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Buzz and Banter

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A quick scan of our database shows that the Bullish Percent charts for the NYSE, Nasdaq and Optionable universe are each down marginally on the day. Wait a minute; I wrote that very sentence last week at this time. Is that weird, or important? Let's go with important. In simple terms this means that there are more stocks giving sell signals than buy signals. By extension, this also means that the rallies in the indices are gradually becoming less technically sound.

How can this be? Good question. Think about the rather trite saying that "stocks don't go up, or down, in a straight line." Let's take a look at a hypothetical chart to get a visual of that old saying.



The chart above shows a stock that is clearly on a sell signal and which has recently exceeded both the March and October, 2002 lows. No matter how you look at it, this is not an attractive stock chart. It has been on a sell signal since January without interruption, although we have seen brief periods of inhales and exhales that show up on the chart as column reversals. There's the old "straight line" saying in action.

This stock is up a little more than a $1 on the day, a move that has no impact on the chart mind you, but which is adding nearly 8 points to the Dow's total. This chart, incidentally, belongs to Eastman Kodak (EK: NYSE).

This is just a small piece of the Dow rally, for example, but hopefully it helps illustrate how not all rallies are created equal.

No positions in stocks mentioned.

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