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Turbo Model



Current Signal Performance

Turbo Signal
Trade Date
Turbo Model Returns (Long & Short Strategy)
 
Nasdaq 100
(QQQ)
Russell 2000
(IWM)
S&P 500
(SPY)
  Classic Signal  
Trade Date
Classic Model Returns (Long & Short Strategy)
World
Nasdaq 100
(QQQ)
Russell 2000
(IWM)
S&P 500
(SPY)


Market Update
Reluctance on the part of G20 finance ministers to support increased funding for Europe dealt a blow to European equities which led to a weak Monday open on Wall Street. Buyers stepped in almost immediately to drive stocks to a flat finish buoyed by another report showing optimism that the housing market is improving. Divergent trade Tuesday marked perhaps by some end-of-month window dressing by managers as a leap higher in Apple and other large-cap Nasdaq 100 stocks pushed that extended index higher still while small and mid-cap stocks encountered some selling pressure. Little damage was done by day's end, however, as the Dow Jones finally cleared 13000, the Nasdaq Compositetacked on another +0.6% and small-caps managed a rebound to only slight losses. Gold found itself on the selling side of the ledger Wednesday when Ben Bernanke testified to Congress that the job market is improving faster than expected. This testimony dampened the enthusiasm of investors betting on another Fed liquidity injection sending the dollar upward, Treasuries and commodities lower. Chairman Bernanke's comments overshadowed the completion of a second round of bank cash handouts from the European Central Bank (ECB), a move that is viewed as further lowering the risk of near-term Eurobank failures. Jobless claims continued their slow tick downward and retail sales continued marching upward in reports Thursday joining good debt auction results in Europe to keep stocks supported. Despite the good cheer, however, indexes only managed to tack on fractional gains while small and mid-cap indexes continue a four-week pattern of sideways trading. No news on Friday resulted in lackluster trading with stocks dipping to very modest losses. Small-caps once again suffered greater than the other indexes while the U.S. dollar jumped higher Friday which hit commodities once more.

Though trade looked tired this week, the Nasdaq 100 (QQQ) brought its winning streak to nine straight with a +1.42% move upward. The S&P 500 (SPY) rode a decent week for financials to a +0.28% finish. The Russell 2000 (IWM) diverged from its large-cap brethren with a significant -2.89% decline on the week.

The first week of the current World portfolio cycle was flat at +0.17%. This portfolio is comprised of the top 5 members of our World Ranking from the February 24th ranking.

Both Classic and Turbo Models remain on Buy signals.
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Trend Timing School
For those who choose to trade within the signal

A beautiful feature of the TimingCube system is its purely mechanical nature. There are no second-guesses, no shades of gray, just simple, clear signals to guide us. Not surprisingly, the human element can take over once those signals have been generated and delivered. The human element has a natural desire to dabble in shades of gray, second-guessing, and the like. Our response to that impulse is to occasionally augment the purity of our crisp, clean signals with commentary that attempts to help those whose natural desires to dabble wander into the process. In this Weekly Update, we work to reconcile the all-too-human dabbling with the very mechanical model output, for those who might find themselves tempted to shade the sharp green, red, or blue resolution of our signals.

We will start with an often-asked practical question: how to enter the market in mid-signal. When coming in mid-signal, we suggest that it's a good idea to dollar-cost average your way into the signal. How many averaging "steps" one takes to become fully invested is a personal choice. The dollar-cost averaging fits well with our worldview because it, too, is a mechanical process if implemented as intended. Dollar-cost averaging simply means that we take the targeted investment amount, split it up into equal pieces, and invest each piece according to some schedule - such as once per week. This spreads out our investment and minimizes the odds that we are buying at the very end of the signal, for we never know how long the signal will last. See more details on dollar-cost averaging in our Weekly Update sent on April 2, 2010.

We espouse the view that it's best to capture profits when you are happy with them. If this leads you to want to take profits mid-signal, one can apply the same dollar-cost averaging method, selling a fixed amount every few days or weeks. However, most people seem to prefer setting a trailing stop as an exit strategy in hopes of capturing any further near-term gains while also being protected from any significant reduction of profit if the market temporarily pulls back to digest the trend. Indeed, we mentioned just last week that some subscribers might wish to protect the heady gains that we've seen in recent weeks on these very successful signals. For most investors, there is nothing worse than the feeling of regret from seeing profits erode. It's in that vein that we offer our trailing stop input. How far behind the market you put that trailing stop, whether 1, 2, 3 or 5%, is obviously dependent on your own objectives. The tighter your stop, the more likely you are to get that stop order triggered and executed.

Whether to augment the simplicity of our signals and consider taking profits is obviously a personal preference. As to when to consider taking profit, we refer to easy to remember inputs from a variety of sources that point to rallies of +20-25% as being rather "full" in nature. Taking some profit at this point is just playing the odds. Should you take that tack, what then? Do we get back into the signal if the trend continues on? If so, when? After all, we know that trends can remain in place longer and stronger than these averages suggest. Indeed, one of the philosophies behind our approach to investing overall is that markets overshoot in any given direction, and doing so gives them swings and volatility that generates opportunity for us. To answer this question of re-entry, it's easy to circle back to the entry process and suggest returning to a dollar-cost averaging approach. This gives you a mechanical process for returning to the trade should it have much more room to run.

We will reiterate that in almost all investing strategies, the idea is not to hit home runs, but rather to compound singles and doubles into big-time gains. The key is also to be disciplined. We offer purely mechanical signals that make the investing process very simple, straightforward, clear, and clean. Should you choose to trade around the margins of those signals, we strongly suggest a similarly disciplined, mechanical approach. Dollar-cost averaging as a mid-signal entry method is such an approach. Taking some profit at a pre-determined profit point(s) is a mechanical exit approach for those concerned about their gains being eroded in a pullback or trend change. If you're more cautious by nature, take some of your profit sooner or dollar-cost average over a longer time.

Investing does not naturally fit well with human behavior. We are emotional beings. Emotion and investing are not compatible. The discipline of a mechanical approach helps us avoid these behavioral pitfalls. Our signals provide the mechanical framework for us to be successful investors over time. Hopefully, the above suggestions and our future intra-signal comments will be helpful for those who choose to work a bit more within the signal framework.
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FAQ of the Week
Question: What happened to gold this week?

Gold suffered one its worst one-day losses Wednesday dropping over -5%. This decline occurred when Fed Chairman Ben Bernanke testified before Congress. Mr. Bernanke's commentary gave pause to investors who have been betting that the Fed would inject more liquidity into markets through pushing interest rates down further. The bet being that this liquidity will cause inflation to ramp up further. Some investors view gold as a beneficiary of that ramping inflation perspective. During the testimony, Mr. Bernanke appeared to say that the labor markets were recovering quicker than expected. Investors read this as meaning that he had no near-term plans to inject more stimulus into the market via a further push downward on interest rates and/or further money being poured into the money supply. Thus, in short, some gold investors took his words to be at odds with their thesis, at least in the short-term. They headed for the exits. As they did, the sharpness of the decline no doubt triggered some stop loss orders traders had in place to protect gains they had built up. Triggering these orders compounds the selling of course. Whether this selloff in gold was rational or not, one can look at the movement in U.S. Treasury bonds, another direct beneficiary of further monetary policy easing. Treasury bonds did drop on the testimony, but not by much. Thus, the bond market still views low interest rates as being the most likely scenario near-term. Gold, as we've said before, is a rather odd duck in the investing world. It sort of marches to its own beat. Wednesday of this week, that beat was decidely negative. If nothing else, gold can be a very volatile investing choice subject to a wide range of expectations, inputs, and beliefs. In our view, Mr. Bernanke said nothing different than what he has said before. He doesn't know what will happen in the economy and has consistently said he will keep interest rates low until the economy demands a relaxation in that approach. With growth projected to be around +2% this year, it's unlikely he will find much cause for relaxing this year. If he does, then it means the economy is doing better than expected. Gold investors might flinch a bit at that. But it wouldn't alter their view for long. However, a positive economic surprise would be a nice change of pace for most of us, we expect.

Warm wishes and until next week.

The TimingCube Staff
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