MFTI: Mutual Fund Timing Indicator

Historical values for the MFTI can be found in Section 1 of MKTSTATS.TXT (Market Status Report); the current value is also shown at the top of the Mutual Fund Report, MUTFUNDS.TXT

Mutual Fund Average Score

This value ranges from 0 to 10, with a 0 being a hard 'sell', a 5 being a 'hold', and a 10 being a strong 'buy'. It is an average of the scores of all mutual funds listed in the Mutual Fund Report, MUTFUNDS.TXT

Total (Grail System) Buy%

This is a percentage of stocks/ETFs in the 'buy' state within our Grail System of short-term (swing trading) models. There are always 1,000 models, consisting of both stocks and ETFs, and only those equities are used that: (1) can be accurately modeled, and (2) offer excellent G/d ratios (annualized gain divided by average maximum drawdown). A complete listing of all Grail System signals is contained in the SIGNALS.TXT report, and in Section 4 of the MKTSTATS.TXT report (ETF signals are also shown in Section 3).

95+ Club Buy%

Our '95+ Club' consists of all Grail System models whose 'back-tested' trading accuracy (since 8/16/02) is 95% or greater. The majority of these are ETF models since ETFs are inherently easier to model than stocks. Pertinent Report: SIGNALS.TXT

100 Club Buy%

Our '100 Club' consists of all Grail System models whose 'back-tested' trading accuracy (since 8/16/02) is 100%. Almost all of these are ETF models. Pertinent Report: SIGNALS.TXT

MTI (Market Timing Indicator, also Market 'Temperature' Indicator)

The MTI is calculated in our Preprocessor using methods analogous to that of calculating the temperature of a gas by looking at the distribution of its molecular speeds (Maxwell-Boltzmann Distribution). The 'back-tested' values for the MTI are shown in Section 1 of MKTSTATS.TXT.

LSI/SSI (Long Strength Indicator and Short Strength Indicator)

These are amongst the oldest of our Preprocessor indicators. Larger values for LSI show that Longs are favored, and larger (positive) values for SSI show that Shorts are favored. For a 'buy' interval we would like LSI positive and LSI > SSI; even better is having SSI negative. The situation is reversed for 'sell' intervals. The historical values for the LSI and SSI are shown in Section 1 of MKTSTATS.TXT.

The LSI will range in value from approximately -3.0 (during a severe correction) to a high of 12.0 (during a strong bull market). The SSI will range in value from approximately -4.0 to a high of 8.0 (during a strong bear market). Even during a bull market, the daily fluctuations in the SSI are extremely important and can portend an imminent dip.

TSI (Technical Strength Indicator)

This is the percentage of "tech" stocks (i.e.,the Computer, Electronic, Instruments, Internet, Software, and Telecom sectors) of the entire set of Long holdings currently held by the Preprocessor. It thus gives some information about market rotation into and out of the tech sectors. When this number is dropping then this suggests that interest is waning in the tech stocks and the market may be preparing to shift attention to non-tech stocks. The historical values for the TSI are shown in Section 1 of MKTSTATS.TXT.

TOT, #L, #S

TOT is the TOTAL number of Long positions currently being held by the Preprocessor. This statistic is very useful in that it shows extended periods when more and more Longs are being accumulated ... or being liquidated ... and can provide additional clues as to whether an uptrend, a downtrend, or a choppy market situation exists.

#L is the number of "new" Long positions detected by the Preprocessor. It tends to corroborate the LSI by detecting the amount of new investment activity taking place, and it is highly correlated with TOT since a large value for #L pretty much guarantees that the 'total' number of Preprocessor positions will increase.

#S is the number of "new" Short positions detected by the Preprocessor. This number is normally zero because the preprocessor only identifies 'short' positions during severe bear market conditions. Thus this number is generally only significant when it becomes greater than 0.

The historical values for TOT, #L, and #S are shown in Section 1 of MKTSTATS.TXT.

# (Raw) QQQQ 'buys'

As a prelude to the calculation of the MTI value, the Preprocessor generates 10 'raw' QQQQ signals based upon the holdings in the smallest Preprocessor portfolios (L/1-L/10). During an actual QQQQ 'buy' interval, the majority of these 'raw' signals will be in the Long (L) state, and during QQQQ 'sell' intervals these signals will mostly be in the Short (S) state. The current number of QQQQ 'buy' (L) signals often provides a sensitive indicator as to the 'relative' strength of our bottom-line QQQQ Grail System signal. This information can be seen in the voteqqqq.htm Report.

N-day Neural Networks: NN1, NN3, NN8, CNNI

NN1, NN3, NN8, and CNNI are all 'neural network' signals, and as such they must be interpreted VERY carefully. What we are mostly interested in are 'changes' in these values, rather than in the actual values themselves. NN1 tries to estimate the percentage change in the price of QQQQ 1 day in the future; NN3 tries to predict the percentage change in QQQQ 3 days in the future, and NN8 tries to do this for 8 days in the future. The CNNI (Composite Neural Network Indicator) is the 'average' of 10 such predictions (NN1, NN2, NN3, NN4, NN5, NN6, NN7, NN8, NN9, and NN10).

5 Day Neural Net QQQQ Forecast (e.g., (+++++), (-----), (++-++))

This set of 5 plus or minus signs was once known as the 'QQQQ Weather Report', and (like the NN1/NN10 neural networks) it tries to show whether the price of QQQQ will be up (+) or down (-) over the next 5 days -– and compared to today's price for QQQQ. This is now a 'secondary' indicator since it has been largely supplanted by the NN1/NN10 (and CNNI) neural networks.

Hedging Vector#0, #1, #2

Based on the current MTI value, Hedging Vector #0 tries to suggest the optimal apportionment of equity between Longs and Cash. Hedging Vector #1 is a bit more aggressive since it tries to divide equity between Longs, Shorts, and Cash. Finally, Hedging Vector #2 is the most aggressive of these in that it apportions only between Longs and Shorts. The values for our intermediate vector (#1) are used to calculate the Prudent Hedging Vector (PHV), and also the Market Color Code. Historical values for H.V. #1 (and the Market Color Code) can be seen in Section 1 of MKTSTATS.TXT.

Market Color Code

The Stock Strategist(TM) assigns a COLOR CODE that corresponds to Hedging Vector #1. These color codes are modeled upon the Terrorist Threat Level color codes, except that the order is inverted:

GREEN -- An Investor's Market (the market is trending upward).

BLUE -- A slightly weaker uptrend; Still a rather "safe" market.

YELLOW -- A cautionary signal; Protective Stops should be considered.

ORANGE -- A Trader's market. Anything can happen.

RED -- A "shorting market" (the market is trending downward).

Historical values for H.V. #1 (and the Market Color Code) can be seen in Section 1 of MKTSTATS.TXT.

# of holdings in the L/1 PORTFOLIO: L/1 Holdings

Of the 10 portfolios generated by the Preprocessor as possible trading portfolios (see NEWPICKS.TXT), the L/1 turns out to be the most sensitive. Since it can only hold a single position, it is always perilous to be Long when the L/1 does not deign to hold a position. Note that the L/1 is one of the portfolios on which the 'raw' QQQQ signals are based (the others are the L/2, L/3, L/4, L/5, L/6, L/7, L/8, L/9, and L/10). L/10 is often a very profitable trading portfolios for experienced traders. This number of holdings in each of these 10 portfolios can also be seen in the voteqqqq.htm Report.

QQQQ Day-Trading signal (Class 1 and Class 2)

In the Prediction Table (PREDTABL.TXT) our Class 1 QQQQ day-trading signal is shown in Table II, and it is based upon the 'actual' Open price of QQQQ. The signals range through the following values: ****, ***, **, , ?+, ?-, S, SS, SSS, SSSS. A very strong 'buy' is indicated by a '****' signals, while a very strong 'short' is indicated by a 'SSSS' signal. The ?+ and ?- signals (our least accurate signals) indicate that QQQQ should 'tend' to go up, or down, respectively, but with a level of accuracy that is only on the order of 60-65%.

The Class 2 signal, which is ONLY shown in this document, is our previous formulation of the QQQQ day-trading signal. Since it uses a rather different approach to interpret our Generalized Candlesticks (RaDiSH Transform) and various neural networks, we have decided to retain its use as a 'corroborating' signal for our 'official' day-trading signal (the Class 1 signal shown in Table II).

Prediction Subtables for QQQQ, SMH, SPY, and DIA

In the Prediction Table (PREDTABL.TXT), Tables II-A, III-A, IV-A, and V-A show the expected 'average' price for QQQQ, SMH, SPY, and DIA for the next trading day. This 'average price', H, is calculated as the average of the projected High and Low prices for the day (the midpoint of the candlestick pattern). This is, of course, an extremely difficult thing to calculate accurately. By using this H value, and by comparing them with the latest Close prices for QQQQ, SMH, SPY, and DIA, we can 'guesstimate' whether these equities are likely to rise or fall based on whether their current price lies 'below' the H (midpoint) value, or 'above' it. If the latest Close price is nearly the same as the H value, then this method is ambiguous (providing no reliable guidance).