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

Market Update

Stocks posted modest gains over the five-day span, allowing both the S&P 500 and the Nasdaq Composite to reach their highest weekly close of the year. After a late-day rally that erased early losses during the first session of the week, the main averages resumed their climb Tuesday on increased trade, following the expected decision by the Federal Reserve to leave interest rates unchanged. The Central Bank also noted that business spending is picking up and that the job market is starting to stabilize. Market participants cheered the news, resulting in a gain of 0.8% for the S&P 500, with momentum strong enough to allow the large-cap index to pick up an additional 0.6% Wednesday. Mixed economic news was released the next day, as a lower-than-expected reading on inflation and a solid Philadelphia manufacturing index were somewhat counterbalanced by a disappointing weekly jobless claims number. This resulted in a trendless market that left stocks little changed by day's end. The main averages then relinquished a portion of their recent gains during the last session of the week, as illustrated by the Nasdaq Composite's 0.7% daily loss. The move lower was attributed to renewed concerns over Greece's ability to repay its debt and a rising dollar. The day's action occurred on heavy volume, as is often the case when Friday marks an options expiration day.

The S&P 500 (SPY) and Nasdaq 100 (QQQQ) respectively gained 0.44% and 0.27% over the five-day span, while the Russell 2000 (IWM) lost 0.46%. All three ETFs remain located above both their 50-day and 200-day exponential moving averages (EMAs).

For its part, our World portfolio was almost unchanged this week, with a loss of 0.03%. The portfolio consists of the 5 top-ranked world ETFs as of February 26, which marked the beginning of the current 4-week holding period.

Our current Buy signal remains in effect.

Trend Timing School

Tax Time

With the much dreaded tax day approaching (April 15^th), it is now becoming a tradition at TimingCube to focus on this subject. While we cannot fill your tax return for you, we feel it is important to address the tax implications of Trend Timing. To that effect it might be beneficial to (re-)read the "Tax considerations" article we published about six years ago. This time we are dealing with the specific issue of wash sales, a little known tax rule which had some of you worried recently.

The essence of the rule is that you cannot deduct losses from stock or security trades in a wash sale. A wash sale occurs when you sell or otherwise dispose of stock or securities (including a contract or option to acquire or sell stock or securities) at a loss and, within 30 days before or after the sale or disposition, you directly or indirectly:

• Buy substantially identical stock or securities,
• Acquire substantially identical stock or securities in a fully taxable trade, or
• Enter into a contract or option to acquire substantially identical stock or securities

By "indirectly" the IRS means that if you sell stock and your spouse, or a corporation you control, buys substantially identical stock, you also have a wash sale.

Where many people interpret the rule strictly as "cannot deduct", the IRS is actually more generous than that because they only call for the deduction to be postponed. If your loss was disallowed because of the wash sales rule, you can add the disallowed loss to the cost of the new stock or securities. This cost basis adjustment effectively postpones the loss deduction until the disposition of the new stock or securities.

An even more obscure exception to the rule which could assist subscribers utilizing certain index options is that the wash sales rule does not apply to so-called Section 1256 contracts, which include non-equity options and broad-based stock index options.

You may ask why TimingCube subscribers should care about wash sales in the first place. It is true that most of the time our signals last more than a month, so the issue of wash sales becomes a moot point. Let's have a look at our recent signals to see if the wash situation applies or not. For 2009, it does not apply of course since our Buy signal (from April 3^rd at the open until November 2^nd at the open) was highly profitable, giving us no choice but to pay our share of capital gain taxes to uncle Sam.
The situation could have been different with the Buy signal that followed on November 10, 2009 and which lasted until January 29, 2010. Depending on how you invested during that signal, you might have had a small loss on some of your World portfolio positions (our "Results" page shows an average loss of 2.93% for the World strategy in that case). However, the Cash signal that followed lasted exactly 32 days, which is just above the limit imposed by the wash sale rule. So when doing your tax return next year, you will be able to declare your losses (if any) from this specific trade.

As always, we need to point out that we are not tax advisors and for more details on wash sales or tax questions in general you should go to the Internal Revenue Service web site at http://www.irs.gov/ or consult a professional tax advisor.

FAQ of the Week

Question: Is the TimingCube subscription fee tax deductible?

The short answer, if your miscellaneous itemized deductions exceed 2% of your adjusted gross income (AGI), is yes. The TimingCube subscription fees you paid during the tax year (2009 in this case) can be deducted as an investment expense, just as tax preparation fees can be itemized as well. The trick is to reach the 2% floor for any of the deductions to count. Many believe that such fees can simply be deducted from stock market gains but this is not the case. Unlike commissions and other fees related to individual transactions, the subscription to a financial newsletter or to the Wall Street Journal cannot be allocated to a particular transaction, and therefore must be handled as miscellaneous itemized deductions.

At the risk of repeating ourselves, we need to point out that we are not tax advisors and for more details on the tax treatment of index options or tax questions in general you should go to the Internal Revenue Service web site at http://www.irs.gov/ or consult a professional tax advisor.

Warm wishes and until next week.

The TimingCube Staff