Bullish Percent Indicators: 28 June 2024

Infrared Experiment

It would not have been necessary to post the Bullish Percent Indicator data this week as no changes are in store for those readers using the Sector BPI investing model.  However, it is useful as we enter the summer months to keep an eye on sectors that may drop into the oversold zone.  Other than a few “shard” sector ETF holdings, the lone sector held in the Sector BPI portfolios is Staples (VDC) and that security as been languishing in the neutral zone for many months.

Index BPI

This week the S&P 500 moved up into the overbought zone.  This should have aided any of our portfolios that are holding shares of VOO and to a lesser degree, VTI.

Note that the broad NYSE index moved down from 52.3% bullish to 51.9%.  This is a small drop and likely accounts for only a few stocks.  Those are most likely small- or mid-cap stocks as the large- and mega-cap stocks continue to perform quite well.  Check the increase in bullish stocks within the DJIA.

Sector BPI

Movement within the eleven market sectors is not unusual.  Five of the sectors moved from bearish to bullish or from O’s to X’s.  This data is known as Point and Figure (PnF) graphing and is a very different way of tracking stock, index or sector movement.

The three overbought sectors are:  Technology, Utilities, and Real Estate.  Holdings in these three sectors were sold out of the Sector BPI portfolios weeks ago.  Readers who have been following the Sector BPI investing model know this created a weakness in the model.  The patch is explained below.

Explaining the Hypothesis of the Sector BPI Model

Investors using the Sector BPI model will recall an adjustment made in this model early in its life.  What is going on within the sectors is a classic example of why ETF options such as VOO and VTI were added to the investment quiver.  Take Real Estate (VNQ) as an example.  We placed a 3% Trailing Stop Loss Order (TSLO) when the sector first showed up as overbought.  It eventually dropped 3% triggering a sale.  Now the sector is once more back in the overbought zone and this upward movment occurred without the sector ever dropping back into the oversold zone.  Real Estate could easily continue to increase in value leaving us, as an investor, hold cash while the market moves up.  To patch this potential problem, we added U.S. Equities such as VOO and VTI to the investment quiver in order to participate in such upward movement when there are no oversold sectors.

Right now the Sector BPI portfolios tracked here at ITA hold significant positions in VOO and VTI as there are no buying opportunities among the sectors.