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Turbo Model
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Signal Update
Current Signal Performance as of
Signal Type
Trade Date
Index
Return since issued
Nasdaq 100
Russell 2000
S&P 500
QQQ

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
QQQ

Note: QQQ returns are included for continuity sake.

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Market Update
After falling since July 1st, markets managed to regain their footing to finish the week higher. There was no major catalyst for the move, but markets had become clearly oversold and were due for a bounce. Once more, there was no surge in volume to accompany the rebound. This suggests that institutional investors were not buying and that the bounce was merely technical and in large part due to short-covering. For the week, the Nasdaq 100 and the Russell 2000 respectively gained 1.81% and 2.24%, while the S&P 500 finished 1.43% higher.

The week's action did not affect our Model and our current Sell signal remains active.

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Trend Timing School
Brokerage accounts versus ProFunds or Rydex accounts

Deciding where best to open an account in order to implement the TimingCube strategies is not just a new investor or new subscriber dilemma but one that concerns all of us. There are times when new money becomes available for investing and always adding to the same existing account may not necessarily be the wisest choice as you never want all your eggs in the same basket. Maybe you received a bonus payment or an inheritance. Perhaps you determine that time has come to shift some of your bank savings to the stock market or, because you recently changed employer, you now need to elect whether to leave your 401(k) with the previous company's plan, move it to the new employer plan, or open a rollover IRA somewhere else. Regardless, it is healthy to periodically review and re-evaluate your options.

There is a seemingly endless selection of companies to choose from ranging from large full-service brokerage houses to small specialized mutual fund companies, and everything in between. Companies that started as pure mutual fund companies but have since grown to become diversified financial institutions with full brokerage services, e.g. Fidelity and Vanguard, are treated as brokerage firms. To simplify the decision process we narrow this week's focus to choosing between brokerage firms in general and the two mutual fund companies offering comprehensive families of index funds suitable to our strategies, namely ProFunds and Rydex. Next week's editorial will deal with brokerage houses and what to look for when selecting one.

The primary reason for setting-up an account with a brokerage firm is that you can trade just about any security such as bonds, ETFs, options, stocks, or mutual funds, including your favorite ProFunds or Rydex funds. The only thing you can trade at ProFunds or Rydex is their own family of funds. So, if you are not ready to limit yourself exclusively to one mutual fund family there is no need to read on, come back next week to find out how to select the right brokerage firm.

Assuming you still consider marrying into one family of funds (and we are talking strict monogamy here) you need to know about the perks, otherwise why bother?

The principal advantages of accounts held directly at the mutual fund company have to do with flexibility and cost. Both fund families allow you to trade free of charge, as much and as frequently as you want. In other words they do not restrict your ability to react to our signal changes. Free of charge means that there is no load or transaction fee, but as with any mutual fund there are management and expense fees. In contrast, many of the brokers offering these very same funds add transaction fees and/or other restrictions. We feel that the most significant impediment with some brokerage firms has to do with the so-called short-term trading fees they assess to discourage switching or timing of these funds, which of course works to defeat the very principle of Trend Timing. Their definition of "short-term" varies but it can be as long as six months, longer than our average trade duration.

Another benefit of accounts held at the mutual fund company is the absence of settlement period. With most brokerage companies, mutual fund trades involve a settlement period of several days during which you are not free to dispose of or redeem the money.

In addition, Rydex offers twice-a-day pricing on selected funds (Dynamic Funds only) held in their accounts, which means that you do not have to wait for the closing price on the trading day, unlike all other mutual fund transactions.

Note that both ProFunds and Rydex require fairly large minimum initial investments to open a self-directed account, $15,000 and $25,000 respectively. Most brokers have no or lower minimums.

TimingCube offers this information for your convenience but cannot guarantee its completeness or accuracy. Make sure to inquire with the respective companies themselves before making any decision.

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FAQ of the Week
Question: Is there always a 9% or 15% loss before a signal change?

No, the 9% and 15% rules have no part in triggering Buy or Sell signals. These Cash signals are purely defensive mechanisms which have never been triggered yet (see the March 12, 2004 Trend Timing School editorial for the full details). Under normal circumstances our Model detects a change in the broad market trend and issues the next signal (Buy or Sell) long before we lose 9% from the entry point or give back 15% of accrued gains.

In theory, there could be unprecedented scenarios in which markets drift against our signal without ever exhibiting the customary tell tale signs of a trend change. The Cash signals have been instituted to protect our investments against such a hypothetical occurrence.

Warm wishes and until next week.

The TimingCube Staff

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