Replies to post #28802 on A.I.M. Users Bulletin Board (AIMUSERS)

[lionhead0]

Hi Gujralh,

Sorry, I have no VLAP for the 3/2000 bubble. The VLAP on the market high (as measured by the V/L Arithmetic Index ($VLE)) on 7/13/2007 was 35%.

From the market low of 10/9/2002, at 891.25, to 10/10/2005, at 1827.58, 3 years from the low, the gain was 2.05x; to the final market high of 2507.38 the full 5 year gain was 2.813x. So, since the VLAP changes weekly, any study of its predictive power would have to be done on rolling 3 and 5 year studies.

In 2006, the V/L projection for the Dow was 15,400 in 2009 to 20,600 in 2011. It likely would have got to 15,400 if the credit/debt bubble had not been pricked. So, projections from V/L are likely best case scenarios.

On the other hand, S&P makes their projections based on best case, baseline, and worst case with probabilities assigned to each scenario. Readers can pick which case they prefer, then assume the risk/reward of it.

Regards,

Tim

[lionhead0]

Hi Gujralh; RE Highest Value of VLAP in 2000 bubble.

Looking at the V/L logarithmic chart from 1992 thru 2008, the highest VLAP in 2000 was 100 that occured roughly during the first big dip in the index during Q1. At the bubble top, the VLAP registered approximately 75. During the remainder of year 2000, the VLAP ranged between 75 thru 90.

It appears V/L had caught a dose of the bubble fever as the VLAP trended higher from 1999 thru 2000. Using it as a market risk/timing indicator during times of mania is problematic.

Tim