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What's new this week?
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On Monday February 28, 2011
TimingCube launches its
 Model
in a fully redesigned Web site!
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Current Signal Performance
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Turbo Signal
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Trade Date
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Turbo Model Returns (Long & Short Strategy)
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Nasdaq 100
(QQQ)
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Russell 2000
(IWM)
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S&P 500
(SPY)
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Classic Signal
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Trade Date
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Classic Model Returns (Long & Short Strategy)
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World
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Nasdaq 100
(QQQ)
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Russell 2000
(IWM)
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S&P 500
(SPY)
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After several weeks of small gains on tame action, increased selling pressure forced stocks to retreat this holiday-shortened week. With unrest in Libya causing a 6% rise in oil prices, the major indexes started the week with a steep sell-off on increased volume that left the Nasdaq Composite 2.7% lower by Tuesday's close. The negative tone of trading persisted during the next session, causing the Nasdaq Composite to relinquish an additional 1.2%. The move lower occurred once again on heavier volume, leaving little doubt that institutional investors were dumping shares. Despite weekly jobless claims data that came in better than expected Thursday, continuous trouble in Libya caused stocks to trade in negative territory for most of the session before a late turnaround allowed the Nasdaq Composite to finish the day with modest gains while the S&P 500 remained slightly in the red. Buyers stepped back in Friday after the latest Consumer Sentiment Survey from the University of Michigan came in at its highest level of the past 2 years. The S&P 500 recovered 1.1% on the day, but it should be noted that the gains occurred on light volume, casting doubts over the sustainability of the rebound, which was in part the result of short covering following three consecutive losing sessions.
The Russell 2000 (IWM), S&P 500 (SPY) and Nasdaq 100 (QQQQ) respectively lost 1.40%, 1.64% and 1.84% 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 posted a 2.26% loss this week. 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. The World portfolio is being rebalanced today, as the current 4-week holding period is now over. 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 Classic Model "Description" page for all the details.
Our current Cash signal remains in effect.
The
TimingCube Turbo Model arrives!
Almost ten years ago, we launched our TimingCube
model as a way to help investors avoid the damaging pitfalls
of bear markets. As the investment industry has leveraged
the power of the internet with brokers offering increasingly
sophisticated trading platforms, our loyal subscribers have
asked when we might offer a quicker version of our tried-and-true
investment system. We are very pleased to announce that
this new day is upon us! With the open of the market Monday,
our Web site will be almost completely revamped as we introduce
our new TimingCube Turbo Model.
Turbo expands upon our Classic Model, offering a faster-trading
friend as a complementary service. Whereas Classic offers
trend-following market signals 3-4 times per year, Turbo
provides a completely independent view of the market. While
many of the Turbo signals will last weeks or even months
during well-established trends, there are occasionally periods
where heightened market volatility generates shorter signals
that will last only a few days. The result is a whole new
gear for our investment returns, with an annualized gain
of 76% since March 1999 using QQQQ
as the trading vehicle,
during a 12-year period we all know has been very unkind
to buy-and-hold investors. However, our Turbo Model never
flinched in the face of the two bear markets during those
years. Our equity curve below tells the story of a very
smooth, nearly uninterrupted path of outstanding gains from
our Turbo Model, through up, down, and sideways markets.
Chart1: Turbo Model applied to QQQQ - Growth of $10,000 since 3/10/1999 as of 1/19/2011
Our Turbo Model invests in the same simple index ETFs as
Classic, with the exception that there is no World Ranking
function for Turbo - trading the five-position World Ranking
portfolio so often would be more burden than benefit. Because
of the prospect of some quicker trading, we caution subscribers
trading Turbo in their IRA, Roth, or other non-margin accounts
to make sure that cash is available in their account before
trading. To minimize any potential trade issues, those accounts
should consider using less than half of their account value,
trading leveraged ETFs to make up for the smaller allocation.
For example, instead of using QQQQ and the corresponding
inverse ETF PSQ to implement the Turbo Long and Short strategy
in an IRA, we can use the double-leveraged
QLD/QID
pair
on half the portfolio size, keeping the other half in cash.
Practically, in a $20,000 account, a Buy signal would suggest
we buy no more than $10,000 worth of QLD, with a Sell signal
driving a purchase of no more than $10,000 worth of QID.
Taking this approach should always keep plenty of cash on
hand for trade settlement and minimize the remote possibility
that your account will encounter any trading restrictions.
With the introduction of Turbo, the question becomes how
to incorporate it into our portfolio. While the "Description"
page under our Turbo heading will provide ideas for what
to trade, the key question is how, when, and even whether
to trade the current signal. As of today, the Turbo Model
is on a Buy signal that dates back to last September, a
full 170+ days ago!! Only SIX trades have lasted more than
100 days during our 12-year testing period. For this reason,
we tend to believe subscribers should act with caution regarding
the current signal. It may well last for many more days
or weeks, but it is also possible that a new signal may
not be that far off. As always when entering a new signal
program, one can choose to simply wait for that next signal,
or take a prudent dollar-cost-averaging approach buying
in small chunks every few days or so.
By taking some cues from market volatility, our Turbo Model
is an entirely different animal than our Classic Model.
We think this dual-model approach gives our subscribers
a unique advantage in trying to wrangle profits out of today's
dynamic stock markets. You now have choices with TimingCube,
and multiple tools that can be customized to fit your investing
lifestyle and trading preferences. As much as we have enjoyed
the past ten years of providing you timing signals to safely
guide your capital through treacherous markets, we believe
the future is even brighter with the arrival of our new
Turbo Model. Starting Monday, our newly remodeled Web site
will provide a fitting platform from which to launch our
new toy. We encourage
you to take a look around the Web site. As the weeks unfold,
we will devote some of our Weekly Update space with answers
to your most frequent questions regarding the new model,
new Web site, as well as ideas for incorporating Turbo into
a broader portfolio from our friends at MARKETTREND Advisors.
Hop in and enjoy the ride!
Question:
Is there a consistent relationship between oil prices and
stocks?
With oil prices shooting higher because of unrest in Libya
and investors already wondering whether the 5-month stock
rally is nearing an end, this is a natural question. Certainly
this week there appears to be a clear cause-and-effect with
oil prices surging over 10% in a couple of days and stocks
taking it on the chin. But as strong as this stock rally
has been, it would be easy for investors to believe this is
just another opportunity to buy the dip. So we looked back
over the past decade+ to see how stock prices react to changes
in oil prices.
The results are comforting in that they are quite consistent.
Not surprisingly, stocks react badly to sharp, sudden
increases in oil prices. The higher level of uncertainty
that drives oil prices higher also creates angst for stock
investors. However, rises in oil prices that occur in a
steady updraft over time, as we saw in the mid-2000s, can
be a positive for stocks, at least for awhile. You will
recall the talk at the time when oil was last marching from
$50 to $100+. Pundits convincing folks that the amount of
oil actually used as an input had dropped considerably from
the prior oil shock period of the 1970s and justifying why
the rising price of oil was actually not so much of a concern.
Energy company profits were soaring, which does help that
rather large piece of the stock market. Consumers complained
but, in aggregate, with cars and trucks that get substantially
more fuel efficiency than in the past, the net effect on
their wallets was mostly manageable.
However, it's also very clear that oil prices eventually
derail stocks as the ability to absorb those higher costs
becomes too much to bear and profit margins struggle. For
this reason, the typical sector rotation playbook puts energy
stock leadership later in the economic cycle rather than
earlier. Recovering economies demand more energy, which
eventually pushes up prices, which lifts energy stocks,
but ultimately hampers the profit margins of industrial
stocks and the sales of consumer stocks. The rising oil
prices also can cause the Fed to squeeze interest rates
higher to keep the inflation monster in check. And so the
stock market eventually succumbs to the pressure and stalls
out, or worse. For now, we're early in this game. The events
in Libya are unpredictable and oil prices could drop back
just as quickly as they've surged. But with a backdrop of
already rising inflation in Asia and resulting weakness
among emerging market stocks, don't be surprised to see
this increase in oil prices bring this chapter of the stock
rally to a temporary end.
Warm wishes and until next week.
The TimingCube Staff
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