After months of work, I am pleased to announce that the weekly StatSheet has been improved by adding an additional column called the M-Index (Momentum Index). The M-Index represents one momentum number, which you can use to simply and quickly identify the top performing funds/ETFs in any category.

Since it is calculated based on the average of the existing momentum figures (4wk, 8wk, 12wk, YTD), you no longer have to agonize as to which one might be most important factor for your selection process: The higher the M-Index number, the stronger the upside momentum of that fund/ETF. It does not mean that a high M-Index is right for you as it also indicates the most volatility. If you’re more conservative, drop down a number or 2 on the ranking system.

Starting with next week’s issue, all StatSheet tables will be sorted by the M-Index in descending order. Want to have a sneak preview? Take a look at the current ETF Master list featuring 470 ETFs. It is updated through 8/24/07.

Feel free to e-mail me a comment if you like. While I will read all comments, I may not be able to respond to all of them.

Not too long ago, I read Malcolm Gladwell’s bestseller “The Tipping Point.” He defines The Tipping Point as that magic moment when an idea, trend or social behavior crosses a threshold, tips and spreads like wildfire.

He explores the fact that just a single person can start an epidemic of the flu, so too can a small but precisely targeted push cause a fashion trend, the popularity of a new product, or a drop in the crime rate based on three characteristics. One, contagiousness; two, the fact that little causes can have big effects; and three, that change happens not gradually but at one dramatic moment.

Of the three, the third trait—the idea that epidemics can rise or fall in one dramatic moment—is the most important, because it is the principle that makes sense of the first two and permits the greatest insight into why modern change happens the way it does. These are the same principles that define how measles move through a grade school classroom or the flu attacks every winter.

It’s a fascinating book that provides plenty of examples of how previously unknown products have become bestsellers virtually overnight, many of which you will recognize. If this subject interests you, this book is for you; I give it thumbs up.

Mark Hulbert of MarketWatch wrote an interesting story about the Dow Theory issuing a Sell signal at last Tuesday’s (8/14) close.

According to the article, the editor of one of the three Dow Theory newsletters said ‘yes.’ This fact will certainly not make headline news on Wall Street since in principle it goes against the all too ingrained Buy-and-Hold mentality.

The Dow Theory was introduced over a 30-year period at the beginning of the past century in editorials in the Wall Street Journal. While it is subject to a wide range of interpretation, because it was not specific enough, the rules for its use can vary widely.

My point is that even almost 100 years ago some smart individuals realized that there is a time when not being in the market might be a good thing for the safety of a portfolio. Why it has not become a standard by which financial markets operate can only be attributed to other facts. My guess is that it would not serve the best interest of the majority of brokerage firms, and their armies of hundreds of thousands of sales people, who are transaction based, meaning they need to be in the market to peddle product all the time.

If Charles Dow were alive today, he most certainly would have completed the work he started, especially after realizing the negative impact a bear market can have on the value of a portfolio. My guess is that he could have been the most vehement opponent of Buy and Hold and may have provided a much needed objective sense of reasoning in an unreasonable self serving investment world.

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

A quiet but positive bullish week had all major indexes gaining solidly.

Our Trend Tracking Index (TTI) for domestic funds/ETFs recovered and has now moved to +2.85% above its long-term trend line (red) as the chart below shows:



The international index also moved to +1.64% above its own trend line, which puts it back on the positive side.



For more details, and the latest market commentary, as well as the updated No load Fund/ETF StatSheet, please see the above link.

Yesterday’s market bounce, although on low volume, was a step in the right direction. It’s too early to tell if this is the beginning of another uptrend or just a head fake. Many traders are still on vacation and will not be back to their desks pushing buy and sell buttons till after Labor Day. Until then, any moves to the upside or downside may not have much meaning.

The Trend Tracking Indexes (TTIs) are now situated relative to their long term trend lines as follows:

Domestic TTI: +2.30%
International TTI: +0.46%

As you can see, the International TTI recovered and barely broke back above its long term trend line. To avoid a whipsaw, I will hold off making any commitments in that arena until I can better determine if this is a sustainable trend or simply sideways action.

I am looking at some sector opportunities and may make some investments in those areas that have best withstood the recent sell off.

I like some of Paul Farrell’s articles. While I can’t for the life of me agree with him on his investment strategies (hold your coffee house portfolio through any market condition), he wrote a fine piece called “Meltdown ‘inside’ Wall Street’s brain.”

He outlines the self-serving and brain washing acts that come with Wall Street’s manipulation, which I have touched on before in various posts. He offers “seven rules (out of 25) for bull-and-bear predators in a ‘brutal, manipulative’ world.”

While it’s a fun read, his conclusion that you must “redefine the rules of engagement and play the game by your rules,” will leave you wondering what the rules are that you should play by.

In my view, it’s certainly not the trap of Buying and Holding a coffee house portfolio blindly through the next bear market. That would be falling into Wall Street’s self serving trap of staying with a losing investment no matter what. Since most investor’s use mutual funds as their preferred investment tool that means you are still paying the company that loses money for you.

If your preference is ETFs, you won’t be paying anybody, but if you’re ignorant of trends you have nobody to blame but yourself when you get mauled by the bear, unless you have a disciplined exit strategy in place that you will actually execute.