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

Market Update

Stocks posted more gains over the five-day span, but did so on disappointing volume as trading activity on the Nasdaq Composite remained subdued all week. After a quiet first session that left the major indexes largely unchanged, stocks gapped higher at the open Tuesday on news that President Obama reached an agreement with Republicans to extend the Bush tax cuts. The profits quickly evaporated, however, and the major averages had to settle for only fractional gains. News that China had decided to tighten its loan standards renewed worries of slower growth for the Chinese economy, putting pressure on stocks Wednesday morning. The main indexes were able to recover by day's end to finish modestly higher on light volume, with the Nasdaq Composite settling for a 0.4% gain. The tech-heavy index captured an additional 0.3% the next day as markets were helped by news that weekly jobless claims fell more than expected. The Commerce Department reported Friday morning that the U.S. trade deficit fell to a nine-month low as global demand for American products is increasing. Encouraged by the positive news, investors pushed stocks higher again, allowing the Nasdaq Composite to finish the last session of the week with a 0.8% gain, albeit on reduced volume.

The Russell 2000 (IWM), S&P 500 (SPY) and Nasdaq 100 (QQQQ) respectively gained 2.75%, 1.29% and 1.15% 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 posted a 0.80% gain this week. The portfolio consists of the 5 top-ranked world ETFs as of December 3, which marked the beginning of the current 4-week holding period. Please note that since we now have an active Cash signal, the World approach calls for selling your holdings if you follow the "Long Only" or "Long and Short" strategy. Only if you follow the "Buy and Rebalance" strategy should you remain invested in the top 5 ETFs, as the strategy calls for staying invested at all times. Please go to the "Our Service" page for all the details.

Our current Cash signal remains in effect.

Trend Timing School

Computing gains and cumulative returns

Knowing the results and understanding how returns are calculated is important to everyone. The sad reality is that many (most?) of us are math challenged. In the September 4, 2009 Trend Timing School article we dumped more performance related terms and formulas than you ever wanted to know. Instead, this week, we take the very simple, step-by-step route to crunch the basic numbers.

What is the gain on a trade?
The gain is calculated by dividing the "ending price" (the open price on the next trade date) by the "initial price" (the open price on the trading date) and subtracting one. Let us refer to the "Signal Returns" table on the "Results" page for specific examples. Please note that open prices are adjusted to factor in splits and distributions.

Example 1: Buy signal, Nasdaq 100 (QQQQ), trade of 5/12/2005 to 5/12/2006
The "ending price", the adjusted open price on 5/12/2006, was 39.75
The "initial price", the adjusted open price on 5/12/2005, was 35.165
Gain = 39.75 / 35.165 - 1 = 0.1304 or 13.04%

For Sell signals during which we are short the market, the calculation is the same but we take the negative of the result (multiply by minus 1) to get our real return.

Example 2: Sell signal, Nasdaq 100 (QQQQ), trade of 5/12/2006 to 7/14/2006
The "ending price", the adjusted open price on 7/14/2006, was 35.60
The "initial price", the adjusted open price on 5/12/2006, was 39.75
Gain = - (35.60 / 39.75 - 1) = 0.1044 or a 10.44% gain

How do I compound two or more trades?
The easiest trick to remember is that the results of successive trades or time periods multiply instead of adding. The cumulative gain is calculated by multiplying the "multipliers" of each trade or period. The "multiplier" is simply one plus the gain.

Example 3: Compounding of 5/12/2005 and 5/12/2006 trades, using Nasdaq 100 (QQQQ)
The "multiplier" for the 5/12/2005 trade is 1 + 13.04% or 1.1304
The "multiplier" for the 5/12/2006 trade is 1 + 10.44% or 1.1044
Cumulative gain = 1.1304 x 1.1044 = 1.2484 or a 24.84% gain

The rest is but repetition.

FAQ of the Week

Question: What to do if I cannot remember my login information?

Surprisingly, this happens a lot more than you would think. One common reason is that some subscribers, knowing that they will receive signal notification via e-mail, do not bother to log in to the site on a regular basis (how they survive without our weekly wisdom is a mystery ).

The next time your memory fails, help is nearby. In fact, right under the User ID and Password fields on the "Log in" page you will find the following small type:


By following the link you will be asked for some information including the answer to your Security Question. Assuming you enter the answer correctly, the requested User ID or Password will be e-mailed to you immediately. Note that your Security Question and Answer can be checked and updated from your "My Profile" page. But if when it counts your memory also fails to answer your security question, as last resort, you can always send us an e-mail to support@timingcube.com and our staff will bail you out.

Warm wishes and until next week.

The TimingCube Staff