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The complete history of Roy's market-timing experiment

[The following two items originally appeared in the September 2005 Highlights and Commentary. The first item describes the origin of the experiment, and the second covers activity during the month of August, 2005.]

And now for something completely different: For the next 12 months, I'm going to invest $5,000 of my own, real money in a mutual fund market-timing program, and I'll report each month's investment results here in Highlights and Commentary.....Those of you who've followed FundAlarm for a while know that I've always been a boring, buy-and-hold investor.....I've never been a market timer and, in fact, I've always been deeply suspicious of market-timing schemes.....I remain deeply suspicious of market-timing, but I thought it might be interesting (and, perhaps, instructive) to get some personal experience with a real-world market timing program .....For example, I'd like to know if it's really possible to follow market-timing signals over the course of a year, exactly as they're given by the program sponsor.....Since I'm going to be playing with real money, I'd also like to know how it feels to be ordered in and out of the market by a black box, which I neither understand nor (as of now) have much confidence in.....Finally, and perhaps most importantly, I'd like to know if my gross return for the year matches up with advertised returns for the program, and I'd also like to understand the effect of real-world transaction costs and taxes on published returns.

There are hundreds, perhaps thousands, of market-timing systems, but for this test I'm going to follow the Intelli-Timer market-timing program (intelli-timer.com), which I first came across about a month ago in an article by financial journalist Chet Currier*.....Currier's article wasn't particularly flattering: Although the Intelli-Timer Web site describes its system as having been developed by "a team of physics PhDs" in the year 2000, Currier notes that the system's track record dates from early 1999.....Unless these "physics PhDs" are also experimenting with time travel, it's difficult to have a track record that's older than the system itself.....Currier also notes that Intelli-Timer's claimed annualized return since inception --- 100.5% -- defies belief.....For example, projecting a 100% return into the future, my initial stake of $5,000 would be worth about $5 million ten years from now.....But what the heck, if I'm going to do market timing, I might as well do it in a big way.....Indeed, it's the lure of these outsized (I'm tempted to say, "absurd") returns that seems to attract people to market-timing in the first place.....And, who knows, maybe I will earn 100%+ returns for myself (it's this irrational hope that also attracts people to market timing)......As the year progresses, some of my impressions and conclusions about the Intelli-Timer system will be applicable only to that system, while some will be applicable to market-timing systems in general.....I'll try to make clear which is which.

For the record, I have no business relationship with Intelli-Timer, or any other connection with them of any kind.....I approached them and requested a free subscription to their timing service, which they gave me, and that's the only thing I have received from them, or will receive from them (the service usually sells for $183 for a six-month term).....Intelli-Timer set no conditions on my use of their system, and I agreed to none, except that I promised to follow their timing signals as closely as possible for a full twelve months.....I informed the Intelli-Timer people that I'd be reporting my investment results each month in FundAlarm, and they seemed pleased with the potential exposure.....Which brings up another point: By selecting the Intelli-Timer system for this test, I am not recommending or endorsing it (that is "I am not recommending endorsing it," as in "I am not recommending or endorsing it").....As I indicated above, I know nothing about this system other than what I've read on the company's Web site.....I have no special insight into this system, or market timing in general, and anyone who follows me at this early stage, thinking otherwise, is being foolish.
"When All Else Fails in Investing, Ask a Scientist," Chet Currier, bloomberg.com, August 5, 2005

	Roy's Excellent Market-Timing Adventure Month One (through August 26, 2005): I Get Set Up, and Then Watch the Grass Grow

· I was subscribed to the Intelli-Timer system on August 16. · Intelli-Timer doesn't take custody of customer funds, so I had to set up my own trading account. Although I have several Schwab accounts, I decided to open my market-timing account at Scottrade (see below for an explanation). · Intelli-Timer's most recent trading signal was issued on July 10, 2005. However, Intelli-Timer recommends that new subscribers wait for a new signal, instead of hitching onto a signal that's already been issued. As of August 26, the cut-off date for this issue of FundAlarm, Intelli-Timer hadn't issued a new trading signal. Therefore, I still have the original $5,000 sitting in my account, plus a few cents interest, waiting for the starting bell to ring · Since the beginning of 2004, Intelli-Timer has issued a total of 14 trading signals, with a new signal coming, on average, every 26 trading days (six days was the shortest interval between signals, and 59 days was the longest interval). So, by the next issue of FundAlarm (October 1), there's a good chance that I'll have received my first trading signal. · When the Intelli-Timer signals do come, by e-mail, they are signals to go "long" or "short" the market (the signal currently in place is a "long" signal). Intelli-Timer recommends that its subscribers go long or short in one of two ways: I could buy and short the Nasdaq 100 Trust Shares (QQQQ), which is a stock, or I could buy ProFunds OTC Investor (OTPIX) and, when the signal comes to go short, exchange out of that fund into its inverse (ProFunds Short OTC Investor (SOPIX)). Since my interest is in mutual-fund timing, I've decided to execute the Intelli-Timer strategy with these two ProFunds . Intelli-Timer notes that its strategy also can be executed with similar Rydex funds. In the long run, Intelli-Timer says there's a negligible difference in return between either the QQQQ or mutual funds as timing vehicles. · Setting up my trading account involved more time and work than I expected -- about three hours total, including a couple of hours research on broker Web sites. I was hoping to make my market-timing trades out of my personal Schwab account. But the Intelli-Timer system is likely to generate at least 10 mutual fund buy signals during the year, and an equal number of sell signals, and Schwab's mutual fund transaction fees are simply too high for that kind of activity. (Although ProFunds can be purchased from Schwab without a transaction fee, Schwab charges a redemption fee if ProFunds funds are sold within 180 days. Since it's highly unlikely that I -- or anyone else -- would ever hold ProFunds for more than 180 days, I would effectively end up paying Schwab $49.95 for each buy and sell that I made as part of the Intelli-Timer program, which would have made the trading program prohibitively expensive.) Among the major online brokers I looked at, Scottrade has the lowest mutual fund transaction fees ($17 for each online "exchange" of one fund into another, which is what I will be doing), no minimum holding period for ProFunds, and a $5,000 minimum investment for each of the funds I was interested in. With Scottrade, I'm probably looking at transaction fees of about $200 a year, or about 4% of my initial $5,000 investment, which is still a pretty ugly haircut. But it's a lot better than Schwab and, hey, you gotta spend money to make money, right?

[The following item originally appeared in the October 2005 Highlights and Commentary, and covers activity during the month of September, 2005.]

I received my first market-timing signal on September 21 from Intelli-Timer .....The signal came, as promised, in an evening e-mail, and here's what it looked like:




A "long" signal was in place at the time I subscribed to the Intelli-Timer service, and Intelli-Timer advises its customers to wait for the first new signal after their subscription date.....So the "short" signal, above, was my clarion call.....A "short" signal means that Intelli-Timer thinks the market is about to head south and, personally, I didn't have any sense that the market was headed in that direction.....But I signed on to the Intelli-Timer program with the intention of being a good, obedient soldier, so I quickly fired up my computer, logged on to my Scottrade account, and typed in an order to buy a $5,000 bet on a declining market: ProFunds Short OTC Inv (SOPIX), for which I expected to incur a $17 Scottrade transaction charge .....And then I encountered a problem: I had exactly $5,000 in my account, plus a few cents interest, and the Scottrade Web site rejected my order to buy $5,000 worth of SOPIX because I didn't have enough funds to cover the $17 transaction fee.....When I tried to reduce the SOPIX purchase to $4,983, Scottrade again rejected my order, because I was trying to buy less than the $5,000 minimum investment for this fund.....My first trade, and my grand experiment was already in jeopardy!.....This problem was especially frustrating, since I had specifically addressed this issue when I opened my account: The Scottrade rep assured me that $5,000 was enough the cover the first trade, since the Scottrade computer would recognize it as a $5,000 trade, take out the transaction fee, and use the remaining amount to buy shares.....In great detail, he proved to be dead wrong.....Next morning, after several insistent phone calls, the manager at my local Scottrade branch agreed to waive the $17 transaction fee ("just this one time"), and he put through my order for $5,000 worth of SOPIX.....My order was executed on the trade date recommended by the Intelli-Timer program -- September 22 -- and I ended up buying 255.969 shares of SOPIX, at 19.60 per share, for a total value of $5,017.....(Scottrade credited me with an extra $17, probably because that's the only way its computer could handle my order. Scottrade still hasn't asked me to reimburse them, although they probably will. In any event, I'll use $5,017 as the starting value of my account.).....As of September 26, the cut-off date for this issue of FundAlarm, SOPIX was valued at 19.54 per share.

To recap the activity in my market-timing account for the (abbreviated) month of September:

Month	Date of signal (1)	Type of signal	Security bought (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month
Sept, 2005	Sept 21	Short	SOPIX	$5,017.00	$5,001.63	-0.31%
Notes: (1) Signal was executed (i.e., mutual fund trade date) was the next business day. (2) SOPIX=ProFunds Short OTC Inv. (3) Cut-off for valuation is 26th day of the month. (4) Account value includes value of fund shares only. We're ignoring a few cents interest on the uninvested cash that sat in the account at its inception.

Here's the performance of my market-timing account from September 22 through September 26, ranked against the performance of each FundAlarm benchmark for the same period (benchmarks are listed in descending order of return):

FundAlarm benchmark	% Return
Vanguard Small Cap Index (NAESX)	1.26%
Schwab International Index Inv (SWINX)	1.22%
Dreyfus Mid Cap Index (PESPX)	0.94%
Roy's market-timing account	-0.31%
Vanguard 500 Index (VFINX)	-0.39%
Vanguard Balanced Index (VBINX)	-0.71%

It was a very short period and, so far, the results are essentially meaningless.....Intelli-Timer didn't cause my hassles, but I can think of easier ways to lose sixteen dollars.

[The following item originally appeared in the November 2005 Highlights and Commentary, and covers activity during the month of October, 2005. As you will note, it became necessary to re-start the timing experiment in mid-October.]

Roy's Excellent Market-Timing Adventure: Month Three: Reboot

As noted in last month's Highlights and Commentary, I received my first Intelli-Timer signal -- to go "short" -- on September 21.....On average, the Intelli-Timer system has generated a new signal every 29 days, so I assumed it would be about a month until I received the next signal.....I assumed wrong: On September 29, just six trading days after the short signal, Intelli-Timer told its subscribers to go long (i.e., place a bet that the market would rise) .....The next day (September 30), when I went to execute the long signal, I discovered that the value of my trading account had dropped to $4947.88, which meant that I didn't have the $5,000 needed to buy the minimum amount of the long position (ProFunds OTC Investor (OTPIX)).....My broker (Scottrade) wasn't able to post additional funds to my account for another two trading days, and that meant I would be two days late executing the Intelli-Timer signal.....Since the timing experiment was now ruined, due to my lack of foresight in dealing with investment minimums, I decided to sell my short position, call off the current experiment, and wait for the next new signal to begin the experiment all over again.....I also added $500 to my account, to avoid any future problems with the $5,000 minimum purchase requirement.....I hope.

Astute readers have already figured out why my account had dropped below $5,000: I was "short" the market, based on the September 21 Intelli-Timer signal, but the market continued to move upwards.....Indeed, during the time the short signal was in place (September 22 through September 30), the NASDAQ 100 Trust Shares (QQQQ) actually rose 2.1%, which caused my short position to drop by the same 2.1%.

I didn't know it at the time, but it was a good thing that I bailed out when I did.....From the date the long signal would have been executed (September 30), through October 7, the QQQQ dropped 2.9%.....On October 7, Intelli-Timer sent an e-mail to its subscribers, suggesting that a stop-loss signal might be coming (this is a signal to go into cash; in effect, the Intelli-Timer computer throws up its arms and says "I don't know what's going on").....Sure enough, the market continued to drop, the stop-loss was triggered on October 12, and Intelli-Timer subscribers were advised to move into cash.....Had I been able to stay with the Intelli-Timer system, I figure that I would have been down another 4.3%, on top of my actual 2.1% loss.....Quite a bit of fuss and confusion, considering that I easily could have generated a loss like that all by myself.

I wasn't on the sidelines for long.....On October 16, Intelli-Timer issued a new, "rather strong" long signal (their description).....On October 17, I started the experiment all over again by purchasing 84.331 shares of ProFunds OTC Investor (OTPIX), at 59.29 per share (that's $5,000 worth of the fund, plus Scottrade's standard $17 transaction charge).....Through October 26, the cut-off for this month's issue of FundAlarm, my investment results were as follows:

Month	Date of signal (1)	Type of signal	Fund bought (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month
October, 2005	Oct.16	Long	OTPIX	$5,000.00	$5,080.09	+1.60%
Notes: (1) Signal was executed (i.e., fund bought) on the next business day. (2) OTPIX=ProFunds OTC Inv. (3) Cut-off for valuation is 26th day of the month. (4) Account value includes value of fund shares only. Cash in the account, as well as interest earned on the cash, is ignored.

Here's the performance of my market-timing account from October 17 through October 26, ranked against the performance of each FundAlarm benchmark for the same period (benchmarks are listed in descending order of return):

Roy's market-timing account	1.60%
Dreyfus Mid Cap Index (PESPX)	0.88%
Vanguard Small Cap Index (NAESX)	0.59%
Vanguard 500 Index (VFINX)	0.12%
Vanguard Balanced Index (VBINX)	0.00%
Schwab International Index Inv (SWINX)	-0.82%

So far, all this proves is that the NASDAQ (long) was a good place to be for a few days at the end of October 2005.....For this go-round of the market-timing experiment, I've think I've finally worked out the operational kinks, and I'm expecting things to go smoothly from here on out.


[The following item originally appeared in the December 2005 Highlights and Commentary, and covers activity during the month of November, 2005.]

Roy's Excellent Market-Timing Adventure: Month Two (since re-start): Nothing Much Happens

Intelli-Timer didn't issue any new timing signals through November 26, so I didn't have a chance to screw anything up.....I started the month long the market (i.e., my entire timing account was invested in ProFunds OTC Investor (OTPIX)), and I ended the month the same way:

Month	Date of signal (1)	Type of signal	Fund bought/held (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month	Change in acct value since inception
October, 2005	Oct.16	Long	OTPIX	$5,000.00	$5,080.09	+1.60%	+1.60%
November, 2005	No new signal	Long still in effect	OTPIX	$5,080.09	$5,484.89	+7.97%	+9.70%
Notes: (1) Signal was executed (i.e., fund bought) on the next business day. (2) OTPIX=ProFunds OTC Inv. (3) Cut-off for valuation is 26th day of the month. (4) Account value includes value of fund shares only. Cash in the account, as well as interest earned on the cash, is ignored.

It was a good month for many segments of the stock market, and my account was no exception.....As you can see above, I was up 7.97% for the month, and I'm up 9.70% since this timing experiment started (or, more accurately, restarted) on October 17.

Other than timing signals, Intelli-Timer sends one e-mail a week to its subscribers, on Friday evening.....Here's the entire e-mail I received on Friday, November 25, which is typical of all the e-mails I've received so far:


Intelli-Timer's November 11 e-mail contained a brief, additional "commentary," as follows:


In fact, the long signal stayed in place, OTPIX was up almost 1.7% for the following week, and Intelli-Timer never followed-up on its "commentary".....What happened to the possible "overbought" condition, and the "short-term consolidation"?.....What, exactly, is the point of telling subscribers that a new timing signal may come "as soon as Wednesday or much later"?.....Communications like this are probably intended to put a human face on the Intelli-Timer system, but it seems to me they just backfire.....Now I'm wondering if anyone at Intelli-timer -- human or computer -- has any idea which way the market is headed.

Unsatisfactory e-mails aside, my Intelli-Timer account has also performed well against the usual FundAlarm benchmarks:

	Current month (10/27 thru 11/26)	Since inception (10/17/05)
Roy's market-timing account	7.97%	9.70%
Dreyfus Mid Cap Index (PESPX)	7.66%	8.61%
Vanguard Small Cap Index (NAESX)	7.18%	7.81%
Vanguard 500 Index (VFINX)	6.66%	6.79%
Vanguard Balanced Index (VBINX)	4.42%	4.42%
Schwab International Index Inv (SWINX)	3.74%	2.88%

The real test for Intelli-Timer will come when the first short signal is issued.....We'll see if I'm able to keep these nice gains, as the benchmarks presumably give theirs back.


[The following item originally appeared in the January 2006 Highlights and Commentary, and covers activity during the month of December, 2005.]

Roy's Excellent Market-Timing Adventure: Month Three: A Short Signal is Issued, and My Account Doesn't Like It

Intelli-Timer issued a new timing signal on November 29, just after the cut-off for our last report.....Since I was long the market in the last report, this new signal was to go short, which meant that I sold my shares of ProFunds OTC Investor (OTPIX) on November 30 and invested the proceeds in ProFunds Short OTC Investor (SOPIX).....This move wasn't a disaster but it wasn't the greatest call, either, as my account value at the end of December ($5,381) was lower than the value at the beginning of the month ($5,484), for an overall monthly return of -1.89%:

Month	Date of signal (1)	Type of signal	Fund bought/held (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month	Change in acct value since inception
October, 2005	10/16	Long	OTPIX	$5,000.00	$5,080.09	+1.60%	+1.60%
November, 2005	No new signal	Long still in effect	OTPIX	$5,080.09	$5,484.89	+7.97%	+9.70%
December, 2005	11/29	Short	SOPIX	$5,484.89	$5,381.32	-1.89%	+7.63%
Notes: (1) Signal was executed (i.e., fund bought) on the next business day. (2) OTPIX=ProFunds OTC Inv.; SOPIX=ProFunds Short OTC Inv. (3) Cut-off for valuation is 26th day of the respective month. (4) Account value includes value of fund shares only. Cash in the account, as well as interest earned on the cash, is ignored. Brokerage commissions are paid out of this free cash, and commissions are not included in return calculations.

The problem with being short in December was that most segments of the markets continued to move up for the month and, on a relative basis, my market-timing account lost ground to every one of the usual FundAlarm benchmarks......For the first time since this experiment began on October 17, one of the FundAlarm benchmarks (Dreyfus MidCap Index) shows a better month-end cumulative return than my market-timing account, and by a considerable margin (9.53% versus 7.63%):

	Current month (11/27 thru 12/26)	Since inception (10/17/05)
Dreyfus Mid Cap Index (PESPX)	0.85%	9.53%
Roy's market-timing account	-1.89%	+7.63%
Vanguard Small Cap Index (NAESX)	-0.48%	7.29%
Vanguard 500 Index (VFINX)	0.20%	7.00%
Schwab International Index Inv (SWINX)	2.17%	5.12%
Vanguard Balanced Index (VBINX)	0.45%	4.89%

Sorted by return "Since inception"
Several readers have pointed out that the returns for my market-timing account don't reflect the commissions that I must pay when I establish each long and short position.....This is true: I've intentionally omitted the commissions from my return calculations, in order to make the arithmetic easier to follow, and also to reflect the fact that others might be able to execute the Intelli-Timer strategy with lower commissions, or no commissions at all.....So far, Scottrade has hit my account for $34 in commissions ($17 for establishing the original long position, and $17 for exchanging the long for the short position), and these commissions represent 0.68% of my initial $5,000 investment.....Also, the Intelli-Timer service (which I received for free) currently costs $183 for a six-month subscription, and that would have to be factored into any return calculation.....All of the FundAlarm benchmarks, above, are no-load funds and, as with all mutual funds, the returns are shown net of all fees and expenses.


[The following item originally appeared in the February 2006 Highlights and Commentary, and covers activity during the month of January, 2006.]

Roy's Excellent Market-Timing Adventure: Month Four: No new signal, lots of action, little change

The Intelli-Timer system didn't issue any new signals during January, which means that I held my short position -- ProFunds Short OTC Inv (SOPIX) -- for the entire month.....If you followed the market during January, you know that short was not the place to be for the first half of the month, as U.S. stock markets rose quite sharply......During the second half of January, however, the markets fell almost as dramatically as they rose, and a short position looked pretty smart.....Overall, the ups and downs of the market basically offset each other, and my timing account ended the month within three dollars of where it started, for a tiny loss of -0.05%:

Month	Date of signal (1)	Type of signal	Fund bought/held (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month	Change in acct value since inception
October, 2005	10/16	Long	OTPIX	$5,000.00	$5,080.09	+1.60%	+1.60%
November, 2005	No new signal	Long still in effect	OTPIX	$5,080.09	$5,484.89	+7.97%	+9.70%
December, 2005	11/29	Short	SOPIX	$5,484.89	$5,381.32	-1.89%	+7.63%
January, 2006	No new signal	Short still in effect	SOPIX	$5,381.32	$5,378.51	-0.05%	+7.57%
Notes: (1) Signal was executed (i.e., fund bought) on the next business day. (2) OTPIX=ProFunds OTC Inv.; SOPIX=ProFunds Short OTC Inv. (3) Cut-off for valuation is 26th day of the respective month. (4) Account value includes value of fund shares only. Cash in the account, as well as interest earned on the cash, is ignored. Brokerage commissions are paid out of this free cash, and commissions are not included in return calculations. Dividends are reinvested.

It would have been nice if Intelli-Timer had moved me into a long position for the first half of January, when the markets rose, and then back into the short position for the last half of the month.....But that's not the way the system works, as Intelli-Timer informed its subscribers in a regular weekly e-mail dated January 7.....According to the folks at Intelli-Timer, the early-January rise in the markets was a "news-induced" event (i.e., it looked like the Fed was going to stop increasing interest rates), and news-induced events can't be predicted by any "mid- or long-term mechanical trading system" such as Intelli-Timer.....I'd like to think that the late-January decline in the markets was vindication of the Intelli-Timer system but that, too, seemed due to news-induced events (weak earnings reports, rising oil prices, higher interest rates with a hint of recession, etc.).....Since there's hardly a day that goes by without market-moving news, I'm not sure how a subscriber is supposed to know when the Intelli-Timer system is successfully calling the market, and when (as in January 2006) the system is overshadowed by external events.....Perhaps I'll figure this out as the experiment progresses.

Compared to the usual FundAlarm benchmarks, the performance of my market-timing account (since inception) has fallen to the middle of the pack:

	Current month (12/27 thru 1/26)	Since inception (10/17/05)
Vanguard Small Cap Index (NAESX)	5.18%	12.85%
Schwab International Index Inv (SWINX)	4.31%	9.65%
Roy's market-timing account	-0.05%	7.57%
Dreyfus Mid Cap Index (PESPX)	-1.81%	7.55%
Vanguard 500 Index (VFINX)	-0.01%	6.99%
Vanguard Balanced Index (VBINX)	-0.05%	4.84%

Sorted by return "Since inception"; benchmark returns assume that dividends are reinvested

In fact, the average return of all five FundAlarm benchmarks since October 17 (8.38%) is higher than my return from the Intelli-Timer system.....In other words, if I had simply invested $1,000 in each of the FundAlarm benchmarks, I'd be ahead of my Intelli-Timer account by about $40 right now (even more if I count my market-timing brokerage commissions).....Perhaps this, too, will change over time.


[The following item originally appeared in the March 2006 Highlights and Commentary, and covers activity during the month of February, 2006.]

Roy's Excellent Market-Timing Adventure: Month Five: I went down, down, down...

On January 29, the Intelli-Timer system issued its only signal for the month, and I dutifully exchanged my short bet on the market (ProFunds Short OTC Inv, or SOPIX) for a long bet (ProFunds OTC Inv, or OTPIX).....The bet did not work out, and my account lost a hefty 3.57% during February:

Month	Date of signal (1)	Type of signal	Fund bought/held (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month	Change in acct value since inception
October, 2005	10/16	Long	OTPIX	$5,000.00	$5,080.09	+1.60%	+1.60%
November, 2005	No new signal	Long still in effect	OTPIX	$5,080.09	$5,484.89	+7.97%	+9.70%
December, 2005	11/29	Short	SOPIX	$5,484.89	$5,381.32	-1.89%	+7.63%
January, 2006	No new signal	Short still in effect	SOPIX	$5,381.32	$5,378.51	-0.05%	+7.57%
February, 2006	1/29	Long	OTPIX	$5,378.51	$5,186.30	-3.57%	+3.73%
Notes: (1) Signal was executed (i.e., fund bought) on the next business day. (2) OTPIX=ProFunds OTC Inv.; SOPIX=ProFunds Short OTC Inv. (3) Cut-off for valuation is 26th day of the respective month. (4) Account value includes value of fund shares only. Cash in the account, as well as interest earned on the cash, is ignored. Brokerage commissions are paid out of this free cash, and commissions are not included in return calculations. Dividends are reinvested.

Intelli-Timer's weekly e-mail explanations were not enlightening: On February 3, after a losing week for OTPIX (down 2.72%), I was reminded that Intelli-Timer remains a "mid-term system," and "each trade has to be given enough time to develop"....On February 10, after a week that went essentially nowhere (down 0.06%), I was assured that an important "bullish reversal" had occurred "intraday today," and the anticipated bullish move had begun (bulls are large animals, but this one had apparently slipped right by me).....On February 17, after a slightly positive week (up 0.69%), Intelli-Timer anticipated that the "uptrend" would continue.....On February 24, after another slightly positive week (up 0.06%), Intelli-Timer was anticipating a "bullish breakout" from a tight trading range.

Meanwhile, each of the usual FundAlarm benchmarks posted positive returns for February, and the performance of my market-timing account (since inception) has now fallen to the bottom of the pack:

	Current month (1/27 thru 2/26)	Since inception (10/17/05)
Vanguard Small Cap Index (NAESX)	1.57%	14.62%
Schwab International Index Inv (SWINX)	0.80%	10.53%
Dreyfus Mid Cap Index (PESPX)	1.27%	8.91%
Vanguard 500 Index (VFINX)	1.44%	8.53%
Vanguard Balanced Index (VBINX)	0.89%	5.78%
Roy's market-timing account	-3.57%	3.73%

Sorted by return "Since inception"; benchmark returns assume that dividends are reinvested

We're only about four months into this year-long experiment, but my account is already in a deep hole relative to these benchmarks.....With one good timing call, the Vanguard 500 Index fund could be in reach, but that isn't saying much, since the Vanguard 500 Index fund is always in reach just by opening a mutual fund account.....We shall see what happens.


[The following item originally appeared in the April, 2006 Highlights and Commentary, and covers activity during the month of March, 2006.]

Roy's Excellent Market-Timing Adventure: Month Six: Sideways

Intelli-Timer didn't issue any new signals during March -- there hasn't been a new signal since January 29 -- so I continued to hold the long position for the entire month (i.e., ProFunds OTC Inv, or OTPIX).....Overall, my account showed a gain of 0.14%, which reflects a month of random up-and-down movement, and a net asset value that ended up just about where it started:

Month	Date of signal (1)	Type of signal	Fund bought/held (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month	Change in acct value since inception
October, 2005	10/16	Long	OTPIX	$5,000.00	$5,080.09	+1.60%	+1.60%
November, 2005	No new signal	Long still in effect	OTPIX	$5,080.09	$5,484.89	+7.97%	+9.70%
December, 2005	11/29	Short	SOPIX	$5,484.89	$5,381.32	-1.89%	+7.63%
January, 2006	No new signal	Short still in effect	SOPIX	$5,381.32	$5,378.51	-0.05%	+7.57%
February, 2006	1/29	Long	OTPIX	$5,378.51	$5,186.30	-3.57%	+3.73%
March, 2006	No new signal	Long still in effect	OTPIX	$5,186.30	$5,193.62	+0.14%	+3.87%
Notes: (1) Signal was executed (i.e., fund bought) on the next business day. (2) OTPIX=ProFunds OTC Inv.; SOPIX=ProFunds Short OTC Inv. (3) Cut-off for valuation is 26th day of the respective month. (4) Account value includes value of fund shares only. Cash in the account, as well as interest earned on the cash, is ignored. Brokerage commissions are paid out of this free cash, and commissions are not included in return calculations. Dividends are reinvested.

Although OTPIX went sideways for the month, a couple of the usual FundAlarm benchmarks (Vanguard Small Cap Index and Schwab International Index) had an excellent month, and pulled away even further from my market-timing account:

	Current month (2/27 thru 3/26)	Since inception (10/17/05)
Vanguard Small Cap Index (NAESX)	2.03%	16.96%
Schwab International Index Inv (SWINX)	2.61%	13.41%
Dreyfus Mid Cap Index (PESPX)	0.81%	9.79%
Vanguard 500 Index (VFINX)	0.76%	9.35%
Vanguard Balanced Index (VBINX)	0.05%	5.83%
Roy's market-timing account	0.14%	3.87%

Sorted by return "Since inception"; benchmark returns assume that dividends are reinvested

As we come up on the halfway point of this experiment, the average of the five FundAlarm benchmarks, from inception, is 11.07%.....Even that number is starting to seem out of reach for my market-timing account.


[The following item originally appeared in the May, 2006 Highlights and Commentary, and covers activity during the month of April, 2006.]

Roy's Excellent Market-Timing Adventure: Month Seven: Longing to go Short

Hey, aren't market-timing programs supposed to be exciting?.....April was the third full month that Intelli-Timer kept me in the long position (ProFunds OTC Inv, or OTPIX), and I'm starting to get itchy for some action......If the market would just take a nosedive, and Intelli-Timer would switch me over to the short position, I could finally start making some money in my timing account (of course, everything else that I own -- long -- would be in the tank, but I really do find myself thinking that way. The human mind is an extremely odd thing.).....On the positive side, April was the best of the three months that I've been long, and the value of my timing account increased 1.24% during the 30-day period.....Since the inception of my account, last October, Intelli-Timer has steered me to an overall gain of 5.16%, as follows:

Month	Date of signal (1)	Type of signal	Fund bought/held (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month	Change in acct value since inception
October, 2005	10/16	Long	OTPIX	$5,000.00	$5,080.09	+1.60%	+1.60%
November, 2005	No new signal	Long still in effect	OTPIX	$5,080.09	$5,484.89	+7.97%	+9.70%
December, 2005	11/29	Short	SOPIX	$5,484.89	$5,381.32	-1.89%	+7.63%
January, 2006	No new signal	Short still in effect	SOPIX	$5,381.32	$5,378.51	-0.05%	+7.57%
February, 2006	1/29	Long	OTPIX	$5,378.51	$5,186.30	-3.57%	+3.73%
March, 2006	No new signal	Long still in effect	OTPIX	$5,186.30	$5,193.62	+0.14%	+3.87%
April, 2006	No new signal	Long still in effect	OTPIX	$5,193.62	$5,257.84	+1.24%	+5.16%
Notes: (1) Signal was executed (i.e., fund bought) on the next business day. (2) OTPIX=ProFunds OTC Inv.; SOPIX=ProFunds Short OTC Inv. (3) Cut-off for valuation is 26th day of the respective month. (4) Account value includes value of fund shares only. Cash in the account, as well as interest earned on the cash, is ignored. Brokerage commissions are paid out of this free cash, and commissions are not included in return calculations. Dividends are reinvested.

For the first time in a while, my timing account outperformed a couple of the usual FundAlarm benchmarks for the month (VFINX and VBINX), but the other three FundAlarm benchmarks continued to pull away from my account, as follows:

	Current month (3/27 thru 4/26)	Since inception (10/17/05)
Schwab International Index Inv (SWINX)	4.82%	18.88%
Vanguard Small Cap Index (NAESX)	1.30%	18.47%
Dreyfus Mid Cap Index (PESPX)	1.71%	11.67%
Vanguard 500 Index (VFINX)	0.30%	9.68%
Vanguard Balanced Index (VBINX)	-0.15%	5.67%
Roy's market-timing account	1.24%	5.16%

Sorted by return "Since inception"; benchmark returns assume that dividends are reinvested

Looking ahead to the end of our experiment, in six months or so, it's pretty clear that my timing account will never be able catch a couple of the FundAlarm benchmarks, unless there's a fairly sustained market decline, and Intelli-Timer makes the proper call to the short position.....Not a pleasant thought.....But, then again, at least there would be some action.


[The following item originally appeared in the June, 2006 Highlights and Commentary, and covers activity during the month of May, 2006.]

Roy's Excellent Market-Timing Adventure: Month Eight: Grim ==> Grimmer

May would have been a great month to be short the market.....Unfortunately, I wasn't.....Guided by the Intelli-Timer system, my market-timing account lost just over 6% for the month and, for the first time, I finished a month with less than I started with back in October.....Here's a summary of the entire experiment so far, with the latest results highlighted in bold:

Month	Date of signal (1)	Type of signal	Fund bought/held (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month	Change in acct value since inception
October, 2005	10/16	Long	OTPIX	$5,000.00	$5,080.09	+1.60%	+1.60%
November, 2005	No new signal	Long still in effect	OTPIX	$5,080.09	$5,484.89	+7.97%	+9.70%
December, 2005	11/29	Short	SOPIX	$5,484.89	$5,381.32	-1.89%	+7.63%
January, 2006	No new signal	Short still in effect	SOPIX	$5,381.32	$5,378.51	-0.05%	+7.57%
February, 2006	1/29	Long	OTPIX	$5,378.51	$5,186.30	-3.57%	+3.73%
March, 2006	No new signal	Long still in effect	OTPIX	$5,186.30	$5,193.62	+0.14%	+3.87%
April, 2006	No new signal	Long still in effect	OTPIX	$5,193.62	$5,257.84	+1.24%	+5.16%
May, 2006	May 16/ May 25	Cash/ Long	OTPIX	$5,257.84	$4,938.37	-6.08%	-1.23%
Notes: (1) Signal was executed (i.e., fund bought) on the next business day. (2) OTPIX=ProFunds OTC Inv.; SOPIX=ProFunds Short OTC Inv. (3) Cut-off for valuation and account activity is 26th day of the respective month. (4) Account value includes value of fund shares only. Cash in the account, as well as interest earned on the cash, is ignored. Brokerage commissions are paid out of this free cash, and commissions are not included in return calculations. Dividends are reinvested.

As you will note above, May was the first month in which I received two market-timing signals.....Basically, the month divided into four segments:

Boring: I entered May with my long position still in place (ProFunds OTC Inv, or OTPIX). From May 1 through May 8 the market drifted, and the value of my account increased about one-half percent. Scary: From May 9 through May 16, my long position got hammered, and my account lost 5.3% Sidelined: From May 17 through May 25, Intelli-Timer's five-percent stop-loss kicked in, and I was directed to sell my long position and go to cash (i.e., for the first time since this experiment began, I was neither long nor short). Who knows? On May 26, I was directed to re-establish my long position.

Should the Intelli-Timer system have foreseen the May 9 through May 16 drop, and moved me to the short side before the major damage was done?.....Before I started this experiment, I would have thought that's exactly what timing systems are supposed to do, but (as I've learned) Intelli-Timer is designed to focus on "medium-" and "long-term" trends in the market, and it doesn't profess to catch every day-to-day turn.....OK, so I can live with a system focused on the medium-term.....The problem is, Intelli-Timer has done a fairly lousy job in that time frame, too.....I'm pretty sure that Intelli-Timer would explain my poor results by noting that, since I came aboard last October, "trends" in the market have been difficult to identify and follow (admittedly, they have been).....But Intelli-Timer promotes itself as an all-purpose timing system, not a system for investing in the stock market only when trends are clear and strong.....Nobody has forced Intelli-Timer to issue any signal and, for each signal that Intelli-Timer has put out into the world, it seems reasonable to hold them fully accountable for the results.....The market is what it is, and their system either works or it doesn't.....So far, I don't believe it has.

Here's the performance of my market-timing account compared to the usual FundAlarm benchmarks:

	Current month (4/27 thru 5/26)	Since inception (10/17/05)
Schwab International Index Inv (SWINX)	-2.28%	18.48%
Vanguard Small Cap Index (NAESX)	-4.16%	14.70%
Dreyfus Mid Cap Index (PESPX)	-4.05%	12.52%
Vanguard 500 Index (VFINX)	-1.75%	8.76%
Vanguard Balanced Index (VBINX)	-1.08%	6.02%
Roy's market-timing account	-6.08%	-1.23%

Sorted by return "Since inception"; benchmark returns assume that dividends are reinvested

Several readers have suggested that I also should benchmark the performance of my Intelli-Timer account to ProFunds OTC Inv (OTPIX) -- in other words, if Intelli-Timer performs better than OTPIX, we would conclude that the Intelli-Timer system is adding value, and vice versa.....I understand the point, but I've decided not to use OTPIX as a benchmark because I wouldn't have considered investing in OTPIX if it weren't for this Intelli-Timer experiment.....In my view, a benchmark is a good benchmark only if it represents something that I might have invested in, or something close, and OTPIX doesn't fit the bill for me.....(But for those who insist, OTPIX would have appreciated +3.20% through May 26, versus -1.23% for my Intelli-Timer account.)


[The following item originally appeared in the July, 2006 Highlights and Commentary, and covers activity during the month of June, 2006.]

Roy's Excellent Market-Timing Adventure: Month Nine: The Ship's Going Down, and the Captain is Changing the Rules

The following chart should help explain the activity in my market-timing account for June:


Thus, on May 26, I was instructed to move out of cash and establish a "long" position in OTPIX (i.e., ProFunds OTC Inv).....The market drifted until June 5, when it started heading straight down, and by June 12 I had lost another 5.44% in my account......At that point, Intelli-Timer's 5% stop-loss kicked in.....I was instructed to sell OTPIX and move to cash again, which I did on June 13, and I remained in cash through the end of the month.....The chart below summarizes the activity in my market-timing account to-date, including a loss of 5.65% in June, which brings my overall loss, since the inception of this experiment, to 6.82%:

Month	Date of signal (1)	Type of signal	Fund bought/held (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month	Change in acct value since inception
October, 2005	10/16	Long	OTPIX	$5,000.00	$5,080.09	+1.60%	+1.60%
November, 2005	No new signal	Long still in effect	OTPIX	$5,080.09	$5,484.89	+7.97%	+9.70%
December, 2005	11/29	Short	SOPIX	$5,484.89	$5,381.32	-1.89%	+7.63%
January, 2006	No new signal	Short still in effect	SOPIX	$5,381.32	$5,378.51	-0.05%	+7.57%
February, 2006	1/29	Long	OTPIX	$5,378.51	$5,186.30	-3.57%	+3.73%
March, 2006	No new signal	Long still in effect	OTPIX	$5,186.30	$5,193.62	+0.14%	+3.87%
April, 2006	No new signal	Long still in effect	OTPIX	$5,193.62	$5,257.84	+1.24%	+5.16%
May, 2006	May 16/ May 25	Cash/ Long	OTPIX	$5,257.84	$4,938.37	-6.08%	-1.23%
June, 2006	June 12	Cash	NA (Cash)	$4,938.37	$4,659.14	-5.65%	-6.82%
Notes: (1) Signal was executed (i.e., fund bought) on the next business day. (2) OTPIX=ProFunds OTC Inv.; SOPIX=ProFunds Short OTC Inv. (3) Cut-off for valuation and account activity is 26th day of the respective month. (4) Account value includes value of fund shares only. Cash in the account, as well as interest earned on the cash, is ignored. Brokerage commissions are paid out of this free cash, and commissions are not included in return calculations. Dividends are reinvested.

So, was the stop-loss on June 12 a good call?.....In retrospect, it was a terrible call, since it turns out that Intelli-Timer instructed me to sell OTPIX at exactly its low point for the month (the chart below is a continuation of the one above):


Had I continued to hold OTPIX, past the stop-loss, I would have picked up another 2.5% or so, which I missed because I was sitting in cash on the sidelines.

As far as I can tell, the Intelli-Timer Web site doesn't mention the 5% stop-loss policy and the first I heard of it was when a stop-loss was triggered in May.....Once I figured out what was going on, I liked the idea, but now it seems that the stop-loss is on its way out: According to a June 16 e-mail from Intelli-Timer, the stop-loss is a "manual" overlay, and it's screwing up the system's indicators (Intelli-Timer claims that the underlying long/short signals, without the 5% stop-loss, are still as reliable as ever).....Bottom line: Intelli-Timer now says that the 5% stop-loss is too low, and a new (higher) stop-loss should be set by each individual (but 5% is OK, if you're a weenie).....However, since Intelli-Timer can't accommodate every user's individual stop-loss limit, Intelli-Timer has decided to officially eliminate the stop-loss from its program, and let each signal ride until it's replaced by the next one.....In other words, the performance of the Intelli-Timer system, going forward, won't necessarily be comparable to the system's historical performance, and every user's future results theoretically could be different from Intelli-Timer's published results (I'm also wondering if Intelli-Timer will now go back and "restate" its historical results to do away with those pesky stop-loss trades).....I've never run a market-timing program, and never will, but I have a feeling that this kind of "do-your-own-thing" market-timing isn't what most investors are looking for.

Here's the performance of my market-timing account compared to the usual FundAlarm benchmarks:

	Current month (5/27 thru 6/26)	Since inception (10/17/05)
Schwab International Index Inv (SWINX)	-4.71%	12.90%
Vanguard Small Cap Index (NAESX)	-3.49%	10.70%
Dreyfus Mid Cap Index (PESPX)	-2.71%	9.47%
Vanguard 500 Index (VFINX)	-2.58%	5.95%
Vanguard Balanced Index (VBINX)	-2.39%	3.48%
Roy's market-timing account	-5.65%	-6.82%

Sorted by return "Since inception"; benchmark returns assume that dividends are reinvested

In percentage terms, my overall losses are starting to look significant, and it increasingly looks like Intelli-Timer is making up some of its moves as it goes along......But I will soldier on to the end, which is now three months away.

[The following item originally appeared in the August, 2006 Highlights and Commentary, and covers activity during the month of July, 2006.]

Roy's Excellent Market-Timing Adventure: Month Ten: We see double digit returns. Unfortunately, there's a minus sign in front.

On June 29, Intelli-Timer advised me to move out of my cash position and into a "long" position in OTPIX (ProFunds OTC Inv), which is where I stayed for the entire month of July.....Unfortunately -- and this is beginning to sound like a broken record -- this was the wrong move to make, and my account lost another 5.66% during the month of July, as follows:

Month	Date of signal (1)	Type of signal	Fund bought/held (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month	Change in acct value since inception
October, 2005	10/16	Long	OTPIX	$5,000.00	$5,080.09	+1.60%	+1.60%
November, 2005	No new signal	Long still in effect	OTPIX	$5,080.09	$5,484.89	+7.97%	+9.70%
December, 2005	11/29	Short	SOPIX	$5,484.89	$5,381.32	-1.89%	+7.63%
January, 2006	No new signal	Short still in effect	SOPIX	$5,381.32	$5,378.51	-0.05%	+7.57%
February, 2006	1/29	Long	OTPIX	$5,378.51	$5,186.30	-3.57%	+3.73%
March, 2006	No new signal	Long still in effect	OTPIX	$5,186.30	$5,193.62	+0.14%	+3.87%
April, 2006	No new signal	Long still in effect	OTPIX	$5,193.62	$5,257.84	+1.24%	+5.16%
May, 2006	May 16/ May 25	Cash/ Long	OTPIX	$5,257.84	$4,938.37	-6.08%	-1.23%
June, 2006	June 12	Cash	NA (Cash)	$4,938.37	$4,659.14	-5.65%	-6.82%
July, 2006	June 29	Long	OTPIX	$4,659.14	$4,395.56	-5.66%	-12.09%
Notes: (1) Signal was executed (i.e., fund bought) on the next business day. (2) OTPIX=ProFunds OTC Inv.; SOPIX=ProFunds Short OTC Inv. (3) Cut-off for valuation and account activity is 26th day of the respective month. (4) Account value includes value of fund shares only. Cash in the account, as well as interest earned on the cash, is ignored. Brokerage commissions are paid out of this free cash, and commissions are not included in return calculations. Dividends are reinvested.

Just for fun (?), I went back to May 16, and took a look at where my account would have been at the end of July if I had done exactly the opposite of what Intelli-Timer instructed me to do over the past two-and-a-half months (although, for purposes of this hypothetical, I did follow Intelli-Timer's "cash" signals).....Sure enough, had I gone short (i.e., bought SOPIX) both times Intelli-Timer said to go long (i.e., buy OTPIX), I would now have $5,570.59 in my Intelli-Timer account instead of $4,395.56 -- a 31% improvement on the actual system, achieved by ignoring it.

Here's the performance of my market-timing account compared to the usual FundAlarm benchmarks:

	Current month (6/27 thru 7/26)	Since inception (10/17/05)
Schwab International Index Inv (SWINX)	3.40%	16.74%
Vanguard Small Cap Index (NAESX)	-1.18%	9.39%
Dreyfus Mid Cap Index (PESPX)	-1.06%	8.31%
Vanguard 500 Index (VFINX)	1.53%	8.02%
Vanguard Balanced Index (VBINX)	1.22%	5.53%
Roy's market-timing account	-5.66%	-12.09%

Sorted by return "Since inception"; benchmark returns assume that dividends are reinvested

I think it's now fair to officially designate the performance of the Intelli-Timer system as "disastrous".....And what does the Intelli-Timer Web site have to say about the performance of its system so far this year?.....Basically nothing, since the last signal shown on the company Web site was issued January 29.

[The following item originally appeared in the September, 2006 Highlights and Commentary, and covers activity during the month of August, 2006.]

Roy's Excellent Market-Timing Adventure: Month Eleven: Holy ****, I didn't lose money this month!

August was a pretty good month for the market, and at least this time I was on the correct side of it.....Intelli-Timer didn't issue any new signals for the month, so I ended August "long," the same way I ended July (in this case, as it has been for the entire experiment, a long position is represented by ProFunds OTC Inv, or OTPIX).....Overall, my account increased 4.70% for the month, and it's now down a little less than 8% since inception, as indicated below:

Month	Date of signal (1)	Type of signal	Fund bought/held (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month	Change in acct value since inception
October, 2005	10/16	Long	OTPIX	$5,000.00	$5,080.09	+1.60%	+1.60%
November, 2005	No new signal	Long still in effect	OTPIX	$5,080.09	$5,484.89	+7.97%	+9.70%
December, 2005	11/29	Short	SOPIX	$5,484.89	$5,381.32	-1.89%	+7.63%
January, 2006	No new signal	Short still in effect	SOPIX	$5,381.32	$5,378.51	-0.05%	+7.57%
February, 2006	1/29	Long	OTPIX	$5,378.51	$5,186.30	-3.57%	+3.73%
March, 2006	No new signal	Long still in effect	OTPIX	$5,186.30	$5,193.62	+0.14%	+3.87%
April, 2006	No new signal	Long still in effect	OTPIX	$5,193.62	$5,257.84	+1.24%	+5.16%
May, 2006	May 16/ May 25	Cash/ Long	OTPIX	$5,257.84	$4,938.37	-6.08%	-1.23%
June, 2006	June 12	Cash	NA (Cash)	$4,938.37	$4,659.14	-5.65%	-6.82%
July, 2006	June 29	Long	OTPIX	$4,659.14	$4,395.56	-5.66%	-12.09%
August, 2006	No new signal	Long still in effect	OTPIX	$4,395.56	$4,602.20	+4.70%	-7.96%
Notes: (1) Signal was executed (i.e., fund bought) on the next business day. (2) OTPIX=ProFunds OTC Inv.; SOPIX=ProFunds Short OTC Inv. (3) Cut-off for valuation and account activity is 26th day of the respective month. (4) Account value includes value of fund shares only. Cash in the account, as well as interest earned on the cash, is ignored. Brokerage commissions are paid out of this free cash, and commissions are not included in return calculations. Dividends are reinvested.

Even better than a decent absolute return for August, I gained some ground on every one of the usual FundAlarm benchmarks (see the table below), which is the first time that's happened since -- well, a long time.....However, from the inception of this experiment, I still trail every FundAlarm benchmark by at least 1,500 basis points (15%), which is almost certainly an insurmountable hurdle to clear by October 16, 2006, when this experiment is scheduled to end:

	Current month (7/27 thru 8/26)	Since inception (10/17/05)
Schwab International Index Inv (SWINX)	3.70%	21.06%
Vanguard 500 Index (VFINX)	2.29%	10.50%
Vanguard Small Cap Index (NAESX)	0.48%	9.91%
Dreyfus Mid Cap Index (PESPX)	-0.11%	8.19%
Vanguard Balanced Index (VBINX)	1.81%	7.44%
Roy's market-timing account	4.70%	-7.96%

Sorted by return "Since inception"; benchmark returns assume that dividends are reinvested

In fact, with 51 days to go until this experiment ends, I'd be thrilled just to get back my original $5,000, plus trading commissions.


[The following item originally appeared in the October, 2006 Highlights and Commentary, and covers activity during the month of September, 2006.]

Roy's Excellent Market-Timing Adventure: Month Twelve: Another $105.38 and I break even (sort of)

The Intelli-Timer system hasn't generated a new signal since June 29, so I ended September the same way I ended July and August: On the "long" side of the market, via shares of ProFunds OTC Inv (OTPIX).....And, as you can see below, September was a good month to be long:

Month	Date of signal (1)	Type of signal	Fund bought/held (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month	Change in acct value since inception
October, 2005	10/16	Long	OTPIX	$5,000.00	$5,080.09	+1.60%	+1.60%
November, 2005	No new signal	Long still in effect	OTPIX	$5,080.09	$5,484.89	+7.97%	+9.70%
December, 2005	11/29	Short	SOPIX	$5,484.89	$5,381.32	-1.89%	+7.63%
January, 2006	No new signal	Short still in effect	SOPIX	$5,381.32	$5,378.51	-0.05%	+7.57%
February, 2006	1/29	Long	OTPIX	$5,378.51	$5,186.30	-3.57%	+3.73%
March, 2006	No new signal	Long still in effect	OTPIX	$5,186.30	$5,193.62	+0.14%	+3.87%
April, 2006	No new signal	Long still in effect	OTPIX	$5,193.62	$5,257.84	+1.24%	+5.16%
May, 2006	May 16/ May 25	Cash/ Long	OTPIX	$5,257.84	$4,938.37	-6.08%	-1.23%
June, 2006	June 12	Cash	NA (Cash)	$4,938.37	$4,659.14	-5.65%	-6.82%
July, 2006	June 29	Long	OTPIX	$4,659.14	$4,395.56	-5.66%	-12.09%
August, 2006	No new signal	Long still in effect	OTPIX	$4,395.56	$4,602.20	+4.70%	-7.96%
September, 2006	No new signal	Long still in effect	OTPIX	$4,602.20	$4,894.62	+6.35%	-2.11%
Notes: (1) Signal was executed (i.e., fund bought) on the next business day. (2) OTPIX=ProFunds OTC Inv.; SOPIX=ProFunds Short OTC Inv. (3) Cut-off for valuation and account activity is 26th day of the respective month. (4) Account value includes value of fund shares only. Cash in the account, as well as interest earned on the cash, is ignored. Brokerage commissions are paid out of this free cash, and commissions are not included in return calculations. Dividends are reinvested.

The problem with my timing account this month -- if a return of +6.35% can ever be a problem -- is that most of FundAlarm's other benchmarks also had a good September.....Therefore, on a relative basis, my timing account managed to gain very little ground, and it still trails every benchmark by a huge margin:

	Current month (8/27 thru 9/26)	Since inception (10/17/05)
Schwab International Index Inv (SWINX)	0.05%	21.12%
Vanguard 500 Index (VFINX)	2.89%	14.18%
Vanguard Small Cap Index (NAESX)	3.88%	14.17%
Dreyfus Mid Cap Index (PESPX)	2.86%	11.29%
Vanguard Balanced Index (VBINX)	1.83%	10.21%
Roy's market-timing account	6.35%	-2.11%

Sorted by return "Since inception"; benchmark returns assume that dividends are reinvested

It's pretty clear to me how this experiment will end up next month, but I'll leave the gruesome post-mortem until then.

[The following item originally appeared in the November, 2006 Highlights and Commentary, and covers activity through October 16, 2006, the end of this experiment]

Roy's Excellent Market-Timing Adventure: The End

October 16, 2006 marked the end of my one-year market-timing experiment, using the Intelli-Timer trading system.....Throughout the final (short) month, the system had me on the "long" side of the market, which is where I had been since June 29.....My return for the final month was +4.10%, and that was just enough to push my return-since-inception into positive territory (+1.90%).....In dollar terms, I started the experiment on October 17, 2005 with exactly $5,000, and ended the year with $5,095 and change, as you can see from the chart below:

Month	Date of signal (1)	Type of signal	Fund bought/held (2)	Acct value (beginning)	Acct value (ending) (3), (4)	Change in acct value for month	Change in acct value since inception
October, 2005	10/16	Long	OTPIX	$5,000.00	$5,080.09	+1.60%	+1.60%
November, 2005	No new signal	Long still in effect	OTPIX	$5,080.09	$5,484.89	+7.97%	+9.70%
December, 2005	11/29	Short	SOPIX	$5,484.89	$5,381.32	-1.89%	+7.63%
January, 2006	No new signal	Short still in effect	SOPIX	$5,381.32	$5,378.51	-0.05%	+7.57%
February, 2006	1/29	Long	OTPIX	$5,378.51	$5,186.30	-3.57%	+3.73%
March, 2006	No new signal	Long still in effect	OTPIX	$5,186.30	$5,193.62	+0.14%	+3.87%
April, 2006	No new signal	Long still in effect	OTPIX	$5,193.62	$5,257.84	+1.24%	+5.16%
May, 2006	May 16/ May 25	Cash/ Long	OTPIX	$5,257.84	$4,938.37	-6.08%	-1.23%
June, 2006	June 12	Cash	NA (Cash)	$4,938.37	$4,659.14	-5.65%	-6.82%
July, 2006	June 29	Long	OTPIX	$4,659.14	$4,395.56	-5.66%	-12.09%
August, 2006	No new signal	Long still in effect	OTPIX	$4,395.56	$4,602.20	+4.70%	-7.96%
September, 2006	No new signal	Long still in effect	OTPIX	$4,602.20	$4,894.62	+6.35%	-2.11%
Thru October 16, 2006	No new signal	Long still in effect	OTPIX	$4,894.62	$5,095.09	+4.10%	1.90%
Notes: (1) Signal was executed (i.e., fund bought) on the next business day. (2) OTPIX=ProFunds OTC Inv.; SOPIX=ProFunds Short OTC Inv. (3) Unless otherwise indicated, cut-off for valuation and account activity is 26th day of the respective month. (4) Account value includes value of fund shares only. Cash in the account, as well as interest earned on the cash, is ignored. Brokerage commissions are paid out of this free cash, and commissions are not included in return calculations. Dividends are reinvested.

Offsetting my $95 profit, above, was a total of $119 in trading costs, so I actually incurred a cash loss for the year of about $24 (I made seven trades at $17 each through Scottrade; however, with an account of $15,000 or more, I would have been able to trade at no cost directly through ProFunds).....Also, as I indicated at the outset of the experiment, Intelli-Timer allowed me free use of its service.....Had I been a paying customer, a "personal" subscription to the Intelli-Timer system would have set me back $366 for the year, while a "professional" subscription, at current rates, would have cost me a whopping (ridiculous?) $2,000.

No investment exists in a vacuum, which is why every investment and investment strategy should be evaluated in comparison to other potential uses of the money.....Throughout this experiment, I've been comparing my Intelli-Timer account to the five benchmark mutual funds used in FundAlarm every month, and this is where the Intelli-Timer system has really suffered, as you can see below:

	Final month (9/27 thru 10/16)	Since inception (10/17/05)	$5,000 at inception would have grown to:
Schwab International Index Inv (SWINX)	3.12%	24.90%	$6,245
Vanguard Small Cap Index (NAESX)	5.08%	19.97%	$5,899
Vanguard 500 Index (VFINX)	2.49%	17.07%	$5,854
Dreyfus Mid Cap Index (PESPX)	4.58%	16.39%	$5,820
Vanguard Balanced Index (VBINX)	1.55%	11.35%	$5,568
Roy's market-timing account	4.10%	1.90%	$5,095

Sorted by return "Since inception"; benchmark returns assume that dividends are reinvested

In other words: Had I simply invested $5,000 in FundAlarm's worst-performing benchmark over the past year (Vanguard Balanced), I would have had $5,568 in my account at the end of the experiment, with no additional trading costs or subscription fees to worry about.....At the other end of the performance spectrum, had I invested my $5,000 in Schwab International Index, my account would have grown to $6,245.....Recently, I've been putting almost all of my new equity money into Vanguard Total Market Index (VTI), an exchange-traded fund, and that's almost certainly where I would have invested the Intelli-Timer money had I decided not to conduct this experiment.....In the year since October 2005, a $5,000 investment in VTI would have grown to about $5,850, so that's what I figure Intelli-Timer has really cost me: About $755, or 15%, in lost return ("opportunity cost"), plus trading costs of $119.

When I started this experiment last year, I said the following:

Those of you who've followed FundAlarm for a while know that I've always been a boring, buy-and-hold investor.....I've never been a market timer and, in fact, I've always been deeply suspicious of market-timing schemes.....I remain deeply suspicious of market-timing, but I thought it might be interesting (and, perhaps, instructive) to get some personal experience with a real-world market timing program .....For example, I'd like to know if it's really possible to follow market-timing signals over the course of a year, exactly as they're given by the program sponsor.....Since I'm going to be playing with real money, I'd also like to know how it feels to be ordered in and out of the market by a black box, which I neither understand nor (as of now) have much confidence in.....Finally, and perhaps most importantly, I'd like to know if my gross return for the year matches up with advertised returns for the program, and I'd also like to understand the effect of real-world transaction costs and taxes on published returns.

The Intelli-Timer trading signals came by e-mail, the night before they were supposed to be executed, and I had no trouble executing all of the signals.....I didn't understand the Intelli-Timer system when I started with the program and, to this day, I still don't understand how or why they develop their signals.....The Intelli-Timer Web site takes a few stabs at explaining the system, and Intelli-Timer's weekly e-mail updates would occasionally explain the most recent signal, but I found these efforts to be pretty much incomprehensible.....Intelli-Timer is in a difficult position, because saying too much about its system might enable someone to copy or reverse-engineer it (not much of a concern these days), while saying too little leads to my problem: I never had confidence in the system, especially during the rocky months of May, June, and July.....If I ever participate in another market-timing program -- unlikely -- I would insist on understanding, in detail, how the system works.....And if the sponsor of the system refused to explain how it works, or I didn't understand the explanation, I simply wouldn't invest my money.....As for comparing my investment results to Intelli-Timer's advertised results, the jury is still out.....The performance section of the Intelli-Timer Web site hasn't been updated since January 30, 2006, undoubtedly because 2006 has been such an abysmal year.....But as we move into 2007, it seems that Intelli-Timer will have to either update its results for 2006 or pull the plug on its system, so I'll keep checking and report back here.....After a year like 2006 I don't know how Intelli-Timer can continue to sell its program, but I have a feeling they're going to try.

If there's a final word on my experiment, here it is: Had I simply invested $5,000 on the long side of the Intelli-Timer strategy (i.e., ProFunds OTC Investor, or OTPIX), and held that position for 365 days, I would have ended up with $5,524 in my account, for a gain of +10.47%.....Which means that all the signals, all the trading, all the expense, and all the fuss of the Intelli-Timer system actually subtracted value from a simple buy-and-hold strategy.......That's a tough marketing hole to talk your way out of.