Saturday Bullish Percents
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This is the sixth week in a row of impressive shifts higher by the bullish percents. This indicates that the price strength of the major indexes is being confirmed and supported by broad participation of the stocks tracked by the indexes. However, many of the bullish percents have moved above the 70% overbought level, and it indicates that some caution towards the market is now called for.
Last week's bullish percents are above and this week's are below. It is a little worrisome that the small cap Russell 2000 and the NASDAQ bullish percents have not yet switched to uptrends, creating a bit of a negative divergence. Perhaps these are areas that will be pulled higher by the momentum of the rest of the market in the coming weeks. The major sectors of the market are all above the 70% level showing broad participation in this bull market. This is a very healthy characteristic. Finally, REITs are back in the uptrend after participating briefly in the real estate scare. The subprime issue still exists and is important, but, at least for now, it is no longer pulling down any stocks related to real estate or lending.
Red is a column of O's in a downtrend, blue is a column of X's in an uptrend. Below 30% is oversold, and above 70% is overbought. Yellow is a shift down, green is up.
The NASDAQ showed several days of excellent volume, although prices didn't advance much and was probably held back by the overbought nature of the broader market. The market could use some consolidation to work off overbought conditions, and if that happens the lagging areas of the market such as the NASDAQ could benefit in the next leg up. However, my view is that the market is in the risky stage where all the good news sucks you in just when you should be more cautious with your portfolio.
