Market Trend:
The Market Trend (i.e. DnUp) is displayed on the VectorVest Express Homepage within the VectorVest Market Dashboard. It is also found in the Color Guard Table in the VectorVest Views. The Market Trend is composed of two components: the Primary Trend and the Underlying Trend. The first part of the Market Trend ("Dn", in this example) is known as the Primary Wave or Primary Trend. The second part of the Market Trend ("Up", in this example) is known as the Underlying Trend.
Primary Trend:
The Primary Trend of the market is determined by the week-to-week direction of the Price of the VectorVest Composite (VVC). The Price of the VectorVest Composite is calculated by averaging the closing prices of all stocks in the VectorVest database. If the Price of the VVC goes down from one week to the next (i.e. Monday to Monday), the Primary Trend becomes "Dn". If the Price of the VVC goes up from one week to the next (i.e. Wednesday to Wednesday), the Primary Trend becomes "Up".
Underlying Trend:
The Underlying Trend of the market is determined by the value of the Market Timing Indicator (MTI) being above or below a value of one (1.0). If the value of the MTI is greater than 1.0, the Underlying Trend is Up. If the value of the MTI is less than 1.0, the Underlying Trend is Dn. However, unlike the Primary Trend, the calculation of the MTI involves more than just the price of the VectorVest Composite.
Market Timing Indicator (MTI):
VectorVest identifies the Underlying Trend via its Market Timing Indicator (MTI). This indicator is computed by combining the Price of the VVC, the Relative Timing (RT) of the VVC, and the Buy Sell Ratio (BSR) into a single indicator. The MTI indicator was designed to do four things:
Go above 1.0 prior to a Confirmed Upturn,
Stay above 1.0 during a Confirmed Upturn,
Go below 1.0 prior to a Confirmed Downturn, and
Stay below 1.0 during a Confirmed Downturn.
MTI Performance:
A study of the VectorVest Market Timing Graph shows that the MTI has performed these tasks in exemplary fashion. For example, it has never failed to perform tasks (1) and (3) as designed, and it has successfully performed tasks (2) and (4) 97.2% of the time over the last five years.
Trend Strength and Trend Momentum:
In addition to indicating the direction of the Underlying Trend, the MTI also provides an excellent indication of Trend Strength and Trend Momentum. Therefore, it is useful in helping to identify turning points. For example, the market is clearly overbought when the MTI goes above 1.60 and it is oversold when the MTI goes below 0.60. These extreme levels of the MTI have marked turning points of major rallies and downturns on numerous occasions.