After a stellar Nov and Dec, the recent collapse in the TMG equity curve during Jan, which was the worst month on record for the NDX, demonstrated to us the critical need for a more rigorous capital preservation strategy. Heretofore, the frequency of trades had minimized the need for stops, but the judicious use of stops would have mitigated the huge Jan downturn significantly. In fact, the largest single loss was due to our failure to follow our own trading rules of entering a required stop of 4% on a 100% margined Long position, and then suffering the additional huge gap down loss when the U.S. markets were closed over the MLK holiday. While the market moves of the last month have been largely event driven (i.e. not in accordance with the markets historical statistical norms and therefore outside the realm of the statistical prediction approach that we employ), a more conservative approach and defensive posture to sudden market moves from whatever the cause was dictated. The signal win rate is still greater than 50% over the backtest period, but when the market reacts to the latest news instead of following its historical statistical pattern, then the system has to be adaptive. Accordingly, a new, comprehensive Stop strategy has now been implemented, including Loss, Profit, and Gap Stops, which minimize the damage of unexpected, random market moves from whatever the cause and take better advantage of the intraday opportunities presented by the high volatility conditions that have been prevalent periodically starting last summer. Contrary to the assertions of some detractors, we have never claimed or otherwise represented TMG as the Holy Grail. The system has been as rigorously backtested as we are capable, and the results are what they are, but if you do not understand the nature of statistics and the limitations of backtesting as it relates to live performance, then you should not be engaged in trading. There is no guarantee, of course, that these most recent changes will produce a better result going forward, but the backtesting, which is all we have, is so far encoraging. What has occurred in the past is history and is not representative of the currently optimized algorithm. With the ugly equity curve of past versions still visible, we doubt that there will be much new interest, but if you are a former subscriber, we are not asking that you take anything on faith, only that you keep an eye on us and see if the recent changes make a difference going forward.

Effective 4/1/03, the enhanced TMG signals will be traded under the TMG II system name. Thank you for your continued interest in TMG. - Jerry (Capt J)