Methodology
Simple, published rules. Applied the same way every day.
The idea
No single indicator tells the whole story. The Scorecard stacks six common, well-understood market signals and adds them up. When most of them agree, the regime is clear. When they disagree, the Scorecard says so.
Scoring
- Each of the six signals scores +1 (supportive), 0 (neutral) or −1 (weak).
- The six scores are added for a total between −6 and +6.
Risk-OnTotal of +3 or higher
CautiousTotal from −2 to +2
Risk-OffTotal of −3 or lower
The trend guardrail
If SPY (the S&P 500 ETF) closes below its 200-day moving average, the regime cannot be Risk-On. Any Risk-On reading is capped at Cautious. A strong short-term bounce inside a long-term downtrend is treated with care.
The six signals
| Signal | What it measures |
|---|---|
| S&P 500 trend (SPY) | Where the S&P 500 ETF sits relative to its 50-day and 200-day moving averages. |
| Nasdaq-100 trend (QQQ) | The same trend read for the Nasdaq-100 ETF, the growth and tech-heavy side of the market. |
| Breadth: % above 50-day | The share of S&P 500 stocks trading above their own 50-day average. Are most stocks participating? |
| McClellan Oscillator | A momentum gauge built from daily advancing versus declining issues. |
| Volatility (VIX) | The market’s expected volatility. Calm, normal or stressed. |
| Sector participation | How many of the 11 S&P 500 sectors are trading above their 50-day average. |
Data
Market data comes from Yahoo Finance and is calculated from daily closing values. Data may be delayed, revised or occasionally wrong.
What the method is, and isn’t
- Mechanical. The score comes straight from the rules. No discretion, no judgment calls.
- Not optimized. Thresholds are set to sensible, conventional levels, not tuned to fit past data.
- Not back-tested. No historical performance is claimed or implied.
- Descriptive. It describes current conditions. It does not predict the future or tell anyone what to do.
See the disclaimer for important limits on how this information should be used.