We believe that for a particular stock price movement, 60.0 percent of that movement is due to the movement of the overall stock market, 30.0 percent is due to the sector or industry the stock is in, and only 10.0 percent to the fundamentals of the company itself. Therefore, our work begins first with predicting the direction of the stock market (based on our 14 stock market indicator model) and then predicting which sectors and industries should outperform the stock market.

In order to determine attractive groups, Garzarelli determines the outlook for the economy using econometric models. The system developed by Elaine Garzarelli forecasts earnings for the S&P industries using mathematical equations linking the economy to the industry. She then analyzes the relationship between each industry's relative stock price, relative earnings, and relative P/E and determines the industry's behavior during economic and market cycles. Each industry is then ranked attractive, neutral, or unattractive.