How TrendPointers Works
TrendPointers is designed to provide a near real-time early
alert system of the emergence and trajectory of events and news
relevant to investment decisions.
The best way to inform
you about TrendPointers is a step-by-step outline of what we do
and report back to you, the subscriber.
- TrendPointers conducts its own research to identify the business
sectors that exhibit emerging trends or are already in a state
of trend growth or decline and meets one or more of our trend
decision criteria:
- A sector that is or will be highly volatile
- A sector that has many companies entering the business
- A sector that has rapid innovation
- A sector that is relatively immature but is beginning
to exhibit increased growth
- A sector that is beginning to receive increased or significant
media attention
- A sector that may be mature but ready to experience significant
changes in its nature
- TrendPointers integrates key economic indicators that can
prove useful in correlating the overall investment environment.
The key indicators may precede or lag market behavior, but we
need to watch the public information and combine it with our
own emerging information trend indicators for the full picture.
- The key to capturing early trend warnings, often months in
advance, is to maximize our watchfulness and not rely on just
one or two sources. TrendPointers captures key information from
a multitude of sources that provide a constant stream of news
and economic information and simultaneously tracks the effect
of the information on actual market performance of the sector
by 10-day moving averages of market price and daily volume.
- No one knows how long it takes for trends to develop or how
long they will last. Technical stock analyses typically define
a trend as at least three consecutive periods of movement in
the same direction and we agree that is a fair start. However,
and this is a big however, trends may develop in a zigzag process
and we may not observe three consecutive periods of continuation
in a given direction. Thus, TrendPointers will track the relevant
factors for a sector for at least 6 months, and up to 18 months
if necessary, if we see emerging activity, however slow or fast
the pace.
- TrendPointers captures a multitude of critical information
factors that can define the presence of a trend and its actual
performance in the market. The core premise of TrendPointers
is that news that can affect your investment decision emerges
slowly, from multiple sources, and migrates from the obscure
sources out to the mainstream media. Here is how we cover each
of the sources in the TrendPointers advantage.
Information that leads
to early detection of trend identification migrates up a news
chain. Here is a step-by- step description of each of the core
TrendPointers information points, starting with the most general.
What's
in the News ...
Concept:
The last link in the information chain is the mass media. It's
been said many times, in many ways -- by the time the big news
is on the cover of Time, its too late. The popular news typically
does not pick up on the next big thing until the big thing is
well under way. Mass media usually have long lead times and, very
often, start their coverage only after lesser sources have already
raised the visibility of the issue.
Method:
TrendPointers monitors of dozens of major mass media sources that
represent a diversity by type and national and international sources(
but English language only). Included are primarily daily news
sources, but also weekly and biweekly sources. TrendPointers has
created very explicit terms to define each sector ( see How Sectors
are Selected) and trends the information weekly, and summarizes
it biweekly and monthly as necessary. In the current information
age, especially with the advent of the internet, there is a great
deal of overlap of news sources and one source often serves as
a feed for another. Thus, TrendPointers is concerned with tracking
what we call “ the weight of the news”,
our measure of how often coverage of the defined sectors appears
in our standard set of information sources. The reality of trend
identification is that it occurs when numerous observers capture
the same news event. There are rarely many entirely different
stories about the same issue. So, regardless of the exact nature
of the content, a story that is captured 50 times a week that
grows to 500 times a week marks a significant information event.
Another important aspect of the captured news is that we do not
edit the content and decide what's important-- everything is captured.
Who knows what will affect a business idea? A new invention, a
scandal, a legal issue, a financial default, an acquisition, a
new product introduction, a change in senior management? Any and
all news these days can and will have an impact on the investment
decisions about that sector and its component firms. So TrendPointers
captures it all.
The
Business Press Says...
Concept:
The business media have a totally vested interest in watching
the market for signs of changes and, if you are reading this,
you probably know that there are thousands of analysts that publish
their opinions and forecasts non-stop. But, as we also learned,
most of the experts are not able to beat the primary market indices
on a regular basis. The business media are often where the first
glimpses of trend ideas begin to hit the broader public, and then
investment activity may also begin to show adsvances or declines
as a result.
Method: Trending the business press is done
in the same manner as the mass media, from a select group of widely
diverse and representative business media. Most business media
is published on a weekly, biweekly or monthly basis, except for
the online sources which may be change hourly.
Guru
Picks...
Concept: The most eclectic source of trend
information is from the literally thousands of independent investment
newsletters. There are many true experts who have great insight
into what trends are about to emerge or disappear, but as a group
they have a relatively small audience. And, one or two gurus picking
up on liquefied natural gas as a near future opportunity is not
a loud enough voice to catch the attention of the mass media.
Method: TrendPointers reads a seemingly endless
list of investment newsletters, economic reports and similar small
scale sources to monitor the views of the idea makers.
The Influential Economic
Factors- The Trend Impact Score ...
Browse through the
Wall Street Journal or Barron's and you will see thousands of
economic and investing bits of information: interest rates, bond
prices, an immense array of government economic statistics, international
items, and more. The various layers of this immense battery of
financial information that have a direct, daily, even hourly impact
on investment decisions and are integral parts of trend formation.
TrendPointers tracks a representative set of these data to create
the Trend Impact Score ( see Trend Impact Score). which is reported
on monthly basis.
The
Stock Market Reacts ...
Concept:
The ultimate use of TrendPointers is to identify trends as they
emerge and make investment decisions BEFORE the mass of investors
obtains the same information and have a significant impact on
price. Thus, we need to determine, in real time, how the trend
information is affecting the actual prices and volume of the sectors.
Method:
For each sector, TrendPointers has created a mini-portfolio that
tracks a specific sector much like a mutual fund dedicated to
a single sector. We have created portfolios of traded equities
and funds that represent the sector for investment purposes. Few
sectors are pure by the definitions used for tracking the news.
That's because for almost all sectors, the firms tracked are in
multiple lines of business. So, our general rule is to select
companies at random from a broader list of firms that have a meaningful
involvement in the sector. Now, it's possible that a company is
included in a sector and is a significant participant in the sector,
but that part of its business is minor to overall revenue, at
least at this time. However, to limit our list to only firms exclusively
in the sector would be somewhere between impossible and impractical
and there would be very few companies to watch. The reality is
that no one knows what will become important to which company,
so we do not want to be arbitrary and judgmental and decide what
will happen. On the positive side of a trend, if a sector becomes
hot, let's say alternative energy, and the major oil companies
are getting heavily involved and buying the small innovators,
then that may be the only way to play the alternative energy sector.
TrendPointers calculates the two critical measures of whether
information affects actual market activity for the sector-- price
and volume. TrendPointers creates 10-day moving averages for the
total mini-portfolio and reports on a biweekly basis.
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