TimingCube - The importance of filtering out the noise - financial information,investor,technical analysis,investment method,market movements

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Signal Update

Current Signal Performance as of 12/26/2003
Signal Type	Trade Date	Return since issued
Buy	04/03/2003	+34.57%

Cumulative Returns since First TimingCube Live Signal (06/18/2001) as of 12/26/2003
Long Only	Long Only with Margin	Long & Short	Long & Short with Margin	Buy & Hold
+86.94%	+207.55%	+245.58%	+833.66%	-15.92%

Note: Performance and Returns above are obtained by using QQQ as the investment vehicle.

Market Update

For a change, it has been a quiet week for the markets. We did not get any of the wild swings we experienced recently, as investors appeared ready to take a break and enjoy the Holiday season instead of spending much time trading. Not surprisingly, volume was very low and is likely to remain that way until the end of the year. Both the Nasdaq Composite and QQQ finished the week 1.13% higher. QQQ now stands at $35.85, the highest weekly close for the current Buy signal, which of course remains in effect.

Trend Timing School

The importance of filtering out the noise

As investors, we are by definition exposed to lots of financial information and, as Trend Timers, our penchant for technical analysis makes us value data even more. On the other hand, we firmly believe that long term wealth building success depends a lot on consistency and staying committed to an investment method for the long term. The reason these two seemingly unrelated statements can potentially conflict is that oftentimes too much information can affect our emotions, which in turn undermine our peace of mind and our resolve.

If you read and listen to enough financial news and information you are very likely to end up overwhelmed and confused. You will routinely find respected gurus, pundits and reporters simultaneously expressing highly contradictory views and opinions on the current state and future direction of the markets. In a similar fashion, daily or hourly market movements can be quite unsettling. Many of us have a natural tendency to worry and we unknowingly focus on items that are potentially troublesome. Yet, given the proper perspective, we recognize most of this information as nothing but useless noise.

No, we don't recommend pulling the plug on your favorite information sources and moving to a cave. We do however stress the importance of limiting the quantity and properly filtering the type of information we consume. We have the luxury of a system we trust to take care of the daily monitoring and to issue timely signals when the market trend changes. Most of us do just fine checking our positions and progress weekly. If you have to get more frequent information fixes, we suggest you train yourself to look for items that reinforce our current position. For example, since we currently are in a bull market with an active Buy signal, we will gravitate to positive news and editorials that tell us the market is headed higher. It is surprising how rapidly this filtering process becomes automatic and subconscious. If nothing else, this noise filtering technique will make you feel better and stronger, but it most likely will also free up numerous hours for you to spend on more valuable activities.

FAQ of the Week

Question: What Trend Timing quadrant are we in?

Last week's Trend Timing School topic on quadrants generated a lot of interest and positive feedback. It also left some of you wondering what quadrant we are currently in. We are in a quadrant 1 Bull/Buy because, per our definition, we are firmly in a bull market and our current signal is a Buy. We also know that the next step will be a quadrant 2 Bull/Sell but we have no way of predicting when this will happen. As usual, we will just let the markets and our Model tell us when the trend changes.

Warm wishes and until next week.

The TimingCube Staff

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