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Turbo 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.

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Market Update
After the Nasdaq Composite and the S&P 500 hit new 4-year highs on Thursday, markets experienced a bout of selling on lower volume. GDP numbers released Friday showed that the economy expanded by 3.4% in Q2, the ninth consecutive quarter of growth greater than 3%. Also released Friday, the Chicago PMI index came in much higher than expected, pointing to a strong economy too. The news caused bond yields to rise on renewed concerns that the Fed will keep increasing short-term interest rates. Also facing higher oil prices, investors apparently decided to lock in some of their recent gains, causing the markets to retreat Friday. Despite the pullback, all major indices finished again higher on the week. On the corporate front, the news continues to be good. More than two-thirds of the companies in the S&P 500 have now reported their quarterly earnings and 70% of them delivered results that were better than expected. Many companies have also boosted their profit projections for the rest of the year.

The Russell 2000 and Nasdaq 100 closed the week 0.29% and 0.27% higher, respectively. As for the S&P 500, it posted a milder gain of 0.04%. All three indices remain well above both their respective 50-day and 200-day exponential moving averages (EMAs). Our Buy signal remains active.

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Trend Timing School
Connected is protected

Every now and then we shed our habitual air of superiority and humbly give one to the adversary. We must admit that Buy and Hold has one advantage over all other investment strategies, which is that there is absolutely nothing to do after taking the initial position (if you can stand it, that is). However simple our system, it forces us to be attentive to possible signals, and to do some occasional trading.

We must always remember that one of the chief tenets of Trend Timing is to protect our assets against major downdrafts. Even though our investment system is long-term oriented with infrequent trades, we know from experience that markets can change direction very quickly. We also know that performance rapidly degrades when trading is delayed. The April 30, 2004 FAQ of the Week entitled "What is the effect of slippage?" demonstrates that the average deficit of missing the trade date by one day is 1.5%, and 2.2% for two days. These are average figures only, but it is easy to imagine the damage a serious market plunge could inflict on our nest egg if the signal was missed for any length of time, leaving us stranded on the wrong side of the market. Above everything, the TimingCube signal is protection against such occurrences.

For the health of our wealth building plan we have the responsibility to never go without such protection and to never miss a single signal. This means that on the evening of every single day the New York stock exchange opens we must somehow connect to determine if a signal was issued or not. And if one was, connect some more to enter our trade orders.

Many of our more recent subscribers may not yet be aware of all the connectivity choices we provide. In order to offer you flexible options to insure you never ever miss a signal, here are the methods currently available:

  • Log in to the www.timingcube.com Web site and check the current signal. Note that our Model is run daily after the New York stock market closes, and we update our Web site accordingly by 7:00 pm ET that same day
  • Check your e-mail after 7:00 pm ET to see if you received a signal message. Note that you can have this e-mail sent to both a primary and alternate address. If you are uncertain you will receive the e-mail(s) use the "Test E-mail" button at the bottom of the "Current Signal" page. You can even use the "E-mail Subject" field on the "My Profile" page to set the e-mail subject line text to something that will better attract your attention
  • If your cell phone can receive e-mails, set that e-mail address as your alternate e-mail address on the "My Profile" page to receive our notification e-mails wherever you are
  • Contact the "Signal by Phone" number from anywhere and get the current signal. See February 27, 2004 FAQ of the Week for details
  • Access current signal and trade results from your SmartPhone. See July 9, 2004 FAQ of the Week for details

We trust that these connection options should help keep the vast majority of us protected at all times. However, if at times connecting is simply not an option, or if it ever gets to the point where the responsibility creates too much stress in your life, you can always have our friends at MARKETTREND Advisors do the connecting, the trading and the worrying for you with a Managed Account.

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FAQ of the Week
Question: How much leverage is too much?

Whenever a signal has experienced a nice run, subscribers look at the results and regret not having invested more aggressively, with additional leverage.

Choosing the amount of leverage to apply is one of the few decisions we need to make in order to select the strategy, or blend of strategies, we implement. The answer to the question "How much is too much?" is of course highly personal and varies greatly based on our individual risk tolerance. The point at which greed meets with fear is different for all of us.

We have written about the risk ranking of our four strategies in the August 27, 2004 FAQ of the Week, but alas it does not tell us how much leverage is right.

One thing we can state categorically is that we consider it folly to buy fully leveraged investments on margin. Specifically, what some extremely brave and/or foolhardy investors do is to buy the 2x bull/bear index mutual funds from the likes of ProFunds and Rydex on full margin, for a resulting leverage of 4 to 1. While they could laugh all the way to the bank if the market fully cooperates, there are possible worst-case scenarios that you need to consider first. Let's say we experience a 15% drawdown which triggers a Cash signal, by the time we liquidate an unleveraged position the next day we could be down more or less than the 15% signal trigger (never forget that markets have been known to move by over 20% in a single day), but with the 4x leverage you would lose 60% or more of your capital in one fell swoop. And it takes a 150% gain to breakeven from a 60% loss!

We are all in favor of a conservative use of margin. While we recognize that over our history the riskiest Long and Short with Margin strategy has outperformed all the others, we believe most investors cannot tolerate the wild ride of full leverage (100%) during volatile times. Instead, we commonly advocate an 80/20 blend of non-leveraged/leveraged investments.

Warm wishes and until next week.

The TimingCube Staff

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