MTI AT 0.60 – MARKET IS FINDING A BOTTOM.
Written by: Robert and Russell Markham
The Market Timing Indicator (MTI) at VectorVest is a very important indicator. The MTI accounts for the indexed average of all the stocks we track in Australia, the Relative Timing (RT) of the Market and the Buy to Sell Ratio (BSR) of all these stocks. You can see the MTI score on the HomePage per the Color Guard.
Load up the Market Timing Graph and put on the MTI indicator (per the Timing tab, select the Market Timing Graph and then you can select the VectorVest MTI Layout per the Graph Control Panel which will automatically put on the MTI indicator for you). If I pull back the Market Timing graph over the last 11.5 years, I can see that the lowest level the MTI ever hit was 0.42 on 21 November 2008 (during the GFC). At this point, we were very close to the bottom of the market. The MTI then started to turn back up and just broke above 1.00 on 7 January 2009. No sooner had MTI broken above 1.00, the MTI went back below 1.00 again – warning us that the bottom of the market had not been found yet. The MTI dived back down to 0.45 by 5 March 2009 and then broke back above 1.00 by 24 March 2009 and proceeded to moved up in a steady fashion for the next few weeks, letting us know that the market bottom has been found, helping guide us back into the market after the GFC. Note too that a Confirmed Up, C/Up, signal took place on 24 March 2009 (the C/Up Signal requires the MTI to be above 1.00).
At VectorVest, over the years, we have seen that the market typically tends to bottom out when the MTI hits 0.60 and tends to top out at 1.60. For this essay, let’s just concentrate on finding a market bottom. The MTI rarely goes too much lower than 0.6. The MTI, as of Tuesday, 20 November, is at 0.64. Based on what we have seen over the years, it seems we are very close to the market bottoming out.
Check out the MTI on your Market Timing Graph on 26 October 2018, note how the MTI had just gone below 0.60. The MTI then started to turnaround, but was not able to break above 1.00 and by 13 November, the MTI was starting to head back down again; telling us that the market may not be yet be done finding a market bottom. Statistically speaking, the MTI has not sat much lower than 0.60 when finding a market bottom. Note too that we have been in a Confirmed Down, C/Dn, since 13 September.
When you are in a C/Dn and you see the MTI falling away, you want to be very careful about entering back into the market.
Keep a close eye on the MTI, watch for it to break back up and, if you are a conservative investor, you want the MTI to break above 1.00 along with seeing the C/Up signal.