TimingCube - Obsessive-Compulsive Investing - Obsessive-Compulsive Investing, index timing model

Current Signal Performance as of

Signal Type	Trade Date	Index	Return since issued
		Nasdaq 100
		Russell 2000
		S&P 500

Market Update

This week was marked by very low trading volume as many investors still appear to be on vacation. The major averages moved slightly lower over the five-day span, which is not that surprising given the scope of last week's gains. On the economic front, we were reminded Tuesday by Fed officials that should inflationary pressures remain, the Fed may have to raise interest rates again. The next day, worries about the shape of the economy resurfaced, as the number of existing-home sales in July dropped by a larger-than-expected 4.1% to a two-year low. The impact such weakness in home sales will have on the economy is a major policy question facing the Federal Reserve and many economists think that it will be sufficient to keep the Fed on hold over the next few months. On the earnings front, the news has been good so far for the current quarter: 94% of the companies in the S&P 500 have reported Q2 results and median earnings growth is 13.2%, with positive surprises outnumbering negative ones by a factor of 4 to 1.

For the week, the Nasdaq 100 and S&P 500 respectively lost 1.19% and 0.55%. The Russell 2000 fared worse, as it shed 1.75%. The S&P 500 remains above its 50-day and 200-day exponential moving averages (EMAs) while the Nasdaq 100 still sits between both averages. As for the Russell 2000, it closed the week just a hair below its 50-day and 200-day EMAs, which are very close to each other. Our Buy signal remains in effect.

Trend Timing School

Obsessive-Compulsive Investing

There is a condition we will call here Obsessive-Compulsive Investing (OCI) which could affect many amongst us to some degree or another. Learning to recognize its symptoms and how to combat it is vital to our mental and financial health.

There are times in our investing lives when we become more prone to the temptations associated with this ailment. Particularly frustrating or painful market phases as well as recent losses can be conducive to a negative state of mind in which anxiety or outright fear can creep in and take over. Fear about being wrong, being on the wrong side of the market, not having followed the last signal, following the wrong system, having another losing trade, etc. Such thoughts make us more susceptible to constantly questioning our trades, our strategy, the TimingCube Model or us as investors.

With the exploding availability of financial and market news at our fingertips it is easy to get inundated with a real-time flow of stock market updates and information which we use to question and judge our approach weekly, daily or even hourly. Now I'm winning, now I'm losing again. We can get to a place where we are addicted to market news. We have to have it or we start getting cold sweats. Then when we get it, we use it to beat ourselves up with it. Short term market gazing can be hazardous to your health.

We have read about the so-called "CrackBerries" and the many studies which reveal that the Blackberry and other handheld e-mail and internet widgets can become addictive and, much like drugs, can present the same destructive mental health issues. Of course we have all heard of the anxiety disorder called Obsessive-Compulsive Disorder (OCD) in which a person has recurrent and persistent thoughts (obsessions) and an urge (compulsion) to do something to relieve the discomfort created by these obsessions.

We do not want to be alarmists and claim that the convergence of stressing market conditions and the technology to access market data will make us all mental patients. In mild forms it is only like having an itch to scratch, again and again. The trouble is that it can lead to judging the market and signal daily, which can lead to dire consequences such as falling off the wagon, abandoning a mechanical investment system for an emotionally driven one. The temptation is always to jump to the current hot stock or system. Chasing investment strategies is well known as common source of individual investor failure. Recent articles from the likes of Mark Hulbert have shown that sticking with the investment systems proven over the long term beats chasing short term results.

Although to some it could seem that lately it has been a contributor to OCI, Trend Timing is actually a time-proven cure for the OCI syndrome. The whole principle of our brand of market trend following is that it is mechanical, keeps our emotions out of it and over the long-term it consistently beats buy and hold investing. We do not need to concern ourselves with day to day market actions, because the Model is designed (and recently revised) to have us participate in all the meaningful market rallies and to keep us safe from the major downturns which affect stock markets from time to time. If you have allocated money to the Trend Timing system you owe it to yourself to give it the chance and the time to do its job.

In lieu of a disclaimer, we would like to point out that while this article's tongue in cheek presentation of frequently observed investor behavior, and however potent our trend following remedy might be, we are not psychiatrists. If you are experiencing any serious anxiety symptoms we kindly suggest you consult a professional.

FAQ of the Week

Question: Where can I find TimingCube's actual track record?

In short, our entire "live" track record is presented on the "Trades History" page.

Since our Model went through a revision recently we made a number of related changes to our website which were intended to provide our subscribers, as well as prospective subscribers, all the tools to fully analyze and evaluate the current index timing Model and strategies. Accordingly, all the tools on the "Results" page which let us do "what if scenarios" on specific investments and various periods of time now fully reflect the current Model, including its entire backtest from 1989 to July 14, 2006.

No, we did not remove, conceal, hide, erase or otherwise tamper with our signal history. The entire history of TimingCube's actual signals, trades and returns since going live on June 18, 2001 can always be found on the "Trades History" page. We are proud of our five-plus years track record.

Warm wishes and until next week.

The TimingCube Staff