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

Market Update

This week saw stocks post solid gains and our model issue a new Buy signal after the close Friday. Following last Friday's severe drop, the main indexes were able to regain their footing Monday to close modestly higher as the euro strengthened vs the dollar. As IBM, Texas Instruments and Goldman Sachs all reported disappointing revenue numbers, the market gapped down at the open Tuesday, but stocks managed to turn around after the Dow Jones Industrial Average successfully tested support at the 10,000 mark. The positive reversal allowed the S&P 500 to gain 1.1% on the day. Stocks looked ready to resume their climb Wednesday following a stellar earnings report from Apple, but sellers returned in earnest after Fed chairman Ben Bernanke stated that the economic outlook remains uncertain. Stocks fell across the board, yielding the Nasdaq Composite a 1.6% drop. Stocks recaptured all of their losses and then some during the next session as a bullish tone prevailed throughout the day following a better-than-expected reading on existing-home sales for June. The rally carried the Nasdaq Composite 2.7% higher. More gains were in store Friday, as solid earnings reports from American Express, McDonalds and Microsoft, combined with strong results from European bank stress tests and a rebound by the euro resulted in an additional 1% daily gain on heavy trade for the Nasdaq Composite. The ability of the index to keep climbing since early July despite selling efforts and to recapture its 50-day exponential moving average (EMA) triggered a new Buy signal after the close Friday.

The Russell 2000 (IWM), Nasdaq 100 (QQQQ) and S&P 500 (SPY) respectively gained 6.40%, 3.88% and 3.52% over the five-day span. All three ETFs are again located above both their 50-day and 200-day exponential moving averages (EMAs).

For its part, our World portfolio posted a 4.31% gain this week. The portfolio consists of the 5 top-ranked world ETFs as of July 16, which marked the beginning of the current 4-week holding period.

We now have a Buy signal in effect.

Trend Timing School

The emotional side of investing

As most investment newsletters we do spend a lot of time on the markets and what affects them, on technical indicators and investment vehicles. Another topic we visit fairly frequently in this column is the emotional side of investing which we judge to be just as critical for success. A long-term wealth building program must by definition be emotionally sustainable.

After the heavy volatility of the past three months it is no surprise to see high levels of unease, uncertainty and doubt. The fear of losses or, when the next signal comes, the fear of being on the wrong side of the market are all the tell tale signs of investors at risk of letting their emotions disrupt their strategy or lead to bad decisions. Most investors have trouble balancing greed and fear. We like to frequently remind ourselves that emotions are our worst enemy.

A landmark 1994 study by Morningstar demonstrated that individual investors lose money on even the best mutual funds. It showed that while the average growth stock fund gained 12.5% per year over the study's 5 year period, the average investor in those same funds lost 2.2% per year. Why such a huge difference? Because of human psychology and the fact that people are highly emotional creatures, most investors cannot bring themselves to simply buy low and sell high. A 2007 study on the "Impact of Emotions on Retirement Investors" confirmed earlier findings once more by observing that although three of four investors (76%) are negatively affected by their emotions, only one third (35%) believe emotions impact their investment decisions. This is a warning sign: most of us are negatively impacted yet we don't believe we are.

Yes, there are many factors affecting and influencing our emotions:

• Our character/predisposition
• Our risk tolerance
• Our expectations
• Our investment time horizon

Emotions can take many forms and result in unpredictable investor behavior. Some of us are so overwhelmed and scared by the extent of the economic turmoil and its effects on the stock market that we simply freeze and go into hibernation waiting for better days. This presents the distinct risk of leaving us stranded in our den long after a new signal has been issued and miss the corresponding profit opportunities. Others are more the impatient type and their emotions drive them to jump into action in order to make up for losses or lost time.

We also want to take this opportunity to welcome our most recent subscribers and recognize them for their distinct set of experiences and emotional baggage. Contrary to our longer-term subscribers who were largely unscathed by the 2008 bear market, many of the more recent arrivals suffered severe capital losses during that time, and their perspective can be quite different. The emotional toll could not be worse than that inflicted on a buy and hold investor during a bear market. Except maybe for a highly leveraged buy and hold investor. On the bright side, by learning the buy and hold lesson the hard way you now truly understand why it makes perfect sense to time the market: to avoid losing your shirt during bear markets! Yet, because of the old adage "once burned, twice shy" these subscribers are amongst the most likely candidates for sudden paralysis in the event of a signal.

So, now that we know what emotions can do to us we can look at what we can do to keep these emotions in check. Here are a few simple steps to manage your investor emotions.

1) Have a plan
We often describe the objective of Trend Timing as participating in all significant market moves and avoiding all significant declines. We firmly believe in the merits of a mechanical system in large part for removing emotions from the investment process. Our approach is 100% mechanical, rigorously unemotional, and leaves no room for analysis or interpretation of data or news events. The system is not perfect and not all signals will be winners. It does not have to be perfect because over time the absolute protection it offers against significant losses will always keep us safe and beat the market.

Rather than perceived risky tactics, market timing signals are the key ingredients in reducing real market risk, helping us keep our emotions in check, and allowing us to stick with our wealth building model for the long run. But since you are reading this, you obviously have taken the first step in having a plan.

2) Turn off the noise and the distractions
Maybe most importantly, Trend Timing gives us the luxury of not suffering through the minute by minute, hour by hour agony of market days like we have experienced recently. Too many investors spend too much time glued to the financial news networks and data feeds. News, forecasts, guesses or other subjective judgments, opinions and rationalizations, however educated and inspired they may be, play no part in determining the market trend. You don't need them. Your health is negatively affected by them. And most importantly, your investment results are not improved by them. By trusting our mechanical trend following system you can achieve superior long-term results without worrying about what the market should be doing or why it is doing what it does. With practice you can achieve results and peace of mind.

3) Be prepared
Last but not least, you need to pre-condition yourself to pull the trigger unconditionally when required. In order to prepare ourselves mentally to execute the plan when the time comes, we want to walk through, and write down, all the steps and rehearse exactly what we will do with a Buy signal and with a Sell signal.

• Make sure in advance that you will receive, and recognize, our signal change e-mail. Use the "Test E-mail Addresses" function at the top of the "My Profile" page to verify end-to-end delivery
• Write down your broker(s) account(s) details including Web site addresses, account numbers, user IDs and passwords (also capture the broker phone numbers, just in case their Web site is down or you run into problems)
• Select your strategies
• Select your investment vehicles
• Make the commitment to execute promptly

Always remember that it is by participating in all the major moves and avoiding all significant downturns that Trend Timers build their wealth, and keep their sanity.

FAQ of the Week

Question: Can I upgrade my monthly subscription to a yearly one?

Switching to a yearly plan is quite advantageous as it will give you two months free over a 12-month period compared to a monthly plan.

How do I do it?
It is very easy. Simply click on the "Show me how" button located at the top of the "Signal and Ranking" page (the page displayed after you log in). A small popup window will guide you through the process.

Warm wishes and until next week.

The TimingCube Staff