Posts Tagged ‘NYSE Bullish Percent Index’

Are institutional investors courting financial losses?

Sunday, September 20th, 2009

As we write, there are more and more mainstream news report that institutional investors (e.g. the ones handling your retirement ‘savings’) are entering the market with their ‘idle’ cash. Reportedly, those investors are the ones who missed out on the rally for the past 6 months. Consequently, after the abortion of what seemed to be the start of a correction in early September (see Time to short stocks in the NYSE?), the market raced up again. Back then, the NYSE Bullish Percent Index was at 77.23%. Today, this is what this technical indicator look like:

NYSE Bullish Percent Index

NYSE Bullish Percent Index

As you can see, at 84.47% the bullish sentiment is at an unprecedented high level. It seems that the stock market is at a euphoric state of drunken ecstasy. Although that does not mean that it cannot go any higher, it means that it is vulnerable to a very significant correction. Therefore, those who are using high leverage to buy stocks at this point in time are courting financial disaster.

We do not pretend to know when the correction will come and we are not experts in technical analysis here. But for those who wants to time the market, we urge you to get some education on charting, trend following, technical analysis and so on. For this, we recommend the services of our business partner at Market Club, who has something to say about the traditional “Buy and Hold” strategy here.

In the next article, we will write about what we believe could be the trigger for the next correction (if it didn’t happen by then). Keep in tune!

Time to short stocks in the NYSE?

Thursday, September 3rd, 2009

In our last article, we mentioned about that gold prices are in the cusps of renewed volatility. The question is, will the volatility break gold prices out to a new record high or will it break it down to a low?

Yesterday, gold price surged US$20 with high volume of trading. Gold prices had not jumped so much for quite a while already and in the minds of many trend following traders (in the context of gold prices forming a technical pennant) this is indeed a buy signal. In the days to come, if this upward momentum is sustained, this will attract the attention of the mainstream media.

But is this the time to short stocks? Let’s take a look at this Point-and-Figure indicator:

NYSE Bullish Percent Index

This indicator tells us the percentage of stocks in the NYSE that are currently under “Buy” signals. Unlike the other index (e.g. Dow Jones & S&P), this is a very ‘democratic’ indicator in the sense that each stock is given an equal share of one ‘vote.’ It is used as a contrarian indicator to tell us when the market is in extreme bullish position or not. As the chart shows, it is current down to 77.23%, from a high of 80%. As you can see from the chart, 80% is an unprecedented high since 2001. The market is at a very high risk territory for a reversal.

Currently, this Point-and-Figure indicator is not officially in trend reversal status yet. But it will be soon if more stocks comes under “Sell” signal.