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VLMAP Indicator Predicting A Bottom

24 July 2008, 7:54 am
by
Bull Bear Trader

As discussed at MarketWatch earlier this week, VLMAP, which stands for Value Line's Median Appreciation Potential, rose to 100, a level that occurred during the last three major market bottoms (Oct 2002, March 2003, and right after 9/11). The VLMAP is a single number representing the median of the projections made by Value Line's analysts regarding trading direction over 3-5 years for the 1,700 stocks they follow. (Note: the last weekly data reported a 95 level, and given the recent market rally it may next report a lower level, but it is believed to have touched 100 intra-day on July 15 - yet an exact benchmark number on a non-widely followed indicator is probably not worth stressing over).

Of course, as just mentioned regarding pre-election market trends, the data and predictions of the indicator (just 3 recent market bottoms) is not enough to provide full confidence, but the indicator has been considered and used as a market timer since 1986. Econometric analysis by the Hulbert Financial Digest in 2004 confirmed its use for market-timing. It is also worth nothing that the VLMAP does not give you a precise time for the market bottom. The indicator simply looks at long-term reversals, and how the risk-reward trade-off is becoming more attractive to justify entering the market.


The Bull Bear Trader discusses market events and news with an interest in understanding risk and return in both bull and bear markets. Discussion topics include trading and hedging strategies, derivatives, risk management, hedge funds, quantitative finance, the energy and commodity markets, and private equity, as well as an occasional investment opinion.

 

 

 
 
 

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