As you check out the Bullish Percent Indicator data, be aware there are a number of anomalies present in the data. By anomaly, check the difference between the percentage gains or losses and then compare with the X’s and O’s on the right side of the tables. X’s are bullish and O’s are bearish signals.
An example of what I am describing shows up in the NASDAQ 100 data where there was an upward move from 64% bullish to 70% bullish while the Point and Figure (PnF) side of the table shows an opposite move from bullish (X) to bearish (O). There are a number of these anomalies among the sectors. What is going on is the week showed an overall strong equities market, but there were corrections on Friday.
With the market this high, caution is merited. Covid-19 is out of control and the current administration is doing little to combat the spread. Will the governors need to shut down businesses, thus crippling the economy? That could negatively impact the stock market. On the other hand, investors have no place to spend their money so saving is up significantly. There is more money to invest so that will likely drive the stock market higher.
We might see a rocky road until the new administration secures its management legs.
The past week was a strong one for the equities market. Check out all the percentage gains on the left side of the table. All the indexes are either in the over-bought zone or close to it. Check out the major gain in the Dow Jones Industrial Average (DJIA).
The number of “anomalies” are far more than normal this week. Therefore, pay more attention to the actual percentages vs. the PnF X’s and O’s shown on the right side of the table.
Seven of the ten sectors are now over-bought.
The NYSE graph is close to touching the over-bought zone of 70%. If you check back historically, this index does not remain above the 70% line for very long.
The NASDAQ parallels the NYSE, only at a slightly lower level. This graph is a good indicator showing how the QQQ ETF is performing.