To look at the following index and sector Bullish Percent Indicators one might conclude we are witnessing the bottom of this recent correction. That is reading too much into all the moves from the defensive (O’s) teams over to the offense (X’s). What is happening is that Friday’s move was sufficiently strong to move at least 3% of the stocks in a particular index or sector causing a shift from O’s to X’s.
Index BPI: The NASDAQ is one example where the percentage of bullish stocks hit a very low number during the week, but rebounded sufficiently to make the switch to offense while still coming in at a lower overall percentage for the week. This happens frequently when the market is quite volatile. The Dow Jones Transportation Average (DJTA) stubbornly hangs on to a lowly 10% bullish position. Otherwise, all the other indexes are now on the offense. It will take a few weeks to shake out what this market is going to do during this crazy election year.
Sector BPI: One of the more significant indicators among the sectors is the failure of the Financials to respond to Friday’s market. Since I have been keeping these records, Financials at 18.2% bullish has never been this low. Nor do I remember when Energy hit the 5% mark. At least seven of the ten sectors turned the corner this week. Now we need to see if this upward move can be sustained. When we see so many indexes and sectors in the over-sold zone (<30%) it is not time to short the market.
Stay the course and pay attention to the momentum recommendations coming out of the Kipling Tranche 2.5.1 spreadsheet.