Buzz and Banter
The Bullish Percent indicators I use are divided into three categories: short-term, intermediate, and long-term. Short-term indicators include the 10-Week Moving Average indicators for the NYSE and NASDAQ, the High Low Indexes for the NYSE and Nasdaq, and the Bullish Percent charts for the S&P 500 and Nasdaq 100. The intermediate indicator is the Bullish Percent for Optionable stocks. The longer-term indicators are the Nasdaq and NYSE Bullish Percents.
The short-term indicators are just that, short-term. Reversals in these indicators do not necessarily presage an imminent decline. To understand the context of the short-term reversals requires a look underneath the hood, so to speak, to see whether the pullbacks in stocks are pullbacks to support areas, or violations of support areas that result in sell signals.
As for the long-term indicators, as I've mentioned before, the troubling aspect of these indicators in their current state is that they are at historically high levels. The NYSE Bullish Percent is the highest it has been since 1997. However, it is important to understand that this indicator can remain in a high-risk area for months on end. Currently it has been above 70% for just 33 trading days.
Looking at the history of this indicator for some guidance that might rhyme with today's status, the initial reversal down for the NYSE Bullish Percent from above 70% rarely leads to a serious decline. It is the second reversal down that leads to something more serious and has in the past caused the most damage.
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