Signal Type	Trade Date	Index	Return since issued
		Nasdaq 100
		Russell 2000
		S&P 500

Cumulative Returns since First TimingCube Live Signal () as of

Index	Long Only	Long Only with Margin	Long & Short	Long & Short with Margin	Buy & Hold
Nasdaq 100
Russell 2000
S&P 500

Market Update

Markets moved higher the first four days of the week. Soothing comments from Fed officials suggesting that inflation is in check and that the 2-year interest rate tightening cycle will soon be over helped spark renewed optimism among investors. The resulting positive action sent the S&P 500, Russell 2000 and Nasdaq Composite to new highs. It looked like the rally would continue as markets opened higher Friday following the release of a better-than-expected employment report. 211,000 jobs were created in March, above estimates for a 190,000 gain. The unemployment rate also fell to 4.7%, showing that the economy is healthy. However, an increase in hourly earnings helped reignite fears that a tight labor market will lift wages and add to inflationary pressures. Bond yields consequently started to move higher and the stock market reversed course to finish the week on a down note, giving back most of the previous days' gains on lower volume.

For a change, our best-performing index of the week was the Nasdaq 100, with a 1.14% gain. The S&P 500 was flat, while the the Russell 2000 lost 1.18%. All three indices remain above both their respective 50-day and 200-day exponential moving averages (EMAs). Our Model did not indicate any change in the broad market trend and our current Buy signal consequently remains active.

Trend Timing School

A stealth bull market

As we begin the second quarter of 2006 it is appropriate to take stock, excuse the pun, assess how we are doing and look at what the market is up to. We have been surprised recently at a flurry of articles about, or mentions of, a stealth bull market that may insidiously be creeping up on us.

OK, even we have complained occasionally about the narrow trading ranges and low volatility, and the general impression left by the financial media is that stocks have been stagnant, meandering, and even that they may well have topped. Such impressions can be deceiving.

First, we need to understand which time frame we are talking about. We have written about "cyclical and secular bear markets" but let us provide a quick summary of the current market situation illustrated by Chart 1 below. The large cap Nasdaq 100 index achieved generational highs in the year 2000 and is widely believed to have entered a secular bear market. After declining all the way to the October 2002 intermediate bear market low, the market has been in a moderate but clear uptrend we call a cyclical bull market. Note that despite this relatively steady three-plus year rise, the index still stands 63% below its March 2000 top.

Chart 1: Secular bear and cyclical bull for the Nasdaq 100



So if we are in a cyclical bull market, why the stealth connotation? Our Model has certainly detected the bull market and, with the exception of a few short protective Sell stints, had us fully invested since the intermediate low in October 2002. Maybe what is different now is that some markets like the Nasdaq can remain choppy, even flat and dull, and market volume can be very low. At the same time company news are predominantly bearish and so is the commentary from a large segment of stock market pundits. All the reasons why the market has to soon come down are given great exposure, and while yesterday's high flying companies are floundering or getting a beating, many under-the-radar stocks are continuing to show strength and keep setting new highs.

The catch is that the Nasdaq 100 represents the large blue chip companies which have been underperforming for so long, but the picture shifts quite dramatically when looking at other segments of the market, such as the small caps in the Russell 2000 index. See Chart 2 below.

Chart 2: Russell 2000 in a cyclical bull market



When it comes to dull markets, we like the Russell 2000 a lot, including a very nice power uptrend since our last Buy in October 2005 for a gain of almost 20% in less than six months. One question this always raises is why should I invest in a signal that is nearly 6 months old? The main reason is that some of the longest signals we've had were also the best, so we always recommend being in sync with the signal at all times.

Unlike the Nasdaq, the Russell 2000 has been setting new all-time highs and you would have to be blind and deaf not to notice the bull market in progress. No sign of secular bear for small caps. For the first quarter of 2006, the Russell 2000 led the way again with a 13.82% gain, versus around 5% for the Nasdaq 100 and S&P 500.

In conclusion, regardless of whether it is stealthy or not, as long as our trend following Model sees such a clear continued uptrend we will keep riding it.

FAQ of the Week

Question: Do you recommend after-hours trading?

The TimingCube Model is run at the end of each trading day and, if a new signal is issued, it will be posted by 7:00 PM (ET), and some creative subscribers wonder if they could gain an edge by trading before the masses.

With the advent of computerized order matching systems known as electronic communications networks, such as Archipelago, buyers and sellers are electronically matched and trading can occur while the main stock exchanges are closed. Once restricted to professionals and institutions, extended hours trading is now offered by most brokers to their retail customers. Trading facilities are frequently available after hours from 4:00 PM (ET) to as late as 8:00 PM, and pre-market from
8:00 AM to 9:15 AM.

In addition to some restrictions on the type of trades (e.g. limit orders only) and generally higher commissions, some frequently listed risks of extended hours trading are lack of transparency, low liquidity, widened spreads, irregular trading, and a bigger chance for the inexperienced investors to get blindsided by the sharks that roam out there.

So the question remains: is there an advantage to trading before everyone else? We have not done an exhaustive study about this, but for a long-term index oriented system like ours there does not seem to be any consistent benefit. The markets our subscribers invest in are so large that our humble signals have no noticeable effect whatsoever (and if we ever grow that large we will gladly cap our number of subscribers ). In fact, it looks like you are just as likely to get a worse price than that at the following market open, and without tangible evidence of a benefit we really cannot be strong supporters of extended hours trading.

Warm wishes and until next week.

The TimingCube Staff