As anticipated, the Bullish Percent Indicators took a dive this week. There were a few exceptions, as usual. Technology in particular was pummeled. QQQ hit its TSLO limit in a number of portfolios as readers will see when portfolios are reviewed throughout the month of September.
All indexes are on defense as we see 100% of the Point and Figure (PnF) identifiers are showing O’s rather than X’s. If you look at the NASDAQ 100 we see where 21 individual stocks turned bearish since last week. The NYSE moved out of the over-bought zone, but not by much. The NASDAQ is a different story as only 55% of the stocks are bullish.
When we check the DJIA and S&P 500, we can conclude that large-cap stocks are still holding firm.
Breaking the U.S. Equities market into sectors, we also see quite a bit of weakness despite five of the ten still over-bought. Telecom is one of those anomalies we see at least once a month where there is a change in the percentage, but not matched over on the right when we examine X’s and O’s. The Telecom sector does not hold all that many stocks. We see a percentage jump from 39.8% up to 58.1%, but Friday’s move kept the PnF graph in the camp of the defense.
It was a bit of a surprise to see two of the sectors, Financial and Materials, flip from defense to offense. Note that the percentage for Financial remained static.
Are we about to experience a correction? One week does not make a market move so I will not venture a prediction. That is always dangerous. Keep in mind that September does not have a good track record for upward stock movements. The reasons are nebulous.
I plan to stick with the same portfolio management models while setting tight (4% to 6%) TSLOs for most equity holdings.
Here we have a graph of the bullish percentages for the New York Stock Exchange. This graph provides a good visual image of the broad market moves over the past months going back to early 2017.
The tech heavy NASDAQ is also off its high from early June 2020. Don’t be surprised if there is not high volatility until after the election. Conclusion: This seems to be a period when it will pay to take risk averse positions with equity holdings.