A brief but pithy market update
The commentary that follows is by the always-excellent and insightful, Dorsey Wright, which service I recommend strongly for all investors.
-- David M Gordon / The Deipnosophist
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We’ve obviously received a number of inquiries as to what impact the recent market activity has had on the NYSE Bullish Percent, our primary market coach.
It appears that with Thursday’s market activity, once the dust settles, we will seen enough net new sell signals to push that indicator into O’s and thus onto defense. The final tally will come after Thursday’s close, but it does appear that the bullish percent will fall ~2.0%, when it needed only a 1.57% decline to trigger a reversal. Should this be the case, it is reflective of the fact that meaningful damage has occurred within the market and that risk levels have risen.
A reversal with Thursday’s action should not come as any real shock; this offensive drive has outlasted every major rally in the market since 1997, except one. Possibly moving to defense after 244 days of offense falls short only to the rally that began in April of 2003, which lasted 349 days. And when we look at how long the NYSE BP has remained above 70% without reversing... well, it has been in the “red zone” for 105 days. Using BP data back to 1955, this is just two days over the average length of time this bullish percent has historically remained above 70% (103 days) before turning over the ball. While not surprising, it does represent an actionable change in the marketplace. It suggests an added emphasis upon diversification away from equities should be explored within accounts, and that wealth preservation is now priority number one...
-- David M Gordon / The Deipnosophist
================================
We’ve obviously received a number of inquiries as to what impact the recent market activity has had on the NYSE Bullish Percent, our primary market coach.
It appears that with Thursday’s market activity, once the dust settles, we will seen enough net new sell signals to push that indicator into O’s and thus onto defense. The final tally will come after Thursday’s close, but it does appear that the bullish percent will fall ~2.0%, when it needed only a 1.57% decline to trigger a reversal. Should this be the case, it is reflective of the fact that meaningful damage has occurred within the market and that risk levels have risen.
A reversal with Thursday’s action should not come as any real shock; this offensive drive has outlasted every major rally in the market since 1997, except one. Possibly moving to defense after 244 days of offense falls short only to the rally that began in April of 2003, which lasted 349 days. And when we look at how long the NYSE BP has remained above 70% without reversing... well, it has been in the “red zone” for 105 days. Using BP data back to 1955, this is just two days over the average length of time this bullish percent has historically remained above 70% (103 days) before turning over the ball. While not surprising, it does represent an actionable change in the marketplace. It suggests an added emphasis upon diversification away from equities should be explored within accounts, and that wealth preservation is now priority number one...
[click on chart to enlarge]
(c) Dorsey Wright
(c) Dorsey Wright
Labels: Market analyses
posted by David M Gordon | 5:40 AM
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