TimingCube - Backtesting - Integral to success in the market? - backtesting,investment models,stock market data,long-term trends,market phases,economic cycles

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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

It has been a mixed, holiday-shortened week. Markets moved higher Tuesday and Wednesday on talk that we may be nearing the end of the interest rate tightening cycle, as Dallas Federal Reserve President Richard Fischer said that Fed tightening is "in the eighth inning". Profit taking then hit on Friday, virtually wiping out all the gains of the previous two days, albeit on lower volume. Investors sold after the release of a disappointing May employment number: the economy only created 78,000 jobs in May, less than the 175,000 economists had expected, renewing concerns that the economy may be slowing down. The net result of the week's action is that major indices did not move much: the Russell 2000 gained 0.55%, while the Nasdaq 100 and S&P 500 posted small losses of 0.34% and 0.23%, respectively. All three indices remain above both their 50-day and 200-day exponential moving averages (EMAs).

There is no change as far as our Model is concerned and our active Buy signal remains in effect.

Trend Timing School

Backtesting - Integral to success in the market?

Nearly all investment Models, particularly those based on technical analysis, are tested and refined the same way, through backtesting. That is, taking a formula and applying it to historical stock market data.

Even if it is but a form of learning from history, a logical aspect of the development process, backtesting has its share of skeptics, many who claim it is simply a way for financial companies to enhance their theories by manipulating statistics.

While this may be the case for some financial Models, TimingCube begs to differ in how it has used - in fact relied upon - backtesting as an integral component of the success of our Model.

From 1989 to our first live signal on June 18, 2001, our 12+ years of backtesting - significantly longer than most companies' backtesting - have allowed us to observe the market over the long term, recognizing trends and following them to employ an effective strategy. Through this process, we have developed and fine-tuned a Model that has illustrated its success historically, is working presently and has a high probability of continuing to provide the desired results in the future. The only reason we did not backtest further is that we are missing some of the data which feeds our Model.

Backtesting has also allowed us to accurately observe, recognize and follow medium to long-term trends (as opposed to short-term blips and bumps other investment systems may react to). We have been able to test our strategy through all market phases (bull, bear and mixed), as well as transitions between these phases, and to confirm that our strategy correctly reacted to economic cycles, events, inflation, interest rates, or any other variable strong enough to influence the markets. Studying the markets through backtesting enabled our Trend Timing system to outperform Buy and Hold in all types of markets, including the long secular bull market of the 90s, a period during which most Buy and Hold investors thought they were geniuses, including dart-throwing monkeys.

Ultimately, our thorough backtesting process has led us to where we are today: with a long-term investment Model that has proven itself successful at minimizing investment risk and maximizing financial success in the market. Backtesting is also the primary tool we continue to use moving forward to assess and evaluate any potential improvements to our Model. Any such enhancement would first have to pass the test of history, and demonstrate increased performance throughout without unduly adding to the level of risk or the number of trades.

FAQ of the Week

Question: How can I be sure I receive e-mails from TimingCube?

With junk e-mail fast becoming the number one plague of computer users, your software vendors and Internet Service Provider have been erecting defenses and countermeasures which in their zeal can even block messages you actually want to receive, such as important communications from TimingCube.

One of the most effective ways to prevent this from happening is to include friendly e-mail addresses in your address book. The three addresses from which TimingCube sends e-mails are:

info@timingcube.com
sales@timingcube.com
support@timingcube.com

This easy fix frequently takes care of the problem, but to be on the safe side and make sure you will actually receive the next signal when it comes, you can use the "Test E-mail" function at the bottom of the "Current Signal" page, which you access after logging in. You can also specify an alternate e-mail address on the "My Profile" page. Our e-mail notifications will then be sent to that address too.

Warm wishes and until next week.

The TimingCube Staff