TimingCube - Bravery in action - new signal,close-out,lock-in,drawdown,pull-backs

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A Sell signal was issued
after the market close yesterday April 29, 2004.

If you have not yet acted on the signal, we urge you to read this week's update thoroughly and place your trades over the weekend.

If you did not receive your signal change e-mail notification(s) last night, please read the and be sure to resolve the issue at your earliest convenience.

Signal Update

Current Signal Performance as of

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

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
QQQ

Note: QQQ returns are included for continuity sake.

Market Update

Just as it looked like stocks were poised for a run-up following better-than-expected earnings releases, markets reversed course sharply this week. This caused our Model to detect a trend reversal and issue a Sell signal after the close on Thursday. The move lower was accompanied by increased volume, a clear sign that large institutional investors are now selling the market. Inflation fears have resurfaced and investors appear increasingly worried that higher interest rates are on the horizon and will prevent the market from moving higher. Geopolitical concerns are not helping either. All this caused the Nasdaq Composite to close below its 200-day moving average on Friday, something that has not happened since April 2003. For the week, the Nasdaq 100 and the Russell 2000 lost 6.39% and 5.23%, respectively. As for the S&P 500, it finished 2.92% lower.

The new Sell signal means that we now are in Quadrant 2, defined as a Bull/Sell combination (please refer to our for more information on Trend Timing quadrants).

Trend Timing School

Bravery in action

For most Trend Timers a new signal is a time to rejoice for more than one reason.

First and foremost, it is only with a signal that we close-out our previous positions and actually lock-in the gains. Between signals, in the middle of a trade, we cannot count on paper gains because one never knows what can happen and how much of these theoretical gains will be retained in the end. Once we sell these holdings we know exactly what we have and the results of the previous signal can officially be posted on the score board, solidly in the win column.
We say "most" Trend Timers because some of us hesitated, or second guessed the previous Buy signal, and somehow failed to execute. Others joined the service mid-course and either decided to wait or bought near a recent top and ended up with a loss. As our drawdown since the Buy signal high on January 26, 2004 was only 9.06% (for the Nasdaq 100), any losses incurred would be tolerable, even using margin.

The second reason to rejoice is that we finally see the fruits of our patience. We know first hand how trying it can be to remain steadfast, especially during a signal which lasts as long as this one has, and not fall prey to the temptation to sell during pull-backs. The gains achieved (ranging from 26% with the S&P 500 to over 100% with the Russell 2000 on margin) are just reward for our fortitude.

The third reason to jump for joy is that by acting on the signal we are now once again positioned on the right side of the market, poised to realize more gains in the weeks and months to come.

Hold it! Before one can pop the cork on that champagne bottle and celebrate, one has to have acted on the signal. Yes, we know a fair percentage of our subscribers have already placed and executed their trades. But we also suspect too many of you are suddenly frozen in fear and incertitude. Here are the main culprits to indecision:

"I don't know what to do"
Luckily with our system it is pretty simple, even if you do not have a lot of investing experience. The first move following a Sell signal is to liquidate your long positions if any. This means sell any stocks, ETFs, or mutual funds you bought on the previous Buy.
Depending on the strategy you follow, you then either stay in cash or money market funds, or with the Long & Short strategies, you short the market. Short the market signifies that you either sell short an ETF or you buy a bear fund that simulates the inverse return of the index it tracks (same as selling short the index). For further reading on exactly what to do, refer to the following resources:

The "Our Service" page describes the 4 strategies, what to trade, and when to trade
The "The importance of readiness"

"I missed the signal and now it is too late"
Since we trade so infrequently, the impact of slipping your trades by a day or two makes very little difference in the long term performance. For the actual historical data on slippage, read the FAQ of the Week below.

"I'm afraid the markets are headed back up"
It's funny how the human mind can switch positions on us in no time at all, as if to play devil's advocate. For the last year while the Buy signal was active our rational side and even our gut feelings have been trying to find reasons why the market was about to fall, as if to tempt us into bailing out. Now, barely a day after the Sell signal was issued, the prospect of acting on this signal has some of us terrified by the prospect of a rebound. We can hear some smart reasoning machines get into high gear with attempts to convince us not to act: "The market has fallen so much lately it is now very oversold"; "Improving economy"; "Historic low interest rates"; "Rising corporate profits"; "It just has to bounce back up in the next couple of weeks". To fight off these counterproductive emotions, please read the editorial entitled "The best contrary indicator".

Maybe the most obvious reason to act right now is that it does not get any easier by procrastinating, and the longer you wait, the less likely you are to take the steps necessary to succeed in your wealth building endeavors.

Action always requires courage. But as they say, no guts, no glory!