NYSE Bullish Percent
This is our major market indicator which tells us whether to be on the offense or defense. It is calculated by dividing the number of NYSE stocks trading on point and figure buy signals by the total listed on the Exchange. The percent of stocks on buy signals in is then plotted on a grid from 0% to 100%, where each box equals 2%. Levels above 70% are generally considered overbought, and below 30% are considered oversold. The best buy signals come when the NYSE Bullish Percent goes below 30% and then reverses up (must reverse 6%). The best sell signals come when the indicator moves above 70% and then reverses below 70%. There are six degrees of risk associated with this indicator but the most important concept to keep in mind is field position and what team is on the field. When the NYSE Bullish Percent is in X's, the offensive team is on the field and wealth accumulation strategies are the focus. Conversely, when the NYSE Bullish Percent is in O's, the defensive team is on the field and wealth preservation strategies are the focus.
Six Degrees of Risk:
- Bull Alert: Characterized by the bullish percent falling to 30% or below and then reversing up into a column of X's. The traffic light turns green.
- Bull Confirmed: The strongest of market conditions. Characterized by a column of X's exceeding a previous column of X's. The traffic light is green.
- Bull Correction: The bull market is taking a breather though it should resume shortly. The traffic light is yellow.
- Bear Alert: Characterized by a bullish percent falling from above 70% to below. Profits should be taken or positions hedged. The traffic light has turned red.
- Bear Confirmed: The weakest of market conditions. Characterized by a column of O's exceeding a previous column of O's. The traffic light is red.
- Bear Correction: The bear market is taking a breather. Trading rallies could be seen but the bear market will likely resume. The traffic light is flashing red -- look both ways carefully before crossing the intersection.
- Bullish Percents are kept on other markets like the Nasdaq Composite, the Amex, the Optionable Universe, the Nasdaq 100, etc. The main bullish percents used for evaluation though are the NYSE and the Nasdaq or OTC Bullish Percent. This is the first step in the game plan - determining what team is on the field and based upon field position, what types of plays to run.
The exact same methodology that applies to the NYSE can also be applied to any stock index in the world including the Toronto Stock Exchange.