This week exposed few changes in the Bullish Percent Indicators. However, there are a several observations and clues to extract from the following data. Discretionary switched from defense to offense while Health made the opposite move. Those changes are not the main takeaway from the data this week.
Index BPI: As most of you heard, the NASDAQ set an all-time record this week. It took this index approximately fifteen years to recoup or return to where it was before the tech crash. That is a long time and gives you some idea how difficult it is to regain losses. I know this math from experience. If you take a 50% loss, it requires a 100% gain to get back to even.
The main observation I pass along from the following data involves the NASDAQ. If you look at the NASDAQ 100 you see that 5 stocks moved from bearish to bullish as there was a five percentage point gain. That is not five percent, but rather five percentage points. There is a difference. The NASDAQ 100 is made up of the largest companies and those tended to do well this week. Now move over to the broad NASDAQ and you will see a slight decline in the percentage of bullish companies. That means that the smaller tech companies did not experience the same gains as their larger sisters. When only the larger stocks are doing well, it tells me to be cautious as the bull may be tiring. Note that six of the seven major indexes are over-bought.
Sector BPI: Financials continue to do well as investors think the handcuffs may be removed from the banks when the new administration takes over. Most of us know how deregulation turned out in 2008 and early 2009. It is my understanding that Canada continues to separate investment and commercial banks much as we did in the U.S. until the late 1990. Once the Glass-Steagall Act of 1932 was removed in the 1990s, banks were free to play dice with investors money. The Dodd-Frank bill sought to bring back some of those earlier regulations. Watch your wallet (and portfolio) if banks are again freed to operate as they wish.
Other than a few subtle changes in the data, this last week turned out to be rather calm. Watch this space as we enter an uncertain future beginning next week.