Here’s a different technical indicator, the Bullish Percent. As Declan Fallon explains, "the Bullish Percent Indices reflect the percentage of stocks on point-n-figure chart ‘buys’." For more on point-n-figure charts, see stockcharts.com.
Bullish Percents All Bearish
Courtesy of Declan Fallon at Fallond Stock Picks
Adding to the intermediate top picture are the Bullish Percents for the Dow, S&P and Nasdaq are now all negative. None of the indices came close to challenging price resistance during the Bullish Percents rally; very disappointing and a worry for bulls looking for a tradable bottom.
I think money will stay on the sidelines (or move back there for those in the market) over the next couple of weeks. I don’t think we are going to see another big downleg like Sep/Oct as the associated period of volatility is a rare occurrence. More likely is a series of drip losses to take the indices back to November lows. From there it’s anyone’s guess but it will mark the first point of entry for value buyers to step in.
During these market conditions I like to read Richard Lehman’s analysis on Trend Channels to get an idea as to what’s happening over the short term. His reading of what’s going on is that a bounce is the best bet going forward. If a bounce does materialise, I will be looking for confirmation of the intermediate top with a failed test of former ascending triangle resistance.
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The comment section helps clarify how the Bullish Percent Indexes are calculated.
Jorge Delgado said…
Rajiv Vyas said…
Could you extrapolate on how these indices are calculated? Did you take the indices or just the underlying components. Thanks, Rajiv
Declan Fallon said…
The Bullish Percents are an available indicator from Stockcharts.com but to create your own you count the total number of Dow stocks (for the Dow BPI) on point-n-figure buy signals and divided that number by the number of stocks in the Dow. This in effect creates an oscillator on which a moving average can be applied to create a trade trigger.
How are these indices calculated? …
I have never used a Bloomberg terminal so I don’t know if there is an equivalent on it…