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Current
Signal Performance as of
Signal
Type |
Trade
Date |
Index |
Return
since issued |
|
|
|
Nasdaq 100 |
|
Russell 2000 |
|
S&P 500 |
|
Markets
suffered heavy losses over the 5-day span, with the Dow Jones
Industrial Average
posting its worst week in five years. After a quiet Monday,
disappointing earnings news from Texas Instruments and American
Express combined with renewed concerns over the mortgage industry
to send stocks lower the next day. The major indexes were able
to move modestly higher Wednesday, but the gain did not last
as they succumbed to heavy selling pressure Thursday following
news that new-home sales fell 6.6% in June and negative comments
from Countrywide Financial on the housing sector. Stocks failed
to regain their footing Friday despite a better-than-expected
reading for the 2nd quarter's GDP and instead moved
lower again.
For the week, the Nasdaq 100
and S&P 500
respectively lost 3.91% and 4.90%. Still underperforming, the
Russell 2000
fared worst, as it shed 7.00% to drop below its 200-day exponential
moving average. For its part, the Nasdaq 100 remains above its
50-day EMA and 200-day EMA, while the S&P 500 is located in
between its two averages.
Our World Index Ranking portfolio lost 5.40%
this week. The portfolio consists of the 5 top-ranked world
indexes as of July 20, which marked the beginning of the current
4-week holding period.
Where does this week's selling leave us? To put things in perspective,
the Dow Jones and the Nasdaq 100 are only down 5.2% and 4.6%
from their recent tops, well within the range of a normal pullback.
Also, the drop has been so sudden that it has left the markets
very oversold as illustrated by a high put-call ratio and the
highest reading for the VIX volatility indicator in four years.
In the past, such spikes for the VIX have often coincided with
market bottoms, as was the case in July 2006 and early March
of this year.
Our Buy signal remains
in effect.
Broker
update
One of the traditions here at TimingCube
has been to provide an Annual Broker Review, the last installment
of which came a little over a year ago on June
2, 2006, yet with this broker update we are about to undo
that tradition. We are not saying that we will never write about
brokers again, but because of changes in the industry we now
feel that brokers have largely become a non-issue with respect
to our Trend Timing investment methodology. The broker selection
process has now become a matter of shopping for price versus
services, with plenty of information available publicly to make
the comparisons easier than ever (see below).
A little history will help understand the shift that has recently
occurred. When TimingCube
pioneered its Long and Short index investing
model in 2001, the investing landscape was very different from
today. For many investors, but at least for all of those with
money in qualified retirement plans such as IRAs, the only practical
way to implement Long/Short and Margin
strategies was to use the Rydex bull/bear funds, shortly followed
by the ProFunds family, and much later by the Direxion family.
Despite drawbacks like high expenses ratios trading at market
close only, these funds provided a very convenient way to bypass
the Government's "no shorting or borrowing in an IRA" rule.
Besides retirement money, the funds also helped many other investors
who would rather not deal with the complexities and vagaries
of shorting and margin investing.
Anyone deciding to use a particular family of bull/bear mutual
funds to implement the Trend Timing strategies has the choice
to do it in a regular broker account or to open an account directly
with the mutual fund company itself. The primary advantages
the mutual fund company has are the absence of any trading fees
and the instantaneous exchange from one fund to another (Read
Brokerage accounts versus
ProFunds or Rydex accounts for comparison). Of course you
could also trade these same mutual funds in a broker account,
but generally with added commissions and various trading restrictions
such as early redemption fees. Most inconvenient for a market
timing strategy!
Alas for the mutual fund companies, but for the benefit of investors,
another industry changing consequence of short and leveraged
ETFs is that they mostly rendered bull/bear mutual funds obsolete
for individual investors, and in turn made brokerage firms the
obvious place for their accounts. Our article entitled "How
do ETFs and mutual funds compare?" clearly shows that since
the advent of short and leveraged ETFs, there is no good reason
left to use the mutual funds. You can now implement all the
long/short and margin strategies from your IRA account at any
broker simply by buying and selling ETFs.
If there is no compelling reason left to use the mutual funds,
then the entire topic of which brokers are better to implement
our Trend Timing strategies disappears, and the only broker
selection issues remaining are services and prices.
On the service front you will find everything from the "bare
bones" to the "everything but the kitchen sink" varieties. From
the long list of features and services you need to decide how
much you really need for your brokerage account because ultimately
you will pay for them whether you use them or not. The key service
areas which differentiate various brokers are:
- Customer
service. Want to be able to speak to a live person 24 hours
a day and get prompt and satisfactory answers? What about
local offices and personal advice?
- Banking
services. Do you need your broker to also offer banking
services such as check writing, bill payment, credit cards,
direct deposit, and ATM cards?
- Investment
selection. In addition to ETFs, do you need a full range
of securities such as options or futures?
- Tools
and research. How much information and guidance are you
looking for?
For extensive
reviews and comparisons we like some independent publications,
such as Barron's highly rated Broker Reviews. We particularly
like the simple recommendations offered by Consumer
Research:
On the
price front, the trends have been clear: broker assisted trading
fees are going through the roof, and online trading fees are
getting smashed. Where the no-frills broker Scottrade will
charge you an already low $7 per trade, there are now many
new "even fewer frills" brokers with commissions down to $0!
Some examples:
To make
sure you make your decisions based on accurate information,
always get the latest directly from the brokers. And remember
that price goes beyond mere commissions but also encompasses
minimum account balances, trade minimums, annual administrative
costs, margin rates and interest rates on fixed accounts.
Read the fine print.
Question:
I forgot my User ID and/or Password, can you help?
Surprisingly, this happens a lot more than you would think.
One common reason is that some subscribers, knowing that they
will receive signal notification via e-mail, do not bother
to log in to the site on a regular basis (how they survive
without our weekly wisdom is a mystery  ).
The next time your memory fails, help is nearby. In fact,
right under the User ID and Password
fields on the "Log
in" page you will find the following small
type:
(Forgot
your User ID or Password? Get it here)
By following
the link you will be asked for some information including
the answer to your Security Question. Assuming
you enter the answer correctly, the requested User
ID or Password will be e-mailed
to you immediately. Note that your Security Question
and Answer can be checked and updated from
your "My Profile" page. But if
when it counts your memory also fails to answer your security
question, as last resort, you can always send us an e-mail
to support@timingcube.com
and our staff will bail you out.
Warm
wishes and until next week.
The TimingCube
Staff
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