Posts Tagged ‘Point & Figure’

Indicator turned bearish despite high in index

Sunday, October 11th, 2009

As you look at the trend analysis of the S&P 500, Dow Jones Index and Nasdaq, you will notice that all of them are still in strong up-trend. The US dollar index, on the other hand is in a strong down-trend. As Marc Faber wrote about his observations on investors in his latest market commentary,

… the longer a trend has been in place, the more confident investors become that the trend will last forever.

Indeed, there are many (including the so-called ‘cash on the sidelines’ crowd) who are more and more convinced that good times has returned. The fear of several months ago has given way to greed today.

But now, we will show you another graph:

NYSE Bullish Percent Index

NYSE Bullish Percent Index

In the midst of strong up-trends in stock indices all over the world, this Point-and-Figure (P&F) chart is giving a negative cue. To put it simply, this chart is telling us that the percentage of stocks in the NYSE that are still giving P&F buy signals has turned into a down-trend.

We shall see what transpire ahead.

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.