Decision Moose
The FAQs
The FAQs

The answers to Frequently Asked Questions (FAQs) are grouped below. Find your question, then click on it.

Questions About the Website

What's this site about?

What's the Moose Club?

Why charge so little for the Moose Club?

Why publish a free signal?

When is the best time to check the website?

Do you sell visitors' names and email addresses?

How do I change my password, username, and/or email address?

Are you being paid to mention ETFs or brokers?

Do you invest in the securities you mention on the site?

Questions About Investment Strategies

What are my basic strategic options?

How Do I decide which strategy is best for me?

Why do your strategies use funds instead of individual securities?

What funds work best in a portfolio?

How many funds should I have in my portfolio?

Which is makes more sense-- market timing or buy and hold?

Which costs more-- market timing or buy and hold?

Which is more work-- market timing or buy and hold?

Which outperforms-- market timing or buy and hold?

Which is riskier-- market timing or buy and hold?

Should I expect similar returns to those on this site?

What other factors may have an impact on my returns?

Questions About the Free INDEX MOOSE Signal

What are Decision Moose and INDEX MOOSE?

How does INDEX MOOSE work?

Why has INDEX MOOSE performance lagged since 2010?

How does the INDEX MOOSE treat switch signals?

Why invest 100% in one asset at a time?

Why use the specific funds in INDEX MOOSE?

Do I have to use the funds in the model?

Where can I find out more about INDEX MOOSE funds?

What's a long-only model?

Would a short-and-long model do even better?

Should I act immediately on a switch signal?

Should I buy an asset when the signal is "HOLD"?

What are INDEX MOOSE’s stop triggers?

How much money do I need?

Terminology Questions

What's a margin account?

What’s the "Fed Check"?

What’s the Interest Rate Indicator?

What's with the ranking table on the Moosecalls Page?

What‘s benchmarking?

What’s the Sharpe Ratio?

What do "Bullish" and "Bearish" mean?


This site is about demystifying the investment process and helping you develop a personal investment strategy that fits your situation. The site has promoted market timing for 20 years, but does not suggest that timing should become the sole focus of your investment strategy, only that if you dismiss it entirely you may be missing something. The site demonstrates INDEX MOOSE, a relative pricing model that uses exchange traded index funds to time the markets. The weekly INDEX MOOSE signal is provided free of charge. Its performance is tracked in real time, and compared both to benchmark and to other investment strategies.

Trivia: Decision Moose is named for a cartoon character created by the model's author while earning his MBA and publishing the campus newspaper at Harvard Business School.


For a modest fee, readers can also join the Moose Club, an online newsletter covering global financial markets. The Moose Club is the premium content area of the site-- an online newsletter covering current global conditions in stocks, bonds, and commodities, coupled with a weekly email summary/ reminder. The site and content are provided by Quant$treet Corporation, a privately held, limited liability Maryland corporation (est. 1989) engaged in financial publishing. It has no affiliation whatsoever with financial services being marketed at (2010). William Dirlam is both the author of this site and the president of Quant$treet. Dirlam holds a Masters in Economics from Georgetown University and a Harvard MBA. He has forty years in banking and finance in both the public and private sectors.


This entire website was free until scammers cloned it several years back and started selling the content at $200 per subscription. Protecting copyrighted material requires the ability to show economic loss in the event it is stolen, so I began charging a nominal fee for the newsletter. The average newsletter competing with Moose Club may be four to eight times more expensive, and provide inferior insight, but every business has to make its own pricing decisions. The Moose Club's goal is investor education-- reaching as many people as possible in an affordable way. So let's just say I'm generous. Folks who surf the net for financial help are a more hands-on, do it yourself demographic with smaller portfolios than those who can afford professional money management and high priced newsletters.


The INDEX MOOSE signal has always been free. I’ve kept it that way to attract people who are interested in market timing to the site.


Mooseclub members can check after receiving their reminder email each weekend. Those following the free signal have to remember on their own. It is updated before the open on the first day of trading every week, and has been since 2003.


No, we do not sell, rent, or lease your personal information to any third party companies. Moreover, we secure your personal information from unauthorized access, use, or disclosure. The personal information you provide is maintained on computer servers in a controlled, secure environment, protected from unauthorized access, use, or disclosure. When personal information (such as a credit card number or personal data to join Moose Club) is transmitted to other websites, it is protected through the use of encryption, such as the Secure Socket Layer (SSL) protocol.


Unfortunately, your subscription username and password cannot be changed. (Cheap security software is one of the reasons this newsletter is so inexpensive.) If you forget either, both can be accessed online through a link at the bottom of the confirmation email you received when you subscribed. Failing that, just email me and I'll send you your security info. Changing your email address also requires that you contact me directly via email.


No. No one associated with this site receives remuneration (hard or soft) from any fund provider or brokerage house for being mentioned here. Moreover, this site does not accept any advertising, insuring an independent viewpoint.


Yes, we do occasionally invest in the funds in INDEX MOOSE or those mentioned elsewhere. Since we're primarily following index and sector funds, however, it is virtually impossible for concerted action by our readers to move asset prices.


Strategies come in three basic flavors-- active, passive, and combinations of the two (active/passive). Our three basic ETF investment strategies are called— passive diversification (diversified buy and hold), active targeting (market timing), and dynamic diversification (timed diversification). They are explained more fully on the Demoostify page.


Knowing your ability and willingness to accept risk is one of the first steps to solid investing. We provide a self-administered questionnaire to help in that regard. In addition there are a number of interactive websites that can help you delve deeper into your risk profile. You'll need at least a moderate tolerance for risk for active targeting strategies. As an example, since May 2000, INDEX MOOSE’s largest one-week drawdown is 10.9%. The largest uninterrupted drawdown is 13.2% over three weeks. (The S&P500’s largest one-week drawdown during the same period, by the way was 19.8%, and its largest extended decline was 56%.)

While such declines are rare, it takes considerable "coolness under fire" to watch 10-15% of your assets evaporate in less than a month and stick with the program. Hence I added stop-loss targets to INDEX MOOSE in October 2017. Since stop-losses were implemented, the largest one-week drawdown in the model is 3.6% and the largest uninterrupted drawdown is 6.5%. While this result appears promising, years of data are needed before declaring that drawdown has been halved.

Active strategies like INDEX MOOSE generally require that the investor have a better than rudimentary understanding of the investment process and a medium to aggressive risk tolerance. They must be willing to accept personal responsibility for the risk implicit in their actions and willing to stick to a program over the medium-term (3-5 years), preferably longer. Understand that no matter the strategy, everyone invests at his or her own risk. Then select the program that makes you most comfortable.


Funds generate fewer trades with less risk. Individual equity prices can be far more volatile than stock or bond indices and that makes individual securities far less predictable. Since the Moose invests in only one asset at a time, a fund provides some of the diversification needed to reduce risk. (Given the prices of individual securities these days, it is pretty tough for a traditional investor to buy a thoroughly diversified portfolio of individual stocks and bonds for less than $300,000, so chances are, if your portfolio is under $300,000 and well diversified, there are some funds in it already.) On the downside, all funds, even ETFs, carry embedded administrative fees that individual securities don't have. In the end, however, after commissions, funds, especially ETFs, provide diversity cheaper and quicker.


It depends on your strategy. For active targeting strategies like INDEX MOOSE, narrowly targeted ("compartmentalized") funds that are not highly correlated with one another work best. On the equity side, index funds and sector funds are most profitable. General or diversified equity funds reduce both profitability and volatility. On the income side, very short money (cash) and very long zeros are sufficient to cover the waterfront. Intermediate income funds actually reduce profitability. As for for passive diversification strategies, diversified equity funds and intermediate income funds, reduce volatility and automatically rebalance for you, making life easier. This site deals exclusively with ETFs because of its penchant for active targeting, but actively managed five-star mutual funds can be a profitable vehicle for buy-and-hold portfolios.


That depends on you, on your strategy, your resources, and on what’s available. A globally diversified portfolio can get by with a minimum of four—cash, world stocks, world bonds, and commodities. Actively targeted strategies like INDEX MOOSE have one ETF in the portfolio at a time, selected from a broader group of ETFs. (INDEX MOOSE picks from 8 index funds and a money market.) Holding fewer assets means fewer trades, lower costs, and a more manageable task. Following and picking from too few assets, however reduces profitability, while picking from too many results in more trades. The optimal number of assets minimizes trade expense and maximizes profit, and is based on the amount of correlation that exists between the component funds.


The debate goes on. Every mutual fund salesman you'll meet-- except maybe the Vanguard 500 guy-- would have you believe that his fund manager is a better stock picker than anyone else in the world, and although few like to mention it, good timing is implicit in good picking. On the other side, academia continues to go to great lengths to disprove timing and promote diversified buy-and-hold investing. The controversy, then, is between market participants with considerable practical experience, but a vested interest in timing's success, and academicians with little practical experience, but no particular vested interest. In the end, it is a personal decision.


It depends on trading frequency. Brokerage expense does go up with active management, but buy-and-hold also incurs trading costs through periodic rebalancing. Both strategies can minimize expenses by using deep discount brokers. To the extent that index funds generally have less turnover resulting in lower capital gains distributions, the funds used in INDEX MOOSE do minimize taxes. Nevertheless, capital gains taxes will accrue from each transaction in taxable accounts, making any strategy more profitable in tax-deferred portfolios like IRA's, SEP's and so on. See “Personal & Portfolio Issues” on the Demoostify page for more.


Managing your assets takes more time than ignoring them, and you should include your time when you're considering the costs of your investment program. Obviously, if you'd rather be doing something else, actively managing money probably isn't for you. INDEX MOOSE seeks to minimize the effort required by active management. It is an intermediate term model (6-9 months) that generates several long-only trades a year. It’s not a daily timing model, however, and you only have to check it once a week. Buy-and-hold is easier (until there is blood in the streets), but it too typically requires rebalancing, usually 1-4 times a year. See “Personal & Portfolio Issues” on the Demoostify page for more.


It depends on the investment environment. INDEX MOOSE outperformed from 1992 to 2010, but past performance is no guarantee of future success, and it lagged from 2010 to 2016. (See below for the reasons.) Incorporating stops into INDEX MOOSE in late 2017, however, may have changed that. Comparative performance statistics over time are updated weekly on the Demoostify page, as well as on the Moosistory page. Performance trends are also monitored in the newsletter’s Moosecalls page.


Depends. Using the standard deviation of weekly returns as a measure of risk (a common method), the time period one selects has a significant impact. As a general rule, the better INDEX MOOSE is performing versus the S&P, the riskier the Moose may appear, using the standard deviation method of comparison. That's reasonable, because greater risk is necessary for greater return. Fact is, investors willingly overlook risk when their portfolios are getting fatter, so a more appropriate measure of overall risk considers return as well. We use the Sharpe ratio to measure risk-adjusted return. See “Personal & Portfolio Issues” on the Demoostify page for more.


Please don't. That way, you won't be disappointed if your effort falls short, and you can be pleasantly surprised if your effort does better. The strategic returns on this site are real time, but theoretical. There is no real account out there backing up the numbers. Moreover, to simplify the calculations, several shortcuts have been employed. Calculations do not include potential margin, taxes, transaction costs, or dividends earned. In addition, model switches are treated differently from reality.

Apart from all that, I also make occasional errors. So I not only appreciate, but I rely on having a few thousand free editors checking my math, my spelling, my grammar, and even my methodology. I welcome the critique.


Theoretical returns are one thing, but do-it-yourself investing means the level of success you actually achieve will depend on you-- how well you keep to it, the type of account you have, your tax situation (state and federal), where you trade, how aggressive you are, and your short-term trading skills when it comes to making profitable switches.


Decision Moose is a financial model framework; a mechanism for timing the buying and selling of investment assets-- like stocks, bonds, and cash. INDEX MOOSE is one of several models within that framework. It uses stock, bond and gold index ETFs to help generate the newsletter and the free signal investment on this site.


The framework is proprietary, but generally, it measures the relative attractiveness of assets under study. Any number of assets can be plugged into it and compared. Technical indicators then select the one asset in the group having the highest probability of price appreciation. The framework is more growth than value oriented in that price momentum and trend-following technical indicators play a central role, but there are also Fed and overall market indicators. Unlike a diversified, buy-and-hold approach-- the strategy preferred by random-walk investors-- INDEX MOOSE invests the entire portfolio in one fund for as long as it is the most attractive among the group.


INDEX MOOSE was a stellar performer from 1994 into 2009, outperforming the S&P500 handily-- predicting both the Y2K Tech Crash and the 2008-09 Financial Crisis. Performance since, however, has been less than impressive. The reasons have to do with the nature of the model itself, and the investment environment. Not all strategies are right for every situation. INDEX MOOSE is a momentum model designed to minimize losses before maximizing gains.

To beat the S&P, INDEX MOOSE needs momentum, and an occasional bear market. Between the equity crashes in 2000 and 2008, and the housing crash in 2009-2011, an immense amount of wealth was destroyed in the US and worldwide. Far less wealth limited the market’s ability to generate and sustain momentum. To restore balance sheets, the Fed stepped in, pumping over $3 trillion into the bond market while keeping interest rates at zero for close to a decade. That eliminated bonds and cash as investment alternatives, leaving only equities. Anemic economic growth, due to severely debilitating government fiscal policies from 2009-2017, led to “financial engineering”. Instead of investing in plant, equipment and jobs, companies borrowed free money and bought their stock with it, driving stock prices higher without having to improve earnings or revenue-- making the S&P the best game in the world, and making bear markets extinct after 2009.

Finally, automated trading algorithms dealing in milliseconds are controlling the markets now. Market cycles were longer and more pronounced a decade or two ago when human traders were predominant. Now the stairs up may take forever, but the elevator down only takes days. Everyone seems to have a machine that does what INDEX MOOSE tries to do, but does it faster.

Ultimately, INDEX MOOSE underperformance over the past ten years can be ascribed to a half-dozen instances in which the model failed to react to market weakness quickly enough. For that reason, a stop-loss mechanism was incorporated into the model in October 2017. It’s still too early to tell if it will work, but results to date are promising.


INDEX MOOSE is (for the most part) a weekly model. For simplicity, it only contains Friday COB ("close of business") data. The instruction to switch is usually published over the weekend. Signals are based on the closing prices from the previous Friday. The model is calculated as if it changed automatically at the Friday close. It is done that way to maintain data consistency. Of course, that is a synthetic construct. In reality, investors' first opportunity to act is Monday, and they must make the best short-term calculation they can in the following week(s). The goal is to get in at or below the Friday closing price. Sometimes that is possible and sometimes not. For more information on this topic, see "The Art of the Switch".


Investing in one asset is logical for an active targeting strategy. Diversification is for those who don't think markets can be timed. Targeting is for those who think they can. For "prudent man" traditionalists, that may sound a little scary, but our research shows unequivocally that in a long-only model like INDEX MOOSE, a 100% investment in the most attractive asset yields significantly higher profits than diversifying a portion of the portfolio into each asset according to its relative attractiveness.


My criteria for selecting the model’s funds are: (1) An adequate data history-- the framework requires almost a year and a half of price data before it can generate a signal. (2) Funds should be exchange traded to allow intraday transparency. (3) Funds should be passive rather than actively managed. (4) Funds should track widely accepted and broadly traded indices. (5) Among similar funds with comparable data histories, the one with the most trade volume is preferred.

The funds in the model are thus all passive, exchange-traded index funds. Finally, the model refers to three-month T-Bills as the standard proxy for cash. Practically speaking, it is more convenient to use a premium money fund, rather than actual T-bills or a short-term bond ETF when going to cash. Premium money funds often pay more than T-bills, and there is no commission to get in or out. The downside is that they trade end of day, so that switching out of cash and into something else takes a couple of days. If your account is too small to qualify for a premium fund, the regular sweep money market fund at your broker works too.


No. INDEX MOOSE was originally developed in 1989 using indexes. It was designed to provide a comprehensive overview of the global investment scene for a newsletter. When it began to show significant promise as a forecasting tool, the search for a way to invest on its signals began. The first tradable version incorporated standard, no load, open-end mutual funds, since they were the only option available at the time. They were not particularly suited to the task. Mutual fund managers have always had an aversion to "hot money", which they define as money that moves out of their fund within six months of moving in. Since INDEX MOOSE's positions averaged three to four months, the switch to exchange traded funds (ETFs) inevitably made sense. It was 1999, however, before there was adequate ETF coverage to begin revising the model. The transition was completed until 2006. The ETFs selected were essentially those with the longest price histories at the time. Since then, there has been a proliferation of exchange-traded funds, increasing the available choices.


You can (and should) get a prospectus from your broker before investing in any security. As for data histories, many of the INDEX MOOSE funds referenced pre-2000 (and their historical data) no longer exist. Otherwise, you can check out the current funds on the internet. A Google search can help you find the latest information about most of them. Meanwhile, try the following sites: and good starting points gold bullion (GLD) the US large cap stocks (SPY) ishares (EDV, IEV, IWM, ILF, EWJ, AAXJ)


Unlike many market-timing models, INDEX MOOSE relies solely on long (or buy) positions. It does not require short selling. (Short selling is a process by which an investor borrows stock from his broker in order to sell it at today's price, in the hope of being able to buy it later at a lower price.) Shorting has two main disadvantages: it's more risky than going long, and it requires a margin account, which makes it unsuitable for tax-deferred investing. With the advent of ETFs that mimic index short-selling, however, that latter disadvantage is gone and the first one is lessened. Nevertheless, short ETFs are not currently employed in INDEX MOOSE.


Research on a short/long versions of the framework suggests three things relevant to INDEX MOOSE:

(1) Back-tests suggest that shorting can outperform the long-only version of INDEX MOOSE, but only under certain conditions. It also invariably increases risk and the number of transactions.

(2) Given inflation and economic growth, stock prices have a natural tendency to rise over time. This makes bull markets the rule and bear markets the exception. (That is particularly true in the decade following the 2008 financial meltdown.) Thus, while going long is considered making an investment, going short is making a wager. This differing psychology promotes different cycles between bull and bear markets. Bull markets are longer in duration, and their upward slope is usually more gradual. Bear retreats most often are shorter and sharper. This is especially true since the end of the uptick rule. Since INDEX MOOSE has been optimized as a long-only model, its math follows a longer, less volatile cycle than is optimum for shorting. Entry into and exit from short positions is late and less profitable than a long strategy. The exception is multi-year or “Grand Bears” (1929, 2000) which happen every couple of generations, and take on the cyclical tendencies of bull markets: long in duration, gradual, and persistent in decline.

(3) Short selling appears to provide less of an advantage as the number of long choices in the model increases. In other words, if the choice is merely cash or stocks (short or long), shorting does make a difference. But if we have nine long choices, and are picking the best one, we inevitably do as well or better than we would shorting. The money goes somewhere. If it goes out of stocks, we can either be general and short stocks, or be specific and follow it long to wherever it seems to go, as INDEX MOOSE does.

Avid, unreconstructed short-sellers can try the Moose for shorting, understanding that it was not designed for that purpose and that the reporting on the site does not support that usage. If the Fed indicator suggests tightening AND/OR the trend in short-term interest rates is up, AND a new ETF sinks into the last spot in the table, short it. When it leaves the last spot, buy back the short. Short signals are not supported with performance data, because INDEX MOOSE is designed to be simple, to maximize profit, and to reduce risk. Shorting runs counter to most of those objectives. It might make sense, however, if you (a) have time on your hands (b) have a large portfolio or (c) want to hedge your bets.


Not necessarily. INDEX MOOSE isn’t particularly effective as a short-term indicator. Waiting for an "up day" to switch out and a "down day" to buy in can improve performance... or not. The author uses short-term trading rules and a commercial charting and technical analysis program (TC-2000) to assist in the buy/sell decision. The fact is, a perfect switch is rarely possible. Short term, you are likely to be dissatisfied with what you got for the one you sold and what you paid for the one you bought. Moreover, delaying the switch could evolve into total inaction-- ignoring the signal altogether. Not a good idea. Even so, some delay is probably better than putting in a blind "switch" order with your broker over the weekend. Acting prior to a close provides better information than acting prior to an open. For more information on this topic, see "The Art of the Switch".


There are two types of signal at the Moose: HOLD and SWITCH. They mean (more or less) what they sound like they mean. Holding onto the ETF you’re supposed to switch out of for more than a week or two after a "switch" signal is not recommended. Similarly, switching into an ETF in the middle of its 'hold" signal is not recommended if the price has risen—and particularly if it is enough of a price increase to make the hold overbought. (The model uses Wilder’s 14-day RSI to determine overbought and oversold levels.)

The reason switching during a hold signal is not recommended has more to do with probabilities and with the way the model works than with the relative quality of the assets. The deeper we get into the signal period, and/or the greater the current signal's gain to date, the less likely it is that switching mid-signal will yield a positive outcome. Moreover, mid-or-late-signal corrections are common. They are easier to weather with a substantial gain already in your pocket.

A HOLD signal, then, means “hold”. It doesn’t mean "buy", or "don’t buy", or even “don’t sell”. It means it is the best asset out there… for now. Hold until further instructions. Those instructions originally came only in the form of a weekly switch signal. Now they can come intra-week via stop-loss or stop-buy triggers.


Since October 2017, the model has used the Donchian 4-week system to set stop-losses and buy-stops. It is not the only method, but it is widely used, and more easily understood than others requiring more difficult calculations (e.g., average true range or standard deviation). An asset’s stop-loss target is generally below its 20-day intra-day low. Its buy-stop strike price is generally above its 20-period intra-day high. Stop levels can change daily, which is problematic for a weekly newsletter, but readers can get instant updates at by adding “Price Channels” to “overlays” below the chart and clicking “update”. (It defaults to 20 periods or four weeks.) Check Investopedia for more info on Donchian channels.


To start investing you only need enough to open a brokerage account at the discount broker of your choice. Most discount brokers, however, do have a minimum account size for both taxable and tax-deferred (IRA) accounts, which you can access through their websites.

From a practical standpoint, however, consider trading costs as a percentage of your portfolio before committing to a strategy. Some strategies are more expensive than others. An active targeting strategy like INDEX MOOSE in an average year, gives four to six signals-- requiring four to six round-trip trades. Say your broker charges $10 per trade ($20 per round-trip). You're looking at up to $120 per year in expense. If your total portfolio is only $1000, that's a 12% expense ratio. A decent no-load mutual fund charges 1-2% in expenses. Even if you’re contemplating a passive diversified buy-and-hold strategy (like the static 60-40 and 80-20 examples on this site) and only intend to re-balance once a year, you’ll still have at least one round-trip per holding in your portfolio. Finally, an actively diversified portfolio, with multiple holdings constantly in flux will result in the most trading expense.

From an expense standpoint, then, buying and holding mutual funds (until you have more money) is a very competitive option. Strictly considering expense-- without factoring in performance differentials or the personal satisfaction you might derive from being a player as opposed to a spectator-- a $6000-$8000 portfolio is a reasonable minimum for an INDEX MOOSE or passive diversification strategy. An active diversification strategy may suggest a portfolio worth twice that or more.

In the end, we all have to pay to play. Minimum account size is a personal decision-- a function of broker's fees, your risk tolerance, and of how badly you want to play.


A margin account allows the investor to borrow from his broker to buy more stock than otherwise would be possible. The loan amount is based on the size of the account, and the broker charges interest on the loan. Most taxable accounts are margin accounts, while tax-deferred (retirement) accounts are not.


The Fed Check reveals what the market thinks the Fed SHOULD do-- not to be confused with what it WILL do. The indicator is a ratio between Treasury bond prices and commodity prices, examined over the medium term. Divide a weekly weighted Aggregate T-Bond Index by the weekly CRB Index. Then divide this week's result by the average result over the last, say, 40-weeks. (The model uses a different period and smooth’s it, but you get the drift.) You'll have an oscillator. Results between 0.95 and 1.05 are not usually significant. Outside that range-- at the extremes-- they can be.

The Fed Check is "tighten" when the reading is below .95, "ease" when it‘s above 1.05, and neutral all other times. Below 0.95 suggests commodity prices are headed up considerably faster than normal and that the Fed ought to hike short rates to keep up and to cool inflation. (Higher Fed interest rates, after a certain point, are considered bearish for stocks.) Above 1.05 means bond prices are headed up (and yields are falling) faster than normal, and that the Fed needs to cut short rates. (Lower Fed interest rates are considered bullish for stocks.)

In either case, when the Fed fails to do what the markets think it ought to do at the short end of the yield curve, the markets tend to take up the slack at the long end. If the market thinks the Fed should raise short rates, but it doesn’t, the market will bid long-term interest rates higher. This steepens the yield curve, which is bullish for stocks. If this bullish Fed/market imbalance (keeping Fed rates too low) persists, however, a stock bubble forms, then bursts, ending badly.

If, on the other hand, the market thinks the Fed should cut short rates, but it doesn’t, the market will send long-term rates lower. This flattens and ultimately inverts the yield curve, which is bearish for stocks. If this bearish Fed/market imbalance (keeping Fed rates too high) persists, a recession occurs, stock prices deteriorate, and it ends badly.

The Fed Check is an alert. It lets us know whether paper is more popular than hard assets, and it helps us determine if the market and the Fed are on the same page regarding monetary policy. That’s important, because if the Fed and the markets are out of synch for an extended period, it invariably ends badly. How badly and how quickly, however, depends on the underlying conditions that gave rise to the situation.

In 1999, the Fed Check gave a "sell" signal in mid-August, which persisted (seemingly incorrectly) all the way to the February 2000 collapse. A similar, long lead-time "sell" occurred in 1987 prior to that year's October crash. Generally, however, the lead time is much shorter and the correction is far less dramatic. To avoid missing out on potentially large gains at the end of a cycle after a Fed Check "sell" signal, however, the model does not react until the price of the asset has fallen below its short-term moving average.


The Interest Rate Indicator (IRI) tells us whether current market interest rates are bullish for stocks or bearish. It does this by examining the yield curve and determining (a) whether the median interest rate is going up or down, and (b) whether the yield curve is flattening or steepening. The two findings are then combined in order to evaluate their potential impact on stocks. The theory behind IRI is as follows:

Rising interest rates get a bad rap from stock investors, but they do not always send stocks into the tank. At times (most recently in 2017) the Fed can raise rates several times in a year and the stock market will rally right along side. After all, higher interest rates can reflect an improving economy, leading to greater corporate profits, and higher stock prices.

Rising interest rates are bullish for stocks until they aren’t. At some point, higher rates can get ahead of the economy, weakening it and sending stock prices lower. We never know when that will happen, because situations differ, but the shape of the yield curve invariably telegraphs it. A positively sloped curve, in which short-term rates are lower than long rates, is normal and bullish for stocks. A flat or inverted curve (where short-term rates are equal to or higher than long rates) is a sign of economic trouble and bearish for stocks.

IRI quantifies the yield curve by calculating the spread between 10-year and 3-month Treasury yields. It then determines whether the curve is flattening or steepening by creating an intermediate term oscillator (dividing this week’s spread by the average spread over 40 weeks or so). A spread oscillator greater than 1 is steepening; less than 1 is flattening. Finally, IRI determines the direction of interest rates by calculating the midpoint between 3-month and 10-year yields and creating an oscillator (dividing this week’s mid-point by the average mid-point over 40 weeks or so.) Interest rates are rising if the midpoint oscillator is greater than 1 and falling if it is less than 1. IRI then averages the two oscillators to get an overall view of the direction of rates and their expected impact on the economy and stocks.


INDEX MOOSE quantitatively ranks assets according to their relative and technical strength over the intermediate term. Along with each asset’s numerical rank in column 1, the table presents the “CI” and “TS” of each asset, and its trend (columns 2,4, and 5 respectively.

CI is the model’s proprietary (i.e., don't ask how it's calculated) “Confidence Index”.  It measures the confidence the Moose has, on a 0-100% scale, in taking a long position in each non-cash asset. CI is a weighted average of the model’s three components-- the tape (technicals), the market (relative strength), and the Fed (Fed Check)-- into a summary snapshot of each asset's perceived attractiveness. It is a weekly measure that is more unstable than the rankings, which are smoothed and take precedence. Thus CI may not always match up with the rankings, and should be taken with a grain of salt. Look to the rankings first.

TS is the overall technical strength of the asset according to the model's proprietary measuring system, which incorporates very short, short, sub-intermediate, intermediate, and longer term technical indicators. It is calculated on a scale of -100 (very bearish) to +100 (very bullish). It is a daily measure that is more unstable than the rankings, which are smoothed and take precedence. Thus TS may not always match up with the rankings, and should be taken with a grain of salt. As with CI, look to the rankings first.

The trend is TS (or technical strength) verbalized. A TS between 75 and 100 is “very bullish”. 50 to 74 = “bullish”. 25 to 49 = “slightly bullish”. -24 to +24 = “neutral”. -25 to -49 = “slightly bearish”. -50 to -74 = “bearish”. -75 to -100 = very bearish.

The lower part of the table provides six data-points that are usually of interest for global investors. They include the Fed Check and our interest rate indicator (both explained above); our volatility indicator; the US Dollar Index; the commodity inflation trend, and the trend in oil prices. These data-points are applied as a second screen to finalize the rankings.


Benchmarking is the best way to tell if your investment ideas are working. The S&P 500 index is the basic benchmark for stocks, the one every stock fund manager tries to beat (often to no avail). When picking a benchmark for an investment mechanism, it's best to compare it to a benchmark with similar characteristics. That isn't always easy. INDEX MOOSE, for example, is a fund of funds that contains a cash fund, a long bond fund, and several domestic and foreign stock funds. The same goes for the six basic diversified portfolios presented in comparison. They are all more akin to flexible global funds of funds than a 100% domestic large-cap equity model, as measured by the S&P. Nevertheless, we benchmark to the S&P on this site. Why? The reason is just because-- because that's the industry's standard, and it makes it easier to compare what we're looking at with everything else that's out there.


It's a ratio developed by William Sharpe to measure risk-adjusted performance. It is calculated by subtracting the risk free rate from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. It tells us whether the returns of a portfolio are because of smart investment decisions or a result of excess risk. Generally, a positive value indicates that the portfolio's risk-adjusted return is greater than it would have been had the funds been invested in three-month Treasury bills over the same period. Sharpe ratios above 2 are considered good, and above 3 are considered excellent. As with standard deviation, the time period selected has an impact on results. The longer the time period, the less risky an investment appears.

We use a three-year Sharpe to be comparable with Morningstar, although there are other differences in our calculation methodologies, most importantly with respect to dividends and calculation frequency. We don't include dividends in our weekly calculation of the Model's and SPY's Sharpe. This tends to understate the Sharpe ratio for the Model and for SPY as presented on our home page. Morningstar correctly includes dividends in calculating the Sharpe for the Vanguard Balanced Fund (our proxy for diversified buy and hold investing), but it only recalculates monthly. This means that the Sharpe ratio for the Vanguard Balanced Fund presented on our home page can lag actual data, at times by up to four weeks. That and the inclusion of dividends mean that the Sharpe for Vanguard Balanced on the home page is not strictly comparable to that of the Model and SPY. (To learn more about how Morningstar calculates its Sharpe ratio, and to compare our Sharpe for SPY and theirs to see how dividends and update frequency impact the numbers, go to


Bullish investors are those who think the value of an investment is going to rise. Bearish investors think the value will fall. (This was an actual reader question. If you did not already know the answer, you might read a couple of books on investing and return to this site later.)

Website Builder