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Point & Go Figure: S&P 500 Bullish Percent Bearish Catapult? Also, Google, Costco


Beware of ever-changing cycles.


Market Overview:

The short-term Percent Above 50-Day Moving Average Indicators have once again reached oversold levels. The Nasdaq-100 50-day indicator reversed up to Xs with yesterday's actions and has formed a higher low from the recent June low at 9%. The S&P 500 50-day indicator has not yet reversed up, but may do so with today's actions.

It is important to keep in mind that these 50-day indicators are not supply and demand indicators. Instead they help us evaluate overbought/oversold conditions within the market's broader context. Since markets do not move in a straight line either up or down, these indicators help us evaluate the probabilities of conditional relief at a point in time.

The High-Low Indexes for the Nasdaq and NYSE both remain in Os (negative) but only the Nasdaq has reached the deep oversold levels seen in late June according to data from Investor's Intelligence.

The long-term bullish percent readings remain negative with the NYSE Bullish Percent in Xs, though still in an active bearish catapult pattern, while the Nasdaq-100 Bullish Percent remains in Os, but at its lowest level since August 2004.

Charts of Interest:

Recently we discussed the bearish catapult pattern for the NYSE Bullish Percent. A bearish catapult pattern is a triple bottom followed by a double bottom. The NYSE Bullish Percent broke a triple bottom on October 19, 2005, then broke a double bottom in June. But can these index breadth charts form patterns that are meaningful?

Regardless of whether one chooses to call the NYSE Bullish Percent pattern a bearish catapult, which we do just for ease of the orthodox nomenclature, or something else, the important point is that following a long-term series of lower highs for the NYSE Bullish Percent dating to its peak in January 2004, the breakdown on the chart (triple bottom, then double bottom) signifies intensified selling pressure and should be viewed as a warning that the previous market cycle is changing.

Meanwhile, below is a chart of the S&P 500 Bullish Percent courtesy This indicator broke a triple bottom in June but has since then reversed back to Xs. Through the market action on July 18 it is .8% away from a reversal to Os. More importantly, it is within 2.8% of forming a potential bearish catapult pattern (triple bottom followed by double bottom)... just like the NYSE Bullish Percent. What a coincidence. Again, should this happen (still a big if) it would signify intensified selling pressure in terms of new PnF sell signals and would be a further warning that the past market is changing.

S&P 500 Bullish Percent Bearish Catapult?

Google (GOOG)

(Chart courtesy

Google reports earnings after the close on Thursday. What are the risks in the stock? After completing a TD-Sequential sell signal on June 23, the stock has not yet found support and is now trading below both the 50-day and 200-day moving averages.

There are so far no new DeMark TD-Sequential or TD-Combo indicators suggesting exhaustion of the new downtrend. As well, a 2x3 PnF chart below shows a clear violation of the long-term uptrend. The 4x3 PnF chart shows the long-term trendline still intact. But without DeMark indicators confirming downside exhaustion the probabilities favor that trendline failing. Upside risk is to 412, which would suggest something more complex is going on, with trendline resistance overhead at 418.

Costco (COST)

(Chart courtesy

A chart of COST shows the stock on a sell signal having failed to break through triple top resistance at 57. A lot of air down to the PnF trendline at 47.

Costco (COST)

(Chart courtesy Thomson Financial)

As well, note that on a weekly basis the stock has registered a DeMark TD-Sequential 13 sell signal.

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