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Market Waits With Bated Breadth

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Is it "baited" breadth or "bated" breadth?

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With the Dow Jones Industrial Average surging to a new all-time high but the S&P 500 still about 12% below its all time high, I wanted to take a fresh look at the bullish percent index for the S&P 500 to see if it's telling us anything about the market.

A bullish percent index is calculated by simply dividing the number of stocks in a given group (that group can be an index or even an industry) that are currently on point and figure buy signals, by the total number of stocks in that group.

For more information about the bullish percent concept see this series of Minyanville articles:
NYSE Bullish Percent Primer
NYSE Bullish Percent Primer, Part Two

Although bullish percent indices can be plotted in point and figure terms, they are also easily plotted in other chart forms as well. As the chart below from StockCharts.com shows, the bullish percent indicator can reveal the underlying health of the market in terms of point and figure buy signal "breadth" when viewed against the price action on the underlying index it is measuring.

On a weekly basis, the S&P 500 price action has been quite positive even as the percent of stocks on PnF buy signals has steadily deteriorated, with fewer and fewer stocks supporting the price action in the index. This kind of negative divergence points to a narrowing in the positive (in point and figure terms) technical health of the underlying stocks.



Here is the actual point and figure chart, courtesy StockCharts.com, showing the S&P 500 bullish percent.


No positions in stocks mentioned.

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