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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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There was no lack of action over the five-day span, yet stocks finished the week little changed from their levels of last Friday. The first session of the week also marked the last one of February. With end-of-month window dressing at play, stocks were able to rise modestly with the S&P 500
posting a 0.6% gain. The market tone changed radically the next day, however, as sellers returned in full force to yield stocks a significant drop on heavy trade, following a jump in oil prices and increased concerns over the situation in Libya. The Nasdaq Composite finished the session 1.6% lower. Stocks managed to stop the bleeding Wednesday and rebounded sharply during the next session on positive economic news: weekly jobless claims, February retail sales and business productivity data were all better than expected. The news helped the S&P 500 gain 1.7% on the day, albeit on light volume. Before the open Friday, the Labor Department reported that the economy added 192,000 jobs in February and that the unemployment rate dropped to 8.9% from 9% the previous month. Yet, the positive news was overshadowed by another spike in oil prices, as many investors fear that rising energy costs might undermine the economic recovery. Stocks retreated on the day, yielding the S&P 500 a 0.7% loss.
For the week, the S&P 500 (SPY)
, Russell 2000 (IWM) and Nasdaq 100 (QQQQ) respectively gained 0.11%, 0.32% and 0.56%. All three ETFs remain located above both their 50-day and 200-day exponential moving averages (EMAs).
For its part, our World portfolio bested its U.S. counterparts this week with a 1.52% gain. The portfolio consists of the 5 top-ranked world ETFs as of February 25, which marked the beginning of the current 4-week holding period. Please note that since we have an active Classic Model 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 Classic Model Cash signal and Turbo Model Buy signal remain in effect.
How to
act on the current Turbo Model signal?
Our newly-introduced Turbo Model gives us clear-cut directions to
enter the market with Buy
signals, and for when to sell short with Sell
signals. Given the fact that the current Turbo Buy
signal was issued on September 7, 2010, almost 6 months ago, subscribers
who want to follow the Model must decide whether they should wait
for the next Sell signal
or instead start buying now.
When starting mid-stream, the natural tendency for many is to conclude
that, because of the time elapsed since the previous signal, the next
one must be near, and therefore we should wait. During a Buy
signal we fear that we are near a top, that the market is overvalued,
or we rationalize that since the signal has been active for so many
months, the probabilities of a Sell
signal being near are high. While it is definitely a possibility that
the next Sell signal
might not be far off, we also know that the longest Turbo signal since
1999 lasted 309 days, which means that the current Buy
could also remain in effect for a few more weeks or months. The fact
is, we don't know when the next Turbo signal will come and, as always,
we will let the market and the Model tell us when a trend change occurs.
In the meantime, subscribers who decide to get in step with the current
signal and buy can limit their risk by using the Dollar Cost Averaging
approach. This is a fancy term for a very simple and widely respected
method of optimizing the investment entry and minimizing the downside
risk. Instead of committing the entire amount we are prepared to invest
in one single lump sum, we invest it in a series of smaller fixed
dollar amounts over a period of time.
In the example below, a $10,000 sum can be invested upfront as a lump
sum, for 1,000 shares at $10 each. Or, with Dollar Cost Averaging,
the $10,000 is divided into 5 installments of $2,000 per week, for
five weeks. There are three possible scenarios, the market goes nowhere
and bounces around, the market goes down, or the market goes straight
up. In the first two scenarios you are substantially ahead with Dollar
Cost Averaging.
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Dollar
Cost Averaging
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Initial
Lump Sum
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Ending
Values after Week 5
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Week
1
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Week
2
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Week
3
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Week
4
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Week
5
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Total
Number of shares
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Average
cost
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Value
of investment
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Value
of investment
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Market
bounces around
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Price
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$10.00
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$15.00
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$10.00
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$5.00
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$10.00
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Shares
purchased
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200
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133
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200
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400
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200
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1133
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$8.82
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$11,330
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$10,000
|
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Market
goes down
|
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Price
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$10.00
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$8.50
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$7.50
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$6.50
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$5.00
|
|
|
|
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Shares
purchased
|
200
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235
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267
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308
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400
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1410
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$7.09
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$7,050
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$5,000
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Market
goes up
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Price
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$10.00
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$11.50
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$12.50
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$13.50
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$15.00
|
|
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Shares
purchased
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200
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174
|
160
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148
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133
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815
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$12.26
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$12,225
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$15,000
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Why is Dollar
Cost Averaging so effective?
- It reduces
the risk of buying everything at the wrong time. If the market
decides to go down and a Sell
signal is triggered in the near future, we have less exposure,
and the Sell signal
protects us from excessive losses
- We get
a better price because the fixed dollar amount buys us fewer
shares when the price is higher and more shares when the price
is lower
- It provides
us with a mechanical and unemotional method to get in step without
all the hesitation and second-guessing
And in the
end, if the downside risk still looks too ominous, nothing prevents
you from setting your own stops at a tolerable percentage. Make
sure you don't set them too tight or you might get stopped out too
early. Remember that the Trend Timing philosophy can only help you
build long-term wealth if you adhere to it.
Question:
Do you provide the list of past signals for the Turbo Model?
Yes, we do! The complete list of all signals generated by our Turbo
Model since March 10, 1999 can be downloaded from our Web site. To
do so, first log in, then go to the "Signal Returns" section of the Turbo Model "Results" page. There, you can download a file that contains all signal and trade dates, along
with the corresponding up-to-date returns for the
Long and Short and Long Only strategies
applied to the Nasdaq 100 (QQQQ)
, Russell 2000 (IWM) and S&P 500
(SPY) vs Buy and Hold. The file is in CSV format and is meant to be
opened with a spreadsheet program such as Excel but it can also be
read by any text editor such as WordPad.
A non-subscriber version of the CSV file can be obtained by following
the above steps without first logging in. The non-subscriber version
does not contain the signal information and returns of the last 20
trading days.
Warm wishes and until next week.
The TimingCube
Staff
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