While I do not make investment decisions based on the following tables, Bullish Percent Indicators (BPIs) do provide a broad overview as to market directions. To be sure, this is only the U.S. Equities market as bonds and international equities are left out of this data.
This week we see some strengthening in the markets as both the NYSE and DJIA moved from defense (O’s) to offense (X’s). A 3% shift in the percentage of stocks showing bullish or bearish trends is required to make the switch. In addition, I only update this information weekly so changes might occur during the week in volatile markets.
Index BPI: Of the seven major markets, and there is overlap, five are in the overbought zone or 70% and above. Only the NYSE and NASDAQ are currently positioned below the 70% mark. As mentioned before, the NYSE is the most important index as it covers a broad range of stocks. The NASDAQ continues to be heavy in high tech stocks so it is of value to watch it as well.
Sector BPI: None of the sector teams changed positions this week. If you check the percentages you will see some variations, but not sufficient to move the needle from defense to offense or the reverse. It looks like it will take at least a 10% correction to move the majority of sectors out of the overbought zone. We are getting into years, not months, since the market was oversold. That occurs when the percentages dip below the 30% line. When that happens again we want plenty of cash to buy back into the market. Our risk reduction models will help us be in the proper position when that time comes.