or country ETFs you use. With Turbo potentially issuing signals daily, the gains come almost solely from the accuracy of the signal. There is far less to be gained from buying and selling a multi-position portfolio and, indeed, you would likely experience higher trading costs with no better performance as a result of trading more than one or two positions with Turbo. That said, we will be offering our popular Ticker Tool feature for the Turbo Model so subscribers can go "off-road" and find their own favorite Turbo investment vehicles.

In summary, our Classic Model is perfect for investors who do not want to take action in their accounts all that often, but simply want to ride the prevailing trend of the market, up or down, in an attempt to gain over time from the market's inherently cyclical nature. Our Turbo Model is perfect for investors who are willing to trade their accounts regularly in an attempt to more closely capture the up and down performance the market offers. We appreciate the feedback of many subscribers who have requested a faster trading version of TimingCube. We think you will find our new Turbo Model to be a fantastic addition to the service and look forward to rolling it out to you shortly.

FAQ of the Week

Question: Does the selloff in emerging markets mean a correction is coming for U.S. stocks?

Ah, this is really the question of the moment. While U.S. stocks have been pushing higher for months now, emerging market stocks have been stuck in neutral with China, Brazil, and India stock indexes having now failed to hold any gains from the rally that began in September 2010. Over the past few years, emerging market stocks have often led the way down for stocks in general. It's always dangerous to think that "this time is different." However, there are more complications than normal this time around, at least enough datapoints floating around to wonder if markets are shifting away from the emerging market leadership.

Some points to ponder:

1. Though the emerging market ETFs - EEM and VWO primarily - have made no progress since October, some of the major underlying components have actually been weak for quite awhile. India, as the worst performer, has dropped sharply throughout 2011 and peaked way back in early October.
   
2. Brazil (EWZ) has made four attempts to clear $78 through the October-January months, finally caving in to downside pressure last month.
   
3. While the emerging markets have generally been faltering, Germany and Japan have been in steady uptrends, consistent with U.S. stocks.

The conclusion one could make is that money is leaving countries where interest rates are quickly rising to battle inflation and manage economic growth. That money is migrating to more developed economies that are, thusfar at least, NOT experiencing the inflation problems and are earlier in their economic growth cycles. Since December, the trend has held pretty steady in favor of Germany, Japan, and U.S.equities, just as it has in favor of stocks and at the expense of bonds. Being trend-followers, we'd ride those horses until they quit running.

Warm wishes and until next week.

The TimingCube Staff