Simple Stock Model aggregates financial and economic data so that investors can easily form a comprehensive data-based outlook on the market. This is a completely free resource provided by Movement Capital

THE COMPOSITE MODEL

Long before this was a website, a big goal of mine was to build a model that analyzed a variety of different short-term indicators. Think of each indicator as a building block that helps form an overall opinion. One study might say current sentiment has historically been bullish for stocks. Who cares, that’s just one data point in isolation. I’m interested in a bigger picture view with more context. A picture that also factors in what’s going on with macro data, interest rates, etc. The composite model does just that.

Here’s how it works: each indicator is given a score of 1 or 0 depending on its current reading relative to its filter rule. If S&P earnings are down over the past year and the filter rule for that metric is to be out of the market if yearly earnings growth is below 0%, then that indicator gets a 0. The table below summarizes data from all the previous pages and assigns a 1 or 0 to each indicator based on its current reading.

TechnicalsSentimentRatesMacro
Momentum1AAII Survey1Yield Curve1Industrial Production1
Trend1SPY Shares Outstanding1High Yield Spreads1Retail Sales1
Best Six Months0NAAIM Exposure Index0TED Spread1Unemployment Rate1
FOMC Drift0CBOE Put/Call Ratio1ISM PMI1
Buyback Blackout0Spot VIX Trend0Housing Prices1
NYSE Margin Debt1VIX Futures Curve1S&P 500 EPS1
ISEE Call/Put Ratio1

All 22 indicator scores are averaged to form the composite score. If the composite score is greater than 0.6, the model is invested in SPY. Buy and sell rules follow the same methodology as outlined in the “How to Use” page. Think of 0.6 as the overall filter rule for the composite model. There’s nothing special about 0.6. It results in being invested in SPY about 2/3 of the time. I could have used a higher filter rule like 0.75 to only be exposed to the S&P when more indicators are saying to be invested, but this results in less time exposed to the market since it’s a “stricter” cut-off. The charts below plot each individual category average score and the overall composite score.


The current composite score is 0.77.

You might wonder why some category averages look different in earlier time periods. This is because data became available for indicators on different dates. For example, the sentiment category solely consisted of the AAII survey until 2002. After 2002, the ISEE call/put ratio became available. Then in 2004 put/call data from the CBOE and spot VIX data became available, so the sentiment category began to incorporate more than just those two indicators. All of the technical and macro data was available since 1994.

The composite model is solely meant to serve as a dashboard of sorts that summarizes the state of all the individual indicators. If you do find the composite model useful, shoot me an e-mail and let me know.

SITE INFO

All data on Simple Stock Model is refreshed each weekend. The site has been updated to reflect data as of 6/19/2017



CONTACT ME

If you have any questions about this site or any of the indicators it covers, send me an e-mail at adam@movement.capital

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