While the following Bullish Percent Indicator (BPI) data is not used to manage any of the ITA portfolios, I keep thinking, how might one use this data to run a portfolio? One possibility is to set up a portfolio using Vanguard’s sector ETFs to form the investment quiver. Construct the initial portfolio by purchasing a few shares of each sector ETF and then wait until the sector drops below the 30% level. Use all available cash to purchase as many shares as possible of that sector that reached the buy level. On 8/20 of last year Energy reached the buy level. Health reached that level on 12/3/21. If you have been tracking BPI data for any period of time you are aware that indexes and sectors tend to breech the 70% level (Sell point) more frequently than they cut through the 30% or Buy level. While it makes sense to Buy when the BPI data moves into the green or <30% level, it does not make as much sense to Sell as soon as the sector moves through the 70% BPI level. Perhaps wait one or two weeks before selling. In other words, let the winner run a few weeks longer.
Market sectors spend most of their time between the 30% and 70% levels so there would be a minimum of trading if one adopted such a portfolio management system.
Below is six months of BPI data. Note that all indexes are bearish or are showing O’s in the right hand section of the following data table. I pay most attention to the NYSE and NASDAQ as they are broad indexes. Both indexes are ranging in the fairly valued zone of around 50% bullish stocks.
All sectors are bearish with exception of Energy. One would have done quite well if they purchased an Energy ETF back in August of 2021 and sold it around the first of October.
When reading these tables, the right side gives the broad or quick view. The percentages on the left side are more granular, thus providing more detailed information. The majority of the sectors are fairly valued at this point as most range between 40% and 60% bullish.
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