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A Closer Look at the Bulls

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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.

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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