We maintain two timing monitors, the PowerStocks Market Monitor (MM) specifically for the All-Share Index (ALSI) and the PowerStocks Share Timing Monitors (STM's) for individual shares in the portfolios of the strategies we track.

The MM is shown as a graphic on our front page, depicting the proportionate status of the JSE shares universe per Momentum Score. The STM's for individual JSE shares are shown purely as Momentum Scores.

MOMENTUM SCORE
The Momentum Scores are a measurement of short-term market momentum (trend support) for a share. It is there to assist you time purchase and disposal of shares in your mechanical Strategy Portfolios.  The score is derived from the daily price the "snapshot" was taken and the ten MA(10) and twenty MA(20) day moving averages, and can be interpreted as follows:

0 : Price < MA(10) < MA(20) | Indicates downward trend
1 : MA(10) < Price < MA(20) | Indicates short term upward support
2 : Price < MA(20) < MA(10) | Potential medium term support reversal
3 : MA(10) < MA(20) < Price | Strong spike, potential medium term support
4 : MA(20) < Price < MA(10) | Consolidation and/or medium term support
5 : MA(20) < MA(10) < Price | Surge with strong short & medium term support.

To download a table of JSE shares, broken up into sections of shares that fit into the above 5 categories as of the 20th mAY 2009, click HERE.

For example on usage, say you are tracking a Strategy Blog and see a share now qualifies for inclusion in your favourite strategy because of its fundamentals or some other reason. You may want to have a look at the STM for the share to decide if you want to purchase. If the share's STM is 0, it is an indication the share is still experiencing significant downward momentum and you may want to wait for some short term (1) or medium term (2) support signal before making your purchase. This not only lowers your risk but might mean you can get the share at a better price. The below table shows how the STM appears in a typical Strategy Portfolio share list.


Be warned though that waiting for high STM triggers can lead you to missing the bulk of a shares initial upward move, especially with undervalued issues which spike very quickly when the market cottons onto them, which could lead to an impairment of medium term gains. The indicator is best used to determine if the share is in a downward trend, with shares with scores of 0 to be avoided at all costs as they are likely to decline further. If the share you are looking at had a strategy trigger comfortably below a threshold (such as Price/Book) and has a STM score of 1 and above, our tests and observations with the value strategies have shown you are better off in most instances to make your purchase straight away.

We have just completed an analysis of a timed versus untimed buy strategy over at the Piotroski Strategy Blog, where we show that the risk adjusted returns for untimed are superior to the conservatively timed. As a side note, both the timed and untimed Piotroski's are giving the ALSI a good walloping!

COMBINED USE
It is useful to use the STM and MM together at times. For example say a Strategy Blog says you can now include a new share that has passed a screen and you see it has an STM of 1. You can go and look at the MM to see what the general market is doing as this will probably impact short term movement of the share as well. If the MM is in a FEAR cycle (high percentage of shares in downward cycle), a purchase could be tricky as you are in a waterfall decline on the market. If the market has formed a base or in the initial rise phase then your share will probably be dragged in the slipstream.

USING MM & STM WITH YOUR PORTFOLIO TRIGGERS
Note that depending on Strategy type (Value, Growth, etc.) shares trigger Strategy Portfolio Alerts only when : 1. The price drops significantly to breach a value threshold (Price-to-X)
2. Results have been announced that change the fundamentals used in screens
3. The price rises significantly to breach a relative strength threshold (Growth)

You need to take the above into account when using the STM and MM to make your purchase decision. For example say you get a Piotroski Trigger about a new shares' inclusion. These are very rare, so you rush and check if its because a price drop has resulted in a Price/Book ratio dropping below 1 or some results being announced. If its because of a price drop (more common), you may want to pay more attention to the MTM together with the STM score and investigate the shares fundamentals further. However if its because of a recent results announcement(less frequent but not uncommon), then provided the STM is > 0 our advice is to climb in immediately as 7 times out of 10 these shares spike dramatically within 1-2 weeks especially if they are undervalued (as Piotroski issues generally are).
 
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