Normally, I don’t use this Bullish Percent Indicator (BPI) data to manage or influence portfolio management decisions. I use it to give a broad view of how the U.S. Equities market is performing. However, I did take advantage of BPI data when the technology sector dipped into the oversold zone several weeks ago. Readers recall I recommended picking up shares of QQQ, an ETF that holds the largest companies in the NASDAQ. QQQ is loaded with tech stocks. What I did was to set multiple purchase orders for shares of QQQ. As the market moved lower and lower, those limit orders were struck. Not all orders where hit as technology reversed and moved back up into the overbought zone, as you see in the following tables.
What does one do with those shares of QQQ now that the NASDAQ 100 is back up in the overbought zone? Read on.
What a difference a few weeks make. Back in January all major indexes were oversold and most have remained that way for several weeks. Despite “Putin’s War” all indexes moved into bullish territory the week as we see from the right-hand side of the following table. Each of the seven indexes show the Point and Figure (PnF) graphs (not shown) with X’s in the right-hand colum from the latest data or what was available on 3/18/2022.
To see the percentage changes, examine the values shown in the left-hand side of the following table. For example, the NASDAQ 100 jumped from 27% bullish stocks up to 80% bullish companies this week. A huge change.
Vanguard and other firms have ETFs that focus on each of the market sectors. As mentioned before, when Technology dropped into the oversold zone back on 1/21/2022, it was time to purchase QQQ or a similar ETF. Now that Technology is back in the overbought zone, what is one to do? One option, and one I plan to employ, is to set a Trailing Stop Loss Order (TSLO) for QQQ. This will lock in profits yet let the ETF run should this sector continue to move up.
If any readers jumped on other sectors when they dipped into the oversold zone (30% or below bullish or green background) and are puzzled what to do with that purchase, wait until the sector moves back into the overbought zone (70% or higher with a red background) and then set a TSLO. I recommend using something around a 5.0% setting. This will vary depending on the individual investor and how much capital preservation is preferred.
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This coming week two Dual Momentum™ portfolios (Galileo and Pauling) and one Relative Strength (Einstein) portfolio will be reviewed. In addition, I’ll run a check on the Copernicus. As readers will recall, the Copernicus is a new portfolio where the investment focuses on the broad U.S. Equities market. My primary ETF is ESGV or a social responsible security. The goal is to do nothing except purchase shares when either new cash or dividends permit the addition of more shares. Young investors are encouraged to invest in a Roth IRA. When the market dips, as it did last January, invest more dollars than normal so as to pick up more shares.