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A Buy signal was issued after the market close on Wednesday May 11^th, 2005!

In case you missed your signal e-mail, a Buy was issued on the evening of Wednesday May 11, and you should have made the ensuing trades.

Signal Update

Current Signal Performance as of

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

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
QQQQ

Note: QQQQ returns are included for continuity sake.

Market Update

Improved action on the Nasdaq Composite caused our Model to issue a Buy signal after the market close on Wednesday. Our Model looks at the Composite over a period of time to detect changes in the price/volume action using several proprietary indicators. Since the Composite bottomed on April 29, these indicators kept improving, which finally triggered Wednesday's Buy signal. This means that we have now moved to Quadrant 4, defined as a Bear/Buy combination (please refer to our December 19, 2003 Weekly Update for more information on Trend Timing quadrants). The week was marked by lower oil prices and mixed economic news. On the earnings front, Wal-Mart disappointed, but positive reports and guidance from both Cisco and Dell helped alleviate concerns about the shape of the economy, showing that the soft patch experienced in March may have only been temporary.

The Nasdaq 100 gained 1.00% on the week to finish above its 50-day simple moving average (SMA) for only the 2nd time this year. Another index we like to watch as it often leads the market, the SOX semiconductor index, broke out to the upside Friday to close above both its 50-day and 200-day SMAs. The Russell 2000 and S&P 500 didn't fare so well. They respectively lost 2.43% and 1.48% on the week and remain below their 200-day exponential moving average (EMA).

Trend Timing School

No head, no guts

We have just gone through another signal and, before doing anything else, we have acted promptly to trade on Thursday 12, 2005, the trade date. And if not, we'd better get moving. Of course we know it is not as easy as that. There are many doubts, questions, frustrations, and concerns. The dilemma we all face is that on one hand we know we cannot listen to our head or our guts when implementing a mechanical investment system, yet on the other we better make sure the issues and emotions our head and guts bring up are properly heard and addressed. A signal is always a good time to pause and reflect (after we are done with the trading), to assess the situation, and gain renewed strength to move forward.

For starters, an issue most of us have to one degree or another is the frustration of not making enough progress, or fast enough progress, on our wealth building path over the last couple of years, certainly not as much as returns of earlier years made us take for granted. In fact, depending on your individual circumstances, had you invested only in the Nasdaq 100, using mostly mutual funds (margined ones even more so), and were off on some of the trades (e.g. entered the market mid-signal), and accounting for fees (including the TimingCube subscription) and commissions you could be looking at barely breakeven or an outright loss. We feel for those of you in this predicament, but believe that since you are now positioned with the signal we can all look forward to more fruitful markets.

On the bright side things aren't all doom and gloom. Many subscribers that have been invested for at least six months see that the Model even manages to extract decent gains from a market that doesn't provide many. For instance, looking at the last two signals shown in the table below, by themselves each signal shows small returns but when compounded we arrive at very decent annualized returns of between 5% and 20%. Yes, the Nasdaq 100 has lagged substantially and it has no doubt been a drag on many portfolios. Nevertheless, a portfolio with one third in each of the three indices would have returned 7% for the 6 month period. Certainly it is far from the 50% plus returns we might have come to expect, but the results beat the market and many investment services. Admittedly, there are systems that have done better. For example, some sector advisory services that had correctly predicted energy stocks probably did very well.

Trade	Trade Date	Nasdaq 100	Russell 2000	S&P 500
Buy	10/28/2004	1473.41	587.19	1122.23
Buy	3/17/2005	1487.72	622.92	1190.38

		0.97%	6.08%	6.07%

Sell	3/17/2005	1487.72	622.92	1190.38
Sell	5/12/2005	1459.07	595.57	1171.38

		1.93%	4.39%	1,60%

	Combined returns for two trades, Long & Short
	10/28/2004 - 5/12/2005	2.92%	10.74%	7.77%
	Annualized	5.43%	20.01%	14.46%

	Buy and Hold
	10/28/2004 - 5/12/2005	-0.97%	1.43%	4.38%
	Annualized	-1.81%	2.66%	8.16%

Then there is the frustration of the previous few signals not developing into the large move we wanted. It helps to review the key principles of Trend Timing:

1. We will participate in all significant market moves, up or down

and (because we're not perfect or clairvoyant)

2. We will limit the losses when the markets move against our signal

We fully admit that these two principles conspire to have us detect trend changes early, at the risk of some failing to develop into the bigger moves we would like to see. After all the market has to deliver the "significant moves" in the first place. So we know that some trades will only deliver small gains or even small losses. What are the alternatives? Some suggest we stay in cash during difficult trendless periods. The catch with this proposition is that by the time you know with 100% certainty that a new trend is big and profitable, the advance has been made. This is why the key word in the first principle listed above is "participate". Unless we participate early in the moves we cannot reap the benefits. And you know what we think about buy and hold, being fully exposed and unprotected from sharp market declines is a risk far too great in our eyes.

In addition to such concerns, many worry about the new signal. Is it correct? Should I follow it or wait? Maybe after last week's issue about cyclical and secular markets some of you may have mistakenly concluded that the market is going to continue down forever. As frequently stated in these pages, we do not predict. We follow the market trends. So the first doubt to dispel is to unequivocally state that we continue to use the same exact mechanical model we have been using all along, no changes, no second-guessing. The fact that various other indicators are not yet pointing to a Buy is not a surprise. Many indicators we discuss occasionally, like the 10-day and 200-day exponential moving averages (EMA) and their crossovers to flag bull and bear markets, play no part in our Model. When using our head to think about the economic situation, the latest financial and corporate news, or listening to what our gut tells us the market will do, we frequently find ourselves intellectually or emotionally at odds with the Model. We have to accept the fact that most of the time markets move in mysterious ways and frequently do the least expected thing, instead of what we think they should be doing.

This Buy signal may feel awkward, as some of our previous signals seemed to be. What we see on the surface does not always reflect the deeper waves that make the markets move. Regardless, the Model has detected a new trend. We know we simply have to trust it, but we fully understand the frustration of not knowing how the model works and exactly what triggers the signals. Why is the Model a secret? Well, after you read the perfectly good answer to that question in the FAQ of the Week below, you will at least know why you have to learn to deal with it.

How well this newly detected up trend and associated Buy signal perform and how long they last, no one knows, but we are participating and positioned for the next move. We hope that frequently reconciling and accepting differences between your investing and your head and guts brings you the peace and harmony to stay on the path to wealth, and wisdom of course.

FAQ of the Week

Question: Why keep the Model a secret?

We perfectly understand the frustration of a proprietary "black-box" system where you cannot precisely see or even predict how and when the Model triggers a signal. The reasons are very simple:

The history of the stock market is littered with great investment systems that stopped performing shortly after their inner workings became publicly known
Since all of us at TimingCube make a living by delivering this service, and like other subscribers we build wealth by following the signals ourselves, we will never do anything to destroy the Model - such as item 1. above

Warm wishes and until next week.

The TimingCube Staff