THE STOCK MARKET MODELER(tm) (c) 2008-10 Dr Jeff Software(tm) ============ USER'S GUIDE ============ THREE PROGRAMS IN ONE The STOCK MARKET MODELER(tm) product contains 3 separate programs, each operating in its own "form" (window): 1. Stock Market Analyzer -- for analyzing the overall market 2. Sector Cyclotron(tm) -- for tracking sectors 3. Stock Tracker -- for tracking individual stocks The STOCK TRACKER(tm) is available as a separate subset product for those only wishing to track individual stocks. BASIC OPERATION The main window ("form") for the STOCK MARKET MODELER(tm) (SMM) should open with a momentary blue title block -- just "click to start". The other two forms/windows can be started from the "launch" area buttons on the lower right corner of the main window. All three windows can be used conventionally: minimize, restore, close, resize, reposition, etc. Only the main window must remain open; once main is closed, all windows will close. Moreover, any number of forms 2 and 3 can be launched, to support simple extensibility for larger numbers of sectors or stocks. Any window can be printed. All operations of SMM are based solely on user input (and the PC calendar) -- as there are no online connections for Dr Jeff products (intentionally, for security). User supplied data can be saved and restored at any time via menu commands, and for any number of instances (i.e., any number of files). FEATURE: COLOR CODING There is extensive use of traffic light (red, yellow, green) color coding of most displayed values, including multiple levels of red and green as visual intensity indicators. Color coding is consistent throughout all 3 forms -- with RED indicating a SELL signal; YELLOW indicating a NEUTRAL signal; and GREEN indicating a BUY signal. STOCK MARKET ANALYZER FORM ========================== The "Stock Market Analyzer" in turn contains 3 independent models: 1. Market Forces -- 10 independent "forces" 2. Technical Levels -- index levels of the DOW, NDAQ, S&P, BKX 3. Calendar -- seasonal, daily, Holidays, quarter-end and option expirations (with pres. election years factored in) OUTPUT: Market Index The "Stock Market Analyzer" calculates a singular value for each of the 3 models. It then combines these 3 values into a linear user-weighted average (mean) of the 3 models to produce its main output: a singular "Market Index" useful as a "market index" of one's own creation -- with a range of (-100 to +100). Since the Overall Market Value is a complexity of constituent values, the value changes slowly with any one parameter change. An analogy would be like a watch: "Market Index" is like the hour hand, controlled by a big gear which moves slowly, being turned to and fro by the many movements of much smaller gears (user clicks on counters). Moreover, since both positive and negative market forces are provided, the Market Index can be either positive or negative -- with the implication being exactly that: positive or negative (bull or bear). OUTPUT: Tomorrow Value Additionally, a "Tomorrow" predictor value is calculated from the "Calendar" section "Day" value, the OMV, and a dedicated "Days U/D" cycle counter -- producing a range of -10 to +10. This value is solely a historical and cyclical computation indicating the prevailing calendar forces acting on the next day's market. CAVEAT: NO OUTPUT IS INVESTMENT ADVICE, AND ALL DATA ARE USED AT YOUR OWN RISK. MARKET FORCES Model The "Market Forces" model identifies, weights and valuates the top 10 forces acting on the stock market as a whole. The user adjusts the weights, and provides all valuations subjectively. This model is a market "electronic spreadsheet," in that it supports "what if" conjectures. Simply change a few parameters, and instantly see how it affects the market. Market Force Values The "values" (range of 0-100) of the Market Forces model are subjective user estimates, with the value selected representing a percentage of a parameter's normal range -- with "0" indicating a non-existent force, "50" a neutral force, and "100" a strongest possible force. Moreover, the Market Forces "value" is normalized to 0 for the default settings of all forces set at 50 (neutral). The "Volatility" parameter is related to the "VIX" (Volatility Index), and thus has its value recomputed with each change in the VIX value (user supplied by entering a stock symbol of "$VIX" for a quote). This MF parameter is the only one allowed to exceed a value of 100 (reached at VIX=40, with max at VIX=60). The "Oil/Energy" parameter has a correlation reversal checkbox. Oil prices and the market do correlate, but the correlation reverses from time to time. Oil prices usually move opposed to the overall market, in the long term, but at times (when observers notice that the oil stocks are a large part of the market) this reverses, and they move in the same direction -- for a short term. This phenomenon is modeled by the "Reverse" checkbox. This toggles the polarity of the effect of the Oil/Energy force (notice the "sign" change). Strengths The "strengths" (0-10) are linear weights applied to parameter "values," which in turn produce a single value for each of the 3 models (sections) -- which in turn results in a single "Market Index" being calculated. The Market Index does indeed change with every user click, albeit by a very small amount -- not always observable upon small changes. Keep clicking any counter until the change in the Market Index becomes observable. Note that any of the 3 models can be eliminated from the Market Index by simply setting its "strength" to 0. Likewise, any one model can be isolated as the only source for the Market Index by setting the other two models' "strengths" to 0. TECHNICAL Model The "Technical Levels" model provides bracketing (support and resistance levels) of the 3 major market indices: Dow Industrials, Nasdaq and S&P 500; plus the all important "BKX" (see below) financials index. This model requires the user to input all 4 index values. However, this model also offers "what if" conjectures -- by simply changing any index parameter and seeing the result on its model value, and on the "Overall Market Value". Special Technical Factors The following technical indices with heavy impact are factored in: 1. $VIX (Volatility index) - directly impacts the "Volatility" market force 2. $BKX (Philly Bank index) - 1/4 technical levels directly factored CALENDAR Model "Calendar" is the only model that is fully automatic, gathering the day's date from the PC, and computing values for the quarter, month, week (in month), and day -- combining historical data with empirical data for a normal or "special" day. "Special" days supported include all of the following: market holidays, option expir- ation Fridays (including "triple witching"), and quarter ends. The model additionally supports the day before and after these special days. This model utilizes 2 user-provided parameters: "Monday" and "Yesterday" -- both of which are factored into the computed value for the "Day". In other words, the "Day" value is updated based on the additional information of what the market did on the Monday of the week, and the day before (as a single level of up or down, using 50-year historical "next-day" data). The "Monday" value should be entered once for each week. On Monday itself, the user should use the current day value itself, if available. If not (early in the day), the previous Monday value can be used (as a predictor of the current Monday). The "Monday" value should be updated after the end of the trading day on each Monday. Each Tuesday is considered a "turnaround" day, etc. for the week. Also, on Tuesdays the "Yesterday" value is redundant to the "Monday" value. Thus, the program will force a zero "Yesterday" value, while ignoring it. (Likewise, on Monday holiday weeks, this applies on Wednesday instead.) For holidays that occur on Mondays (MLK Day, Pres. Day, Memorial Day, Labor Day, and any holiday that happens to fall on Monday), the "Monday" label is automatically adjusted to read "Tuesday" -- which replaces "Monday" as the week's starting or "anchor" value. Continue to use the previous "Monday" value until the end of the trading day on Tuesday, then update it. Finally, for such short weeks, day values are computed on an averaging basis (i.e., Tuesday acts somewhat like the 1st day and somewhat like the 2nd day of the week). DATA ENTRY Most data fields use up/down counters to change values. However, any data field can be typed into directly (to save time); but, up/down counters do not register (recognize) the new value until one of its arrows is clicked. Moreover, the Sectors and Stocks forms each have a data field that is supported as being updated en masse, via a "Register" or "ENTER" button; i.e., data values are not actually entered into the program until its field's register button is clicked. SMM DATA GUIDE Dr Jeff publishes an updated user "Data Guide" on the SMM product web page, which provides an updated baseline set of suggested current Market Force and Technical Levels values based on current conditions. These values will be adjusted frequently, as conditions change. Additionally, Dr Jeff provides for the full product a sample data file for each form -- which can be directly loaded into the program with the "File.Open" command. Dr Jeff encourages users to experiment with their own set of values, and perform "what if" conjectures. SECTOR CYCLOTRON(tm) FORM ====================== The "Sector Cyclotron(tm)" is the all-important tracker of 15 major sectors, including 3 "Commodities" (includes energy, metals), 4 "Tech" and 8 "Others". User inputs daily up/down performance, to track cycles. The idea is that traders would play entire sectors via their ETFs (e.g., GLD, SLV, IAU for "metals"), or play individual stocks within a sector. The user may choose to "identify" each sector however one wishes. (There currently is no provision for subdividing sectors.) This form supports the tracking of sector cycling for 1-day, 2-day or longer sector plays. Sector tracking is often useful for timing entries and exits for any stock in a particular sector. For example, "steel" and "gold" often exhibit regular multi-day cycles. This simple form uses up/down counters to track how many days in a row each sector has gone up or down. The user sets the expected cycle length (as a "limit"). The program then compares the cycle length to the user-set limit, and sets a color signal for BUY or SELL. Each day the user enters a subjective value of 0, +/- 1 or 2 for each sector -- representing no change, up or down (a little or a lot). When done, the user clicks the "Register" button to record all of the day's values into the "Days Up/Down" column. The values should be saved into a file via the "Save As" command, and restored each day via the "Open" command. Multiple value sets are supported by simply using multiple files (saved and loaded). These same 15 sectors are included in the Stock Tracker form (Form 3). STOCK TRACKER(tm) FORM =================== This form supports your overall trading radar by keeping track of relevant data on "individual" stocks -- the most common activity associated with stock trading. Each form provides room for user input on a dozen (12) stocks. Additional stocks can be accommodated by either by launching more forms (multiple forms active), or simply by using multiple data files (via "Save As" and "Open" commands) on one form. Each form includes the following (with appropriate color codings): -stock name -signal (color-coded buy/sell) -sector (to couple in sector cycling) -stock pattern (e.g., buy rating, ETF, cup & handle, Elliot wave or "none") -term (day, week, month, quarter, year) -price field: current, bracketing support/resistance, entry/exit -cycles (similar to sectors) -forces (overhead resistance, short interest, buyback, merger spec.) Each stock's buy/sell "signal" is determined by the "price field". A current price <= the "support" and/or "entry" prices gives a BUY signal; and if not, then current price >= "exit" and/or "resistance" prices gives a SELL signal. All stock related values can be entered via the "ADD" button, and changed or added later via the "EDIT" button. The price field can be edited at any time, but values are not recorded until the "ENTER" button is hit (allows for speedy data entry at day's end). Note that no data is "saved" in a file until the "Save As" command is used, and data is loaded via the "Open" command. Each stock also includes "cycles" and "forces" entries with their own separate color signals. These values are independently entered/operated. The "Forces" provided are the most commonly affecting share prices, and they are defined as follows: 1. Technical Indicator -- users may track any number of such indicators, and click counter to flag occurrences (up to 3). 2. Short Interest -- a value of 3 would indicate largest short interest (80-90%). 3. Buy Back -- indicates level of company stock purchase programs in effect. 4. Merger Speculation -- use to track level of such speculation. APPLICATION NOTE 1. Shorting Dr Jeff recommends treating "short" sales similar to any other "sales" -- use the "sell" signal generated by the Stock Tracker. If a given stock is worth selling due to new negative news or analyst downgrade, then it MAY also be worth going short. If a given stock is worth selling due to simply reaching one's exit price or resistance level, then it may also be a short candidate (but further analysis is highly recommended). 2. Breakouts A stock may also become a "short" candidate when it breaks through its support level. The Stock Tracker will switch signals from "Buy" at or near support level, to "Sell" after a stock breaks support. Similarly, a stock may become or remain a "long" candidate when it breaks through its resistance level. The Stock Tracker will switch signals from "Sell" at or near resistance level, to "Buy" after a stock breaks resistance. The threshold for this buy/sell switch in practice is highly intuitive, and Dr Jeff reserves the right to fine tune this parameter from time to time (in new versions). ==================== ERRORS, BUGS, ISSUES ==================== ERRORS 1. Error message: "missing .dll files" Your PC does NOT have the "Microsoft.NET Framework" adequately installed. 2. "Demo Alert!" messages are not errors. This is to warn you that you are using a "Demo" version, and the operation is not supported. 3. "File Alert!" messages are not errors. This is to report that the "Help" file requested cannot be found in the same folder as the program, or that the data file to be "Opened" is not valid for the specific form. KNOWN BUGS 1. Printing 1.1 Older versions (such as 1.1) of .NET Framework may cause this symptom: partial overlays of printer dialog box onto printed form. Workaround is to drag the printer dialog box out of the form print area before executing the final "print" command. 1.2 Printer default is "portrait" orientation, which causes a small clipping off the right end of the Stock Tracker form. .NET Framework does not seem capable of supporting a change to "landscape" orientation (although users may try). ============ DEMO VERSION ============ The STOCK MARKET MODELER(tm) "demo" version is sub-functional: All the menu commands are disabled, except for the HELP commands. All other functionality is preserved. Note that load/save are disabled. This implies that SMM will start in the same default state each time. The real usefulness of SMM is being able to save your changes, including current prices, targets, values, etc. -- features available only in the full product. Otherwise, the STOCK MARKET MODELER(tm) demo version operates and functions just like the full version. ======== VERSIONS ======== 1.0 Original release - 6/2009 1.1 Modified method of calculating "Tomorrow" value - 4/2010 ========= ***WARNING: THIS "USER GUIDE" FILE NAME SHOULD NOT BE CHANGED (else the file will not be found). If the file cannot be found, make sure it is located in the same folder as the program, and is named: "SMM-user_guide" TO CLOSE: if online, click browser BACK button; if running program, CLOSE this window LAST EDIT: 4/19/10