The Super Model -
Combined Monetary and Momentum Indicators
Martin Zweig uses a combined monetary and momentum model to time stock market entries and exits.
Martin Zweig took his individually successful monetary and momentum indicators and combined them into one single method - The Super Model - to assess market conditions.
The Super Model is built by assigning a score to each of the individual indicators that make up the monetary and momentum indicators. When the scores are added, the result indicates whether the market should be bought or sold.
In Winning On Wall Street Zweig keeps the outcome of the model relatively simple. He uses the Super Model to indicate whether funds should be 100 percent in cash or 100 percent invested in the stock market. Higher degrees of sophistication are possible - for example 50 percent of funds in cash and 50 percent invested in the market for conditions that are ambiguous but not bearish.
Zweig explained the advantage of combining indicators into a Super Model as follows:
"Obviously, if all the indicators in the two models are bullish, the Super Model would be bullish, and vice versa. But the virtue of combining the monetary and momentum indicators is that, if the monetary indicators were relatively neutral but the market's momentum was positive, it could be just enough to give us a buy signal. At such a time, it might make a bit more sense to be invested in stocks rather than in cash ....... Obviously, our first choice is to have both the monetary and the momentum indicators on our side. But that's not always possible. The Super Model allows for some reasonable trade-off between the monetary and the momentum indicators."