When the ratio of Buys to
Sells is above 1.00, the
market is robust. Correspondingly,
the market is weak when
the Buy to Sell ratio is
below 1.00. As you can see
from the above data, the
Buy to Sell ration was below
1.00 on 03/07/97 and continued
to deteriorate through 04/04/97.
This confirmed that the
market was in a correction.
 Those
of you with good eyes may
have noticed that RT, VectorVest’s
Relative Timing indicator,
ticked upward on 04/11/97
even though the price of
the VectorVest Composite
went down. RT was sensing
a change in momentum of
the downward move. Sure
enough, the market bottomed
two weeks later.
A
careful look at the Recommendation
Profile shows that on 04/11/97
the percentage Buys increased
and the percentage of Sells
decreased from the prior
week. This was another sign
that the correction was
nearing completion.
From
the very beginning, (1988),
we recognized that the VectorVest
Recommendation Profile provided
a measure of the pulse of
the market. And it was used
to help guide our thoughts
on the direction of the
market. But it was not until
March of 1995, that we discovered
how the Price of the VVC
clearly signaled the direction
of the market. We examined
our data back to April 1991
(the time when we first
began computing the VVC),
and found that tracking
the direction of the market
with the Price of the VectorVest
Composite was incredibly
simple and reliable.
Here’s
how the system works. If
the Price of the VectorVest
Composite moves in a given
direction two weeks without
an intermediate contrary
move, it gives a preliminary
signal of the market’s direction.
If the preliminary signal
is followed by another move
in the same direction, the
preliminary signal is reinforced,
but not confirmed. We must
turn to the VectorVest |
|
Recommendation Profile for
confirmation of the market’s
direction.
In
the data sets shown above
you saw that the Price of
the VectorVest Composite
had been undergoing a steady
week-to-week decline, and
the ratio of Buys to Sells
in the Recommendation Profile
was well below 1.00. There
was no question that the
market was going down. Yet
many analysts didn’t realize
this was happening. The
Price of the VectorVest
Composite peaked on February
14, 1997, (this is called
a Turning Point), and gave
a "DOWN" signal two weeks
later on 02/28/97. The Price
of the VectorVest Composite
finally bottomed 10 weeks
later on 04/25/97, 11.0
percent below the price
reached on 02/14/97. (You
may see this data in the
VectorVest ProGraphics documentation.)
Although,
we had discovered this timing
technique in March 1995,
the first major DOWN signal
given in "real time" did
not occur until 09/22/95.
The market had just completed
a marvelous Bull run lasting
39 weeks. Signs of weakness
had begun to appear in July,
but the market did not peak
until 09/08/95. Two weeks
later we got the DOWN signal.
Here’s what we said on 09/22/97:
"The Price of our VectorVest
Composite has now gone down
for the second week without
an intermediate upmove.
Our studies have shown that
this event signals a market
correction. The still favorable
investment climate suggests,
however, that it will be
only a mild correction.
It’s OK for Aggressive investors
to buy high VST-Vector,
"B" rated stocks, but Prudent
investors should stand aside."
From
September 22nd on, we tracked
the correction week-by-week
until it bottomed on January
12, 1996. Two weeks later,
we said, "The Price of our
Vector- Vest Composite rose
for the second week in a
row, signaling that the
market’s correction is over.
Although the green light
has not been confirmed by
our Recommendation |
