Market Timing: Get Ready
Time to get your shopping list ready and be prepared to buy stocks when it’s safe to buy.
What Is the Buy to Sell Ratio (BSR)?
The Buy to Sell Ratio (BSR) is a proprietary market analysis indicator tracked daily by VectorVest. It measures the relationship between the number of stocks rated Buy versus those rated Sell in the system.
Think of it as the “canary in the coal mine” — a gauge of market breadth that reveals the underlying strength or weakness of rallies and pullbacks.
When the BSR is above 1.00, more stocks are rated Buy than Sell, signaling a strong and healthy market.
When the BSR is below 1.00, more stocks are rated Sell than Buy, signaling market weakness and potential trouble ahead.
Why Is the BSR Important?
Market Breadth Insight: Measures the overall participation of stocks in a rally or decline.
Early Warning System: Divergences between BSR and the VectorVest Composite (VVC) often precede pullbacks. (Canary Signal)
Trend Confirmation: A rising BSR validates rallies; a falling BSR signals weakening momentum.
Risk Awareness: Helps investors anticipate reversals before they appear on price charts.
Confidence Booster: Aligning trades with a healthy BSR adds conviction to entries and exits.
How Do I Use It in VectorVest?
Check the BSR daily in the Advanced Market Timing section alongside the Color Guard and MTI.
Watch for divergences: If the VVC makes higher highs while the BSR makes lower highs, it’s a bearish warning of a potential pullback.
Use BSR with timing signals: A rising BSR strengthens a Safe to Buy signals, while a falling BSR adds weight to Be Defensive signals.
Stay disciplined: Treat bearish divergences as caution flags, not guarantees, and always follow your stop rules.
Summary
The Buy to Sell Ratio is a critical market breadth indicator in VectorVest. It reveals whether rallies have real strength behind them or if momentum is fading. By tracking the BSR daily and combining it with VectorVest’s timing signals, investors gain an edge in spotting reversals early, managing risk, and making smarter, more confident trading decisions.
Example of this bearish divergence giving a warning of a coming pullback.
As illustrated in the chart above, a bearish divergence occurs when the price the VectorVest Composite (VVC) is hitting higher highs, but the Buy to Sell ratio (BSR) is hitting lower highs. This discrepancy can often signal a potential reversal in the market’s upward trend, suggesting that the momentum behind the price increase is weakening.
Investors often view bearish divergences as a warning sign that the market may be due for a pullback or a downward reversal. It suggests that buyers are losing strength, and the market may soon decline. A bearish divergence is an important concept that helps traders identify potential trend reversals and assess the strength of price movement.