Follow TimingCube » Follow TimingCube on Facebook Follow TimingCube on Twitter Follow TimingCube on LinkedIn
Turbo Model
Classic Model




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.

Back to the Top of the page


Market Update
After being the best performing index since our current Buy signal was issued on May 11, the Nasdaq 100 relinquished that title to the Russell 2000 this week. Profit taking hit technology stocks, especially on Friday as a typical "sell-the-news" reaction followed Intel's bullish mid-quarter update. The move lower occurred on much reduced volume though, showing that institutional investors were not eager to sell. On the economic front, Alan Greenspan said to Congress that the economy is on a "firm footing" and that inflation remains under control. His testimony was viewed positively, even though he said that more measured rate hikes are coming. How many hikes? Who knows, but the market seemed comfortable with the statement. On Friday, it was announced that the trade deficit for April was smaller than expected, also a positive.

The Russell 2000 and S&P 500 closed the week higher, with respective gains of 0.97% and 0.17%. For its part, the Nasdaq 100 lost 1.52%. All three indices remain above their 50-day and 200-day (EMA) exponential moving averages. Our Current Buy signal remains active.

Back to the Top of the page


Trend Timing School
Ask not what your investments can do for you, but what you can do for your investments

We have written about the value of setting realistic expectations before (see the January 30, 2004 Trend Timing School article), but we felt that a logical follow-up to last week's commentary on backtesting should have something to do with what you can realistically expect from the Trend Timing system and, more importantly, what you can do to optimize your investment returns.

As our long time subscribers know full well, we like truth in advertising, and all the results we publish are as accurate, clear, complete, and simple as we know how to make them. With the exception of the last twenty trading days which are only accessible by current subscribers (there is no reason to divulge the current signal to the general public), all the performance information is fully disclosed on the Results page. Every signal is listed, be it live or backtested, and since we only use publicly available data such as historical data for standard market indices, anyone can verify and reconstruct every bit of performance data we publish. The numbers have been checked and re-checked thousands of times and no one has ever found an error.

Yet, when people ask us if they can realistically expect to achieve such returns year-in, year-out, the answer is an unconditional no. It is wiser, and emotionally healthier, to view these sixteen plus years of historical returns as a maximum goal to strive for, not as a given or a minimum performance level the markets owe us. The markets do not owe us anything and we should be grateful for what they give.

There are many reasons as to why such lofty results are unlikely to be duplicated consistently by investors in the future. The first one is that the results are for pure indices, not the investment vehicles that track them. A mutual fund or even an ETF which mimics an index has some built-in inefficiencies and costs, and therefore will never exactly match its role model. Secondly, our numbers do not take into account the various costs, fees, and taxes that an investor might incur while implementing the strategies. There are such diverse individual circumstances that attempting to factor in all these variables inevitably confuses the picture excessively.

As they say in the financial industry: "Past performance is no guarantee of future results." The last twenty years have given us one of the longest bull markets in investor memory but also the collapse of one of the biggest bubbles in stock market history. Such exceptional times were accompanied by wild price swings and high volatility which our trend following system thrives on. As we go through periods with market movements of lesser amplitude, our results can also be expected to be somewhat more subdued.

The "Objects in the rearview mirror appear larger than they are" maxim frequently applies to investment results as well because of the effects of compounding. All of our results assume gains are fully reinvested, and over longer periods of time the returns on reinvested gains tend to dwarf those on the original assets. Alas, we are not all in a position, or of a mental disposition, to leave our assets to grow untouched, and as we dip into our savings and withdraw some of the gains along the way, we can also expect our realized returns to decrease accordingly.

Last but not least is arguably the biggest single culprit in missed expectations and lower actual returns: second-guessing. Just as market tops always occur when everyone is convinced the rise will continue, our signals most frequently are triggered at a time when our emotions tell us otherwise. We have countless anecdotes of subscribers who over the years have told us that they did not follow a signal because they thought it was wrong, too early or too late. Failing to fully act on a signal in a timely manner (i.e. immediately and unconditionally) can undermine investment performance more than any other factor. Whether we delay for a few days to think about it, or that we only invest a fraction of our assets because we doubt the signal is accurate, the results suffer.

If you are serious about your wealth building program and have made the commitment to Trend Timing you owe it to yourself to give it a chance to return its full potential, even if that potential is somewhat less than published historical returns.

Back to the Top of the page


FAQ of the Week
Question: How should I handle regular interval investments?

Many of us have wisely adopted savings or investment plans that involve recurring deposits at regular intervals such as an employer sponsored 401(k) retirement plan. Such repeated payments, be they bi-weekly or at some other interval, beg the question of how and when they should be invested. The two options are to immediately invest the money according to the active signal, or to let the new funds accumulate in cash until the next signal.

As we described in the October 10, 2003 FAQ of the Week entitled "What should I do between signals?", our preference is generally to get in sync with the predominant market trend because we never know how long it will be until the next signal. However, with regular investments the issue is one of affordability. If your 401(k) plan lets you buy mutual funds at no cost, you should definitely take the position right away. If instead you are in a regular brokerage account and you invest in ETFs, you will likely incur transaction fees which could be prohibitive for small amounts. If, for example, you deposit $100 every other week and your broker charges a flat $19.95 per transaction you would be better off keeping the money in cash until the next signal or until you have enough money accumulated to make the transaction fee reasonable. As a simple rule of thumb we would suggest never paying more than 5% in transaction fees.

Warm wishes and until next week.

The TimingCube Staff

Back to the Top of the page


Follow TimingCube » Follow TimingCube on Facebook Follow TimingCube on Twitter Follow TimingCube on LinkedIn

   Turbo Model
   Results
 
   Classic Model
  
   Site Map
   Glossary

TimingCube® is a registered trademark of Fraser Partners, LLC.
Disclaimer/Terms of Use    Privacy Policy
©2001- Fraser Partners, LLC
  All Rights Reserved.