Bullish Percent Indicators give us a broad overview of how well U.S. Equities are performing. This last week has been a bloody one for the stock market as every indicator, be it a broad index or a sector, took a beating. The increased number of Covid-19 cases is having a negative impact on the market. Closing down the economy, if this were to happen again, is going to be a psychological blow to the stock market and that appears to be what happened this week.
Every major index found a high percentage of companies turn from bullish to bearish. When looking at the following data, pay most attention to the New York Stock Exchange (NYSE) and the NASDAQ. While the markets are not yet over-sold, one or two more weeks like this last one and we will be back to conditions of last March.
Sectors of the stock market did not fare much better as every one contained stocks where the Point and Figure (PnF) moved from bullish to bearish. Only Materials is showing X’s in the right-hand column and that was due to a bit of a lift on Friday. For the entire week, Materials dropped nearly 30 percentage points. That is a large percentage drop. Please note the difference between percentage and percentage points.
When you see these negative signals, take note as to how to preserve capital.
- In the Position Sizing (Auto) worksheet, adjust the risk for the portfolio so it does not exceed 5.0%.
- Tighten up the TSLOs.
- Don’t be afraid to hold cash.