A Closer Look at the Bulls
Despite yesterday's daylong weakness, the bulls remain firmly in control of our indicators and, for now, the market.
Last week I covered the NYSE Bullish Percent risk indicator and how this longer-term indicator simply provides a picture of risk in the market at any given time.
For a shorter-term look at the market, there are a number of faster indicators we watch. The Percent of Stocks Above Their 10-week Moving Average is one. As well, the more narrow Bullish Percent charts for the Nasdaq 100 and S&P 500 will naturally turn quicker than the NYSE or OTC Bullish Percent charts.
When does a much-needed respite from a rally become something more serious? Well, from a technical standpoint it becomes more serious when stocks begin pulling back through support. In the Point & Figure Methodology, this will show up as stocks giving sell signals on their charts. We'll see net sell signals begin to outweigh net buy signals and the Bullish Percent indicators begin to weaken and eventually reverse to Os.
On any given morning we'll wake to find our favorite newspaper's business section make a judgment on what occurred the previous day in the market. Sometimes a business editor will make the judgment, but other times it may be a copy editor in the right place at the right time. For example, most business pages today say that shares fell based on Freddie Mac (FRE:NYSE)developments, Motorola (MOT:NYSE) developments or some variation of that. Fair enough.
What I like about the bullish percent indicators, however, is that they clue me in to when supply really takes over for demand, versus when stocks simply pull back toward support levels.
So how did yesterday shake out? The NYSE Bullish Percent was down just a hair, less than a half a percent. The OTC Bullish Percent was actually up a fraction. As well, the shorter-term Bullish Percent charts for the NDX and SPX were virtually unchanged. We did see weakness in the Percent of 10 charts for the NYSE and Nasdaq, but nothing close to a reversal down yet. With all of our indicators at such extreme bullish readings I believe this rally will ultimately end in tears, but for now dry eyes are in command.
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