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Technical Indicators Scream Caution

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This rally is getting very long in the tooth.

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A huge array of charts I'm following are signaling caution.

Let's take a look:

Bullish Percent Index (BPI)

"A market breadth indicator calculated by dividing the number of stocks in a given group -- currently trading with Point and Figure buy signals -- by the total number of stocks in that group. Bullish Percent levels over 70% are considered overbought; levels below 30% are considered oversold. Strong buy signals occur when the Index falls below 30%, then reverses up by at least 6%. Conversely, promising sell signals occur when it goes above 70%, then reverses down by at least 6%."

McClellan Oscillator

"A breadth indicator derived from each day's net advances, the number of advancing issues less the number of declining issues. Subtracting the 39-day exponential moving average from the 19-day exponential moving average of net advances forms the oscillator.

"Usually, readings above +100 are considered overbought and below -100 oversold. Buy signals are generated when the oscillator advances from oversold levels to positive territory. Sell signals are generated on declines from overbought to negative territory... A series of rising troughs would denote strength, while a series of declining peaks weakness."


Record High Percent Index

"A market breadth indicator created by dividing the number of 52-week highs for a given market by the sum of the number of new highs and the number of new lows.

Record High Percent = New Highs / (New Highs + New Lows)

The values range between 0.0 and 1.0. A value of 0.0 means that there were no new highs on that day. A value of 1.0 means that there were no new lows on that day. A value of 0.5 means that the number of new highs and new lows were equal."

$BPSPX - S&P 500 Bullish Percent Index

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$BPCOMPQ - Nasdaq Bullish Percent Index

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$BPNYA - NYSE Bullish Percent Index

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$BPTRAN - Dow Jones Transports Bullish Percent Index

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$BPFINA- S&P Financial Sector Bullish Percent Index

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$NAMO - Nasdaq McClellan Oscillator

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$NYMO - NYSE McClellan Oscillator

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$RHSPX - S&P 500 Record High Percent Index

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$RHNYA - NYSE Record High Percent Index

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$RHCOMPQ - Nasdaq Record High Percent Index

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Please remember these indicators aren't a precise timing device. Nor do they indicate the magnitude of a move. They do, however, indicate direction - and, in this case, a potential change in direction.

The key point to note is these and many other similar indicators are flashing warning signs saying: This rally is getting very long in the tooth. With that in mind, bulls may wish to consider reviewing their risk-reward setups and stop-loss positions.

Bears who haven't been blown out of the water may have an opportunity at hand.



In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.
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