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

HOW THIS SITE WORKS


Each page category includes a number of different indicators. For each indicator, there’s a “filter rule” for when to be out of the market. In the spirit of simplicity, the filter rule is always binary dictating either 100% long exposure to the S&P or a 100% cash position. The S&P is represented by State Street’s SPY ETF. Let’s dive into an example graph.

The above graph is of the price momentum indicator on the Technicals page. The bottom portion plots the momentum metric over time and the top portion plots the historical performance of following the filter rule.

METHODOLOGY

The website is updated each weekend. For each indicator, new data is used to generate a long SPY or cash position for the next week. For the momentum example, SPY’s dividend-adjusted close as of Friday is the main input. Using this, I calculate the 12-month total return. For each indicator on this site (except for the macro data), I take a 4-week average of the main indicator input. So for this example, I’m taking the 4-week average of 12-month total return momentum. Why four weeks? To reduce false positives and whipsaws when an indicator is bouncing slightly above or below its filter rule. There’s nothing special about a 4-week average. You could use two or eight weeks and reach similar results.

Data is compiled as of Friday’s close. Buying or selling decisions occur on Monday’s close. I do this, as opposed to making trades at Monday’s open, simply because I had a more reliable data source for dividend-adjusted close data. It’s also important to reflect realistic transaction costs. Each historical performance graph factors in a $10 trade commission and a 0.02% spread on SPY for each buy or sell. Commissions and spreads are lower now, but considering SPY started in 1993 I chose to use these above-average numbers.

Each graph shows data as of each Monday. So for example, look at June 30, 2014 in the momentum graph. As of that Monday’s close the Momentum Filter portfolio had a value of $925,560 and the B&H portfolio had a value of $600,836. The 23.1% momentum metric you see is that weekend’s value for the upcoming week. So at the close on Monday June 30th you would have stayed invested for the following week. This is because the filter rule for momentum is to be invested if the 4-week average of SPY’s 12-month total return is above 0%.

REGARDING MACRO INDICATORS

Macro data is unique in that 1) most of it is released monthly, as opposed to weekly and 2) there’s a lag you have to incorporate to realistically base a trading model off of it. Check out the below example using the unemployment rate.


Unemployment rate data is typically released on the first Friday of the month. So there’s no way to use April’s unemployment rate in April since it isn’t released until May. Each Macro indicator has logic built in that reflects the time lag. Also, since macro data is lower frequency in nature I choose to base macro filter rules off of the most recent indicator value as opposed to a 4-week average.

MISCELLANEOUS INFO

For each indicator, I cite relevant historical research or articles that I found interesting. Additionally, I outline 1) the filter rule 2) the current indicator reading and 3) exactly where I got the data. Each filter rule is not meant to be some over-optimized metric that backtested the best. I forget who said it, but a high historic Sharpe ratio is probably a good sign of future strategy failure. The graphs and filter rules are solely meant to give you a quick rule of thumb for that indicator.

For time periods when an indicator doesn’t meet its filter rule and is out of the market, I deliberately show no return. Yes, rotating into short or long-term Treasuries would have gotten you higher returns. Again, I tried to keep things as simple as possible.

Finally, check out the Composite page. It’s the actual “model” of the website. The model incorporates data about all of the individual indicators to arrive at a composite long SPY or cash position.

I hope you find this website useful. Please don’t blindly follow any indicator or the composite model. If this site helps you cut your research time down by aggregating a lot info in one place, I’ve done my job. Do let me know if you’ve got any questions!

SITE INFO

All data on Simple Stock Model is refreshed each weekend. The site has been updated to reflect data as of 10/6/2017



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

Click the images below to go to my other websites.