Bear Confirmed. Sounds ominous, doesn't it? To clarify what Toddo mentioned in Random Thoughts regarding our work and the Wall Street sector, Bear Confirmed is a risk status applied to a sector that has exceeded a previous column of Os on its sector Bullish Percent chart.
There are six risk status designations and they are as follows:
Bull Alert: Characterized by the bullish percent falling to 30% or below and then reversing up into a column of Xs.
Bull Confirmed: The strongest of market conditions. Characterized by a column of Xs exceeding a previous column of Xs.
Bull Correction: The bullish percent has reversed down but remains on a buy signal.
Bear Alert: Characterized by a bullish percent falling from above 70% to below 70%, although the bullish percent remains on a buy signal. The thought here is that risk is high enough that we would want to take defensive action without necessarily waiting for the reversal to exceed a previous column of Os.
Bear Confirmed: The weakest of market conditions. Characterized by a column of Os exceeding a previous column of Os.
Bear Correction: The bullish percent has reversed up to Xs but remains on a sell signal.
These status readings are simply another tool in the arsenal to gauge sector risk. We take a top down approach so in our view the most important element is understanding what the risk level of the broad market is. The sector risk levels are the next step.
Below is the Bullish Percent chart of the Wall Street sector. Although not shown on the chart, the last time this sector was at this level was 1997. A reversal down to Os, and a move to Bear Confirmed status, does not mean this sector must now come unglued and move straight down to 30%. It simply means risk has increased.
By comparison, notice on the chart where this sector was in March ...8%. That's a far cry from the current chart reading of 78%.
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