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Bear Markets Ain't Over 'Til They're Over

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Bulls continue to pick up dimes in front of the bulldozer

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Below is typical of the questions I've been receiving lately with respect to how the market will perform over the next few weeks and months:

Kevin,

Does the fact that the S&P 500 Bullish Percent Indicator flipped to negative provide evidence for the view that "the longer we meander sideways, the more likely it is that we're working off the oversold condition as a function of time rather than price"? And does this, in turn, imply that the odds are increasing that the market will exit this sideways "meander" with a move down rather than up?

Thanks as always,
Minyan Randall

The specific indicator Randall is referring to - the S&P 500 Bullish Percent - is something I post and update on the Minyanville Buzz & Banter each day with data obtained from Investor's Intelligence. (For a primer on the bullish percent concept, please click here, and for part two, click here.)

The bullish percents are not predictive. They provide a snapshot of supply/demand at a given moment. From that standpoint, I use them as additional contextual indicators to help interpret the predictive DeMark price exhaustion techniques. What I see from that standpoint are the following (basis S&P 500 Index):

Yearly: Qualified break of long-term TD Demand line.

Quarterly: Qualified break of long-term TD Demand line, count 4 of potential 9 in TD-Sequential Buy Setup.

Monthly: Count 7 of potential 9 in TD Sequential Buy Setup (with the requirement for a perfected Buy Setup being that the low of bar 6, 741.02, is exceeded to the downside at some point in January or February).

Weekly: Upside level following Perfected Buy Setup in November was met at 919. Now, a new potential Buy setup has begun.

Daily: A potential TD Sequential Buy Countdown 13 signal could occur as soon as this week, while an overlapping Buy Setup is on bar 6 of potential 9.

Viewing this from top down, the bottom line is that bulls are still in the awkward position of picking up dimes in front of a bulldozer. Because the indicators are dynamic, a new low in the first quarter is not some kind of preordained destiny, though it is (for now) highly probable.

That being the case, to sum up this long-winded answer, there are signs another short-term upside try is approaching, but expect that to be short-lived. Based on the bullish percent for the S&P 500 and the longer-term DeMark exhaustion techniques, the probabilities are that we see lower prices before bears become the ones scraping the ground for coffee change in front of the bulldozer.

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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