Current
Signal Performance as of
Signal
Type |
Trade
Date |
Return
since issued |
|
|
|
World |
U.S. |
|
Nasdaq
100
(QQQQ)
|
Russell
2000
(IWM)
|
S&P
500
(SPY)
|
|
Stocks powered higher again this week as the rallies continues in earnest. A better-than-expected reading for the index of leading indicators Monday raised hopes that the economy is on the path to recovery. Investors reacted to the news by bidding stocks higher, with the Dow Jones Industrial Average gaining 1.2% on the day. The main averages then proceeded to rise modestly over the next two sessions following positive earnings news from such companies as Apple and Starbucks, before surging again on heavy volume Thursday. This time, the trigger for the rally was the third straight monthly increase in existing home sales in June. The Nasdaq Composite climbed 2.5% on the day, bringing its winning streak to 12 consecutive sessions, a performance not seen since early 1992. Disappointing earnings reports from Microsoft and American Express caused early weakness Friday, but the market eventually righted itself, with the S&P 500 finishing the session in the black to cap another strong week for stocks.
The Russell 2000 (IWM), Nasdaq 100 (QQQQ) and S&P 500 (SPY) respectively gained 5.61%, 3.97% and 3.96% over the five-day span. All three ETFs are located above both their 50-day and 200-day exponential moving averages (EMAs).
For its part, our World portfolio posted a
5.17% gain this
week. The portfolio consists of the 5 top-ranked world ETFs
as of July 17, which marked the beginning of the current 4-week
holding period.
Our current Buy
signal remains in effect.
Avoiding
procrastination
If you are a committed Trend Timer and are currently invested
long per the current Buy
signal, we commend you, and respectfully suggest you skip
this article which is dedicated to those subscribers remaining
on the sidelines.
For the rest of us sideliners, we apologize in advance for
the maybe somewhat moralizing tone of this commentary and
hope it does not come across as patronizing (we certainly
do not intend it to be). It is because we know from personal
experience that our trend following method provides superior
long term results, without the large downside risks of buy
and hold, that we always make ourselves the advocates of a
key Trend Timing principle:
We try to participate in all significant market moves,
up or down
The key word here is "participate". Participation involves
resolve and steadfast commitment to execute the trades in
a timely manner, without second guessing the signal. A major
side effect of standing on the sidelines is that we cannot
make money if we are not invested. Not only are we not making
up for losses but we are losing ground to inflation, and losing
precious time.
There are various reasons for a subscriber to procrastinate
and remain on the sidelines. Maybe you are a new member and
are trying to decide between getting started now and waiting
for the next signal. Maybe, you missed the last signal for some
reason or hesitated to pull the trigger. Many people have suffered
steep losses during the recent market crash and cannot find
the courage to invest in equities again. Sadly, once you are
on the sidelines the path of least resistance is to continue
doing nothing. The fear of losing money is a strong driver for
people to just sit in cash and for some even to abandon the
stock market altogether.
The most serious drawback of not participating is that without
any skin in the game, interest inevitably wanes, which leads
to throwing in the towel and falling off the trend following
bandwagon. You stand to lose much more than just the return
on the current signal: your mental commitment and discipline.
We know that there are alternative investment strategies,
but we also know that many have proven inferior or even outright
dangerous over the long term. The more significant risk of
dropping out, in our view, is the abandonment of a systematic
and unemotional investment approach.
Mark Hulbert has frequently written about the consistency
of long term winning systems, which despite temporary periods
of underperformance are the more likely to return to leadership
returns than not.
We urge you to reconsider your current wait and see attitude.
For those thinking "this signal is almost four months old, it
is too late to enter now so I will just wait until the next
one", we luckily have the "dollar-cost averaging" method to
reduce the risk of mid-signal entry and by far the best way
to get with the program. For details on this technique read
"Dollar
Cost Averaging explained".
Of course we have a vested interest for you to stick with
the program, but trust us to have your wealth building objectives
first and foremost in our minds. Without them we do not exist.
We know that achieving your financial goals critically depends
on your continued and sustained participation in the market.
Investing is not a spectator sport; you need to get your hands
dirty to have a chance to win.
Question:
Should I trade after hours?
The TimingCube
Model is run at the end of each trading day and, if a new
signal is issued, it will be posted by 7:00 PM (ET), and some
creative subscribers wonder if they could gain an edge by
trading before the masses.
With the advent of computerized order matching systems known
as electronic communications networks, such as Archipelago,
buyers and sellers are electronically matched and trading can
occur while the main stock exchanges are closed. Once restricted
to professionals and institutions, extended hours trading is
now offered by most brokers to their retail customers. Trading
facilities are frequently available after hours from 4:00 PM
(ET) to as late as 8:00 PM, and pre-market from 8:00 AM to 9:15
AM.
In addition to some restrictions on the type of trades (e.g.
limit orders only) and generally higher commissions, some
frequently listed risks of extended hours trading are lack
of transparency, low liquidity, widened spreads, irregular
trading, and a bigger chance for the inexperienced investors
to get blindsided by the sharks that roam out there.
So the question remains: is there an advantage to trading before
everyone else? We have not done an exhaustive study about this,
but for a long-term index-oriented system that trades very little
like ours, there does not seem to be any consistent benefit.
The markets our subscribers invest in are so large that our
humble signals have no noticeable effect whatsoever (and if
we ever grow that large we will gladly cap our number of subscribers
 ).
In fact, it looks like you are just as likely to get a worse
price than that at the following market open, and without tangible
evidence of a benefit we really cannot be strong supporters
of extended hours trading.
Warm
wishes and until next week.
The TimingCube
Staff
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