If, like many other dedicated Trend Timers, you have diligently applied the Buy signal and moved your short positions to the long side, congratulations! You are all set and can skip this week's editorial (it's for the slackers ).

Despite the fact that we all know to be continually ready to pounce on a signal should it come, now that one came, many of us have not yet done their trading. This seemingly innocuous oversight is actually much more significant, it can mean the end of your wealth building plan. After all, we want to build long-term wealth with the Trend Timing system, but we only get the opportunity to do so if we participate by placing our trades in a timely manner. It does not matter what the reason is for inaction, the longer you put it off, the less likely you are to ever get in sync with the signal.

Right after the last signal, in the April 30, 2004 Update, we wrote about how to overcome some of the most frequent reasons that hold us from just doing it, and if you have serious misgivings about the new signal you might try to read that article again. On the other hand, there are many of us who are just plain confused and unsure about what to do. Accordingly, today's editorial is dedicated to getting the task taken care of, simply and quickly. We propose you do it right now, while you read this, and you could be done in as little as 15 to 20 minutes.

Step 1: Forget about the last signal, and move on. Yes, by closing these positions you probably have a loss, but we always affirm that not every signal is a winner. We can be satisfied that the Sell signal served its primary purpose which is to protect us against a major downdraft (and a slight loss is cheap insurance against the big fall).

Step 2: Decide how you want to invest your long positions by selecting the 1, 2 or 3 indices to buy (see "What to trade?" on the "Resources" page to find the corresponding choices of investment vehicles be they ETFs or mutual funds). If you must, choose to apply some degree of leverage but most importantly, remember that simpler is better. Often, having fewer funds and avoiding complicated portfolios and lengthy trading works best. For small accounts, a single QQQ (Nasdaq 100 ETF) buy is one of the best and easiest ways to get started. With more assets you can begin to diversify by adding IWM (Russell 2000 ETF) and/or SPY (S&P 500 ETF). The same minimalist reasoning applies when using mutual funds.

Step 3: Close any short positions you still have. If you shorted ETFs, you cover them simply by buying back the same number of shares (which then are returned to the broker to complete the transaction). If you are invested in inverse "bear" mutual funds (which behave as short positions) you might close them by selling the fund. However, as long as you select to stay with funds from the same family, you are better off with a single "exchange" transaction instead of a sell followed by a buy. Since most mutual funds are traded only once per day, at the close, a sell and buy operation would take two days to complete, while the exchange is done in only one.

Step 4: Buy the long positions you selected in Step 2 (unless you already "exchanged" into them with mutual funds). Do not worry about having missed the initial trade date, the market is still virtually unchanged. Don't try to finesse when and how you take these positions. A simple "buy at market" order is fine. Now is the time to do it.

With these four short steps you are already finished. Well done. Now we can be satisfied to be in sync with the newly established trend, and can patiently wait to see how long and powerful a trend the market is serving-up for this trade.

From what we read in the press and in some of the e-mails you send us, many believe they know about the impact the election has or will have on the stock market and would like us to issue signals accordingly. Many have been forecasting a sure-bet market rally in anticipation of a George W. Bush win, or because of that no-fail post-election day market bounce rule, and would have wanted us to generate a Buy signal for that reason. On the other hand, now that a signal has been triggered, others believe that the Buy is in fact erroneous because it was obviously triggered by pre-election market manipulations or because regardless of who wins the election on November 2^nd, the economy and the stock market are bound to tank anyway. The main point of sharing these views with you is to highlight the simple fact that of those people with an opinion about the impact of elections (or anything else for that matter), about 50% will prove to be wrong.

So, instead of long explanations, the answer is: no, we have not "factored-in the election effect", nor will we ever artificially taint the signal with our opinions. The Model exclusively looks at what the market is actually doing to determine the trend. If an influence, event or other, is strong enough to move the markets into a trend change, the Model will react to it as well. What we or anybody thinks the market should do for this reason or that reason plays no part in our Model. We have also written about the randomness of "Seasonality investing" in the September 3, 2004 Update.

Warm wishes and until next week.

The TimingCube Staff