Value Line VLMAP Indicator Predicting A Bottom?

Posted by Bull Bear Trader | 7/24/2008 09:54:00 AM | , , | 0 comments »

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.