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

Market Update

After an initial plunge Monday, stocks rallied for the rest of the week, sending the S&P 500 to its highest close since October of last year. Monday's weakness was largely due to a poor showing by asian markets that spilled over to the U.S. indexes, resulting in a 2.8% daily loss for the Nasdaq Composite. It did not take long for stocks to rebound as a set of positive news turned the mood around Tuesday: several retailers beat earnings forecasts while home construction and core inflation readings came in better than the market anticipated. Buying appetite returned, helping the Nasdaq recover half of the previous day's losses. It was only the beginning as stocks kept rising for the next three sessions to finish the week on a strong note. Investors' renewed optimism was fueled by news that manufacturing activity, as measured by the Philadelphia Fex index, rose for the first time in 12 months and that existing homes sales jumped 7.2% in July, marking the fourth straight monthly increase. Fed chairman Ben Bernanke also helped by stating that the economy is on the verge of recovery.

The Russell 2000 (IWM), S&P 500 (SPY) and Nasdaq 100 (QQQQ) respectively gained 3.08%, 2.16% and 1.67% over the five-day span. All three ETFs remain located above both their 50-day and 200-day exponential moving averages (EMAs).

For its part, our World portfolio trailed its U.S. counterparts this week as it posted a 0.29% loss. The portfolio consists of the 5 top-ranked world ETFs as of August 14, which marked the beginning of the current 4-week holding period.

Our current Buy signal remains in effect.

Trend Timing School

Order types

Whenever we go through a signal, the general question of which type of order is best comes up. Our Web site states that to achieve the full benefit from the signal, you should act on it as soon as possible. Since signals are issued in the evening after the markets close, your orders should optimally be placed before the market opens on the next trading day. If your selected investment vehicle is an ETF, the order should be executed at the open. The crux of the issue is the realization that market orders seldom get filled exactly at the official open price. The natural reaction is to first be suspicious of your broker and to blame them for the difference. The next logic step is to look for ways to avoid the issue by using limit orders instead. But are limit orders really better?

Note that this entire discussion does not apply to trading mutual funds. Since mutual fund trades are all filled at the same price, the closing price, there are no market or limit orders (some fund families, e.g. Rydex, offer a second daily execution slot).

Taking the most recent Buy signal we issued on the evening of April 2, 2009 and QQQQ as an example, we can see that the official open price on April 3 was $32.01. Most of us with market orders entered prior to the open bought at a slightly higher price, and from what you tell us it sounds like many of these orders got filled in the neighborhood of $32.07. In this particular instance, had you placed a limit order at $31.72 (the previous closing price) it would not have been filled as the intra-day low on April 3 turned out to be higher ($31.79). If instead of placing an order prior to the market open (market or limit) you had waited to observe the market's real-time action during the day, you might have gotten very lucky and snatched that intra-day low price of $31.79. The problem with this approach is that the market could have just as well gone up steadily during the day and you would have ended up without a trade, or have been forced to take a position at a substantially higher price to avoid being left stranded on the side lines.

Let's review and compare the two types of orders discussed here:

A market order is to buy or sell immediately (or as soon as the corresponding market opens) at the best price possible. It guarantees the order will be executed, but because orders placed when the markets are closed are subject to market conditions existing when the markets next open, it does not guarantee the price. A buy order is typically filled near the ask price, and a sell order near the bid price. Note that some brokers also provide an option to specify "On the open" as the time in force for securities traded on auction exchanges such as the New York Stock Exchange (NYSE). There is no such thing as "On the open" orders for electronic exchanges such as the Nasdaq or Over-the-Counter (OTC) markets. Because of how trading actually takes place, "On the open" orders still do not guarantee you will get the exact open price. By law, brokers are obligated to give each client the best possible order execution and they now have to report to the SEC on their trade execution quality. This largely eliminates some of the abuse that used to take place, but it still does not guarantee you will get the exact open price because of the many different ways an order can get filled.

A limit order specifies the maximum you are willing to pay for a buy order, or the minimum price you want to receive for a sell order. It guarantees a minimum/maximum price, but it does not guarantee execution. If the market moves against you from the open, your limit price may not be seen and the order will remain dormant until it expires. Professional traders frequently use limit orders to limit their risk. While limit orders can be beneficial for low volume or highly volatile securities, they also require time and attention to detect what the markets are doing and make adjustments as necessary. Some brokers also charge higher commissions for limit orders.

Order Type	Pros	Cons
Market	Guaranteed to fill	Price is not guaranteed
	Execution speed	Higher exposure in fast moving and volatile markets
	Lower cost*
Limit	Price is guaranteed	Can lose the opportunity to buy
	Only risk is that the order might not fill	Higher cost*
*Broker dependent

To circle back to our previous example, if you had traded 1,000 QQQQ shares with a market order and gotten the $32.07 price on April 3, 2009, the difference with the open price would have been a mere $60 on a $32,070 trade, or 0.19%. For us Trend Timers with a long-term horizon and infrequent trading, such small differences in price are largely irrelevant. For us, timely order execution is much more important and this is why we believe that a market order placed before the market opens is the best approach for the vast majority of our subscribers.

FAQ of the Week

Question: What is the expiration/renewal date for my subscription?

For convenience, and to avoid any unwanted interruption of service, all of our subscriptions are automatically renewed at the end of each paid period, unless cancelled before. You can check your scheduled renewal (or expiration) date at any time. To do so, go to the "My Profile" page after you log in to the site and click on the button "Click here to see the Current Status of My Subscription" located at the top of the page. This will display your current subscription status, including the type of plan you are on (e.g. monthly or yearly) as well as the scheduled renewal/expiration date.

Warm wishes and until next week.

The TimingCube Staff