Richard Shaw's  Instablog

Comparing the charts for multiple funds can be challenging.  Visual memory is fleeting, and the sheer information complexity of chart patterns poses the problem of what and how to compare on the charts.

To reduce the extent of those problems, we collect 15 data points from each chart and post them in a table, then color code them red or green to aid in scanning the table.  By that method we can compare dozens of charts in a standardized way that is completely beyond our visual memory capabilities.

We call that table, our “TechCheck&rdquo... While the TechCheck is the beginning, not the end of exploration, it really helps manage time and focus attention.

The 15 data points are based on the price and four simple moving averages (5-weeks, 10-weeks, 20-weeks, and 40-weeks), and are divided into four types:

• Reference Trend Line Direction (40-week moving average)
• Positions of Signals Relative to Reference Trend Line (price, 5-week, 10-week and 20-week moving averages)
• Direction of Signal Moving Averages (5-week, 10-week and 20-week)
• Positions of Signal Averages Relative to Each Other.

The Reference Trend Line is either going up or down.  That is a primary fact.  The Signals are positioned either above or below the Reference Trend Line.  Those relative positions are also primary facts.

The Signal averages are themselves either going up or down.  Those are important secondary facts.  The Signals also have a positional relationship to each other (one being greater than the other).  Those too are important secondary facts.

The table below (as of Friday May 15, 2009) for 10 important asset categories shows how we display the data points for easy visual scanning.

[images at QVM site]

To a certain degree the table is self-sufficient to point to better and worse opportunities.  However, to make it more useful, we add a proprietary scoring system that helps us decide what percentage of our ultimate allocation to each category or fund should be invested at the time the chart is assembled.  We update the chart weekly, and assess risk commitments accordingly.

[... continued at QVM site]

[Securities analyzed in this article: SPY, EFA, VWO, VNQ, DBC, BND, MUB, BWX, EMB, UUP, IEF, TLT, MBB, LQD, JNK, TIP, VCVSX, MUB, VWSTX, VWITX, VWLTX, VWAHX, EWJ, EWG, EWF, EWP, FXI, EWZ, IFN, RSX, ECH, TUR, ISL, THD, EWW, EZA, EWU, EWC, EWH, EWT, EWA, EWS, EWM, XLB, XLE, XLF, XLI, XLK XLP, XLU, XLV, XLY]

Richard Shaw
QVM Group LLC

Disclosure:  We own some of the securities mentioned in some managed accounts.