Question:

How do we interpret the different combination of movements of the three lines in the Wealth Phase charts?

Answer:

The “moving average” lines you asked about are used primarily to determine a market’s MOMENTUM.

The STAR Indicator tool (red/yellow/green traffic light icons) was designed to ‘interpret’ the Chart (and its Moving Average lines) to determine a markets momentum so you don’t have to become a chart reader/expert.

I discuss the relationship between the STAR tool and the Wealth Phase CHART in this PDF article.

It’s easier to reply in terms of STAR indicators than specific positions of the MA lines; they are largely one in the same.

We look at TWO broad categories (variables) to analyze a market:

a) Momentum (red, yellow, green STAR traffic signal icons)
b) Technical Score (TAPS slider balls)

These are both important, INDEPENDENT variables. They do not always agree/align.

When ENTERING a new market, we want to see BOTH a strong STAR momentum indicator (lots of green, especially in the Intermediate and Long Term columns) and strong TAPS scores. A strong STAR score (along with a high TAPS score) makes it less likely the market will roll over and go negative any time soon.

Here’s a rough ranking of each tool/indicator’s relative importance when ENTERING a new market:

  • Wealth Phase
  • Master Score
  • STAR Momentum
  • TAPS Score Overall
  • TAPS Local
  • 1 YR THAR
  • 4 Yr THAR

Once you are ALREADY invested in a market, because of the transaction cost and effort to EXIT a market, we are less concerned with the STAR tool EXCEPT as an early warning indicator.

Here’s a rough ranking of each tool/indicator’s relative importance when EXITING a market:

  • Wealth Phase
  • TAPS Local
  • 1 YR THAR
  • Master Score
  • TAPS Score Overall
  • STAR Momentum
  • 4 Yr THAR

Note that for EXITING a market, the STAR tool (momentum) is less important compared to ENTERING a new market.The above assumes you are ONLY interested in LV (ie – a Local Market Master).If you’re not ‘stuck’ in a single market, WHEN you leave a market is more a question of “OPPORTUNITY COST” rather than milking any single market for the last bits of appreciation.

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