Saturday, December 08, 2007

Stock Market Forecast



Above is a weekly chart of the S&P500 and below that is an indicator called the S&P bullish Percent Index.

The Bullish Percent Index (BPI) is a popular market breadth indicator that is calculated by dividing the number of stocks in a given group (an exchange, an industry, etc.) that are currently trading with Point and Figure buy signals, by the total number of stocks in that group. Strong buy signals occur when the Bullish Percent Index falls below a low level and then reverses up by at least 6%. Conversely, promising sell signals occur when it goes above a high level, and then reverses down by at least 6%.

As you can see, the BPI has fallen to it's lowest level in years and is now rising which in my opinion is very bullish for stocks. I am long the NASDAQ because the NASDAQ has been showing relative strength compared to the S&P and the Dow. I think we'll see new highs for the year in the NASDAQ and the S&P.

1 comment:

JBetz said...

Kevin - This indicator is probably one of the best market indicators in terms of current market risk. Curious why you use a line chart instead of the point & figure version, which gives signals that are automatic when a new column changes direction (same as a 6% change).

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