Signal Type	Trade Date	Return since issued
		World	U.S.
			Nasdaq 100 (QQQQ) Russell 2000 (IWM) S&P 500 (SPY)

Market Update

The main indexes lost ground for the second week in a row. After last Thursday's steep drop, stocks were able to stabilize Monday following news that the ISM index of service activity rose from 44 to 47 in May. The next session proved to be more challenging, as investors turned cautious ahead of earnings season, causing all major averages to shed in excess of 2%. Stocks continued to retreat Wednesday morning but a late-day rally helped trim most of the losses, with the Nasdaq Composite even finishing in the black. After the close, the first major company to report earnings, Alcoa, announced results that topped expectations. Coupled with better-than-expected economic reports regarding jobless claims and May wholesale sales, the news helped the market post modest gains during Thursday's session. Falling oil prices and uneasiness ahead of next week's rash of earnings reports pressured stocks early Friday, but outperformance from the tech sector allowed the Nasdaq composite to finish the day in positive territory.

The Nasdaq 100 (QQQQ), S&P 500 (SPY) and Russell 2000 (IWM) respectively lost 1.91%, 2.06% and 3.63% on the week. If the Nasdaq 100 remains located above both its 50-day and 200-day exponential moving averages (EMAs), both the S&P 500 and Russell 2000 now rest below their two EMAs.

For its part, our World portfolio posted a 3.19% loss this week. The portfolio consists of the 5 top-ranked world ETFs as of June 19, which marked the beginning of the current 4-week holding period.

Our current Buy signal remains in effect.

Trend Timing School

The power of diversification

Diversification is a key tenet of the Trend Timing risk management discipline and should be part of every investor's strategy. The simple definition of diversification is to include an assortment of investments in a portfolio in order to limit the exposure to any one of them going bad. There are however many types of diversification:

Asset diversification. This is the theory that one should place their financial assets in diverse areas such as real estate, stock market, collectibles, precious metals, etc. TimingCube does not offer specific recommendations along these lines. However, if you are interested by this type of diversification we can recommend our sister company ETFTide which has a momentum-based fund ranking system seeking at identifying the best performing and overall strongest ETFs, regardless of asset class, geography or industry sectors.

Strategy diversification. Since no system is perfect, this seems like a wise proposition. We frequently get asked "how much of my money should I invest according to the TimingCube Model?" The answer is highly personal, and since it depends on your specific circumstances, your style and risk tolerance, and your level of trust in our system, we cannot answer the question for you. For our own investments, we refuse to risk any money on strategies that have poor track records, such as Buy and Hold. Instead, we follow our own signal with the majority of our moneys using a blend of strategies described in the "Our Service" page.

Portfolio diversification. The conventional wisdom that evolved in tandem with Buy and Hold is that you should spread your portfolio amongst negatively correlated (i.e. which move in opposite directions) investment vehicles, so that when one goes down - like your stocks during a bear market - others will go up. We reject any method which guarantees mediocre returns by watering-down the best performers with losers.

Instead we advocate the Trend Timing Model which enables us to commit substantially all of our serious money to the stock market, and benefit in both up or down markets. For diversification we favor index-tracking investment vehicles which represent broad baskets of stocks, a method that is significantly less risky than the individual stock picking approach. We also favor the diversification towards the best performing foreign markets through the use of our World ETF ranking system. Our research has verified the high correlation between major stock market indices - both U.S. and international - when applying our Trend Timing Model. While the indices move in unison, they represent different facets or segments of the broad market and exhibit changing relative strength over time.

For a well-diversified approach for conservative investors, we can recommend the combination of TimingCube (including its World ETF ranking strategy) along with a wider asset allocation model like the above mentioned ETFTide system. Though both are trend-following strategies seeking at maximizing profits through the identification of best performing investment candidates, they react differently, invest differently, and do not always follow the same path. Their occasional lack of correlation makes them good companions in an overall portfolio strategy.

FAQ of the Week

Question: Does the same signal still work with all the international markets?

In the continuously evolving world of finance, a legitimate question to ask ourselves is whether or not the US and international indices continue to be well correlated with one another. We explained several times in the past that our Model does not require an individual signal for each of the three major indices we track - the Nasdaq 100, Russell 2000 and S&P 500 - and going further, that the same signal also works perfectly well with the world ETFs that are ranked within TimingCube. For more information about the correlation of broad markets, you can review the Trend Timing School article titled "A connected world" and "Correlation of world stock markets" in the June 11, 2004 and March 14, 2008 issues of our Weekly Updates.

Since a picture is worth a thousand words, here is a graph of the 5 country ETFs currently at the top of our World ETF ranking system plotted along with the Nasdaq Composite index over the last 18 months. It is clear from this picture that the world markets have been moving up and down in unison, only differing by their own degree of amplitude.



Warm wishes and until next week.

The TimingCube Staff