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

Stocks rallied strongly on Tuesday, fueled by solid earnings reports and hints that the Fed might soon end its 2-year campaign of interest rate increases. Released minutes of the last Fed meeting showed that most members think that the end of the tightening process is near. Some members also expressed concerns about the risk to the economy if the tightening cycle goes too far. This is exactly the kind of news that investors wanted to hear and they sent the major averages soaring to their best gains in over a year. Stocks kept moving up the next day, helping the Nasdaq composite close at a new 5-year high and the Russell 2000 at a new all-time high. Markets then faced increased selling pressure as oil prices approached and then surpassed the $75-a-barrel threshold. The major indices held their own, however, and posted nice gains for the week. The Russell 2000 finished 2.80% higher while the S&P 500 had a 1.72% gain. The exception was the Nasdaq 100. Despite a stellar earnings report from Google, the index dropped Friday after an analyst's downgrade of Dell helped send tech stocks lower. For the week, the Nasdaq 100 lost a modest 0.18%. All three indices remain above both their respective 50-day and 200-day exponential moving averages (EMAs). Our Buy signal remains in effect.

Trend Timing School

Closed-end ETFs

Exchange Traded Funds (ETFs) such as QQQQ and SPY were inspirations for the Trend Timing concept. Despite having written about ETFs thousands of times we never once mentioned the closed-end variety. Well, now we have.

The world of ETFs is broadly divided into two distinct categories, index ETFs (the ones we have been blabbering about endlessly) and closed-end funds, sometimes referred to as CEFs. Some of our more adventurous subscribers may well be interested to learn about some of the specialized products they offer.

What distinguishes closed-end funds is that they raise their money through an initial public offering (IPO) of a fixed number of shares which then remains unchanged. Yes, from time to time the fund company may issue additional shares through a secondary offering or for dividend reinvestment, but under normal circumstances the number of outstanding shares is fixed and the issuance of shares is said to be "closed" to new investors. Instead, investors trade the shares between themselves on national stock exchange, just like stocks.

In contrast, when an investor buys or sells shares of a traditional "open-ended" index ETF through a stock exchange, the shares are actually issued or redeemed; the fund company and its agents actually create or unwind the shares.

The primary effect of the fixed number of shares is that the market price of closed-end funds is determined by supply and demand for the fund itself, not by calculation of net-asset-value (NAV) or sum of the values of all the underlying stocks, as is the case with index ETFs. Closed-end funds will be priced at a premium or at a discount depending on whether the price is above or below NAV.

The world of closed-end funds actually goes back further than the modern open-ended variety which was only made possible by the advanced computing and communications technology available more recently. In addition to equity closed-end funds which invest in the common stock of companies, there are also fixed-income types which invest in corporate or government debt securities, REITs or just about anything else. Such non-equity funds are not discussed here as they do not relate to our system which strictly follows stock market trends. Even in the equity category, most of the U.S. equity closed-end funds have been out of consideration to use with our broad market signals because their managers specialize in particular sectors or strategies which do not necessarily correlate with our signals.

The closed-end funds that are of potential interest for us Trend Timers are the ones that invest in outperforming specialty areas not covered by index ETFs. Looking at some of the best closed-end performers, Table 1 below, we see that most of them have been international funds which are well correlated to our broad market trend indicators. Since many of them are not liquid enough to short with your broker we only show the Long Only strategy. Still, the returns are not too bad! India for example, a huge and rapidly growing stock market, has no index ETF available but the closed-end variety has been raking-up triple digit gains.

Table 1: Best performing closed-end ETFs (Long Only strategy since 1/1/2005)

Fund name	Ticker symbol	Long Only Return (%) Since 1/1/2005	Total Assets (millions)
Templeton Russia & East European Fund	TRF	136%	$439
India Fund	IFN	117%	$1,820
Brazil Fund	BZF	106%	$1,080
The Latin America Discovery Fund	LDF	101%	$233
Korea Fund	KF	96%	$1,190
New Germany Fund	GF	80%	$342
Templeton Emerging Markets Fund, Inc.	EMF	77%	$384
Mexico Fund	MXF	70%	$541
Chile Fund	CH	65%	$183
Templeton Dragon Fund	TDF	59%	$940

Open-ended ETFs are mostly index tracking funds (no advisor IQ or salary involved), unlike their closed-end counterparts which are actively managed and clearly not as transparent. The track record of the fund manager is a lot more important with closed-end funds. You don't know exactly what he is doing and he better be good. Costs are much lower with closed-end funds because they do not spend their time creating and unwinding shares by buying and selling the underlying shares. Regular distributions and income are another nice side benefit of many closed-end funds.

Still, as a general guideline, when both an open- and a closed-end version of a fund type exist, we recommend going the open-end route because they tend to be (not always but frequently) larger, more transparent, independent of an advisor, and therefore safer. Index ETFs for some unknown reason often seem to outperform closed-end funds as well.

FAQ of the Week

Question: Are there leveraged international bull/bear funds?

Yes. As anticipated in a recent FAQ of the Week (see "Have you heard of a double inverse Japan fund?" published on March 31, 2006), ProFunds launched two additional pairs of leveraged international bull/bear funds this week to complement the similar pair of Japan funds they introduced earlier. Two of the funds offer exposure to established international markets and two offer exposure to emerging markets. The new mutual fund pairs are:

Established markets:
The UltraInternational ProFund (UNPIX) seeks daily investment results that correspond to double (200%) the daily price performance of the MSCI EAFE Index. The UltraShort International ProFund (UXPIX) seeks the opposite - double the inverse of the daily performance of that index.
The MSCI EAFE Index (Europe, Australasia, Far East) is designed to measure developed market equity performance, excluding the U.S. & Canada. Currently the index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

Emerging markets:
The UltraEmerging Markets ProFund (UUPIX) seeks daily investment results that double the daily price performance of The Bank of New York Emerging Markets 50 Index. The UltraShort Emerging Markets ProFund (UVPIX) seeks double the inverse of the daily performance of that index.
The Bank of New York Emerging Markets 50 Index is designed to track the performance of a basket of companies who have their primary equity listing on a stock exchange of an emerging market country and who also have Depositary Receipts that trade on a U.S. exchange. The Index currently consists of the following emerging market countries: Brazil, Korea, Mexico, Taiwan, China, South Africa, India, Israel, Russia, Indonesia and Argentina.

In the past these indices have been well correlated with the broad market trends depicted by the TimingCube signals, and over the last couple of years these international markets have outperformed their U.S. counterparts.

Warm wishes and until next week.

The TimingCube Staff