Saturday Bullish Percents
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HeadlineCharts will be on vacation Thanksgiving week. Special thanks to all of you who emailed your comments and suggestions about this blog on its one-year anniversary. Some minor changes are being planned for the year-ahead.
The ECRI Economic Cycle Reseach Institute continues to report a serious slowdown ahead for the economy, but have not declared a recession ahead. Their future inflation gauge continues to point to low levels of inflation. I highly recommend a subscription to the ECRI. Recommended blogs are Declan Fallon, VIXandMore, GoldStockProphet, Millionaire Now, Kevin's Market.
The major indexes stabilized this week, and the week included one huge up day on Tuesday. But the underlying market not shown by the major index levels was steady, punishing distribution. This was revealed by the very negative new highs /new lows and the continued downward shifts in the bullish percents.
The good news though is that the sectors that undermined the market in the first place, financials and discretionary, have stabilized at their lows, at least temporarily. Now the leading sectors that ran up too high have pulled back significantly as well, and this includes tech, materials and energy. Only the bullish percents of the traditional late-cycle, safe-haven sectors remain above the 50% mark such as utilities, consumer staples and large-cap blue chips.
I don't know how much longer the 5-year bull market can remain intact, but with the bullish percents at these lower-risk, pessimistic levels, and with the favorable seasonal period, the help from Fed liquidity, the huge corporate buybacks, etc. ... I like the chances of a post-Thanksgiving rally into the new year. But I'm waiting on the sidelines until there is a signal that the market has bottomed and is ready for the next push higher. A signal such as an IBD follow through day.
After the new year, there is plenty to worry about. I am starting to read concerns about excesses in the emerging markets, and a serious slowdown developing in Europe. Also worrisome is the China stock market discussed in Business Week magazine.
I follow a number of breadth indicators, and all of them are pointing to a market bottom. However, the only indicator that's making me nervous is the put/call ratio 20-day moving average. It isn't as high as it was back in August when that bottom was set.
http://www.indexindicators.com/charts/sp500-vs-put-call-ratio-total-20d-sma-range-3years/
Maybe we'll get a short-lived rally followed by a big(ish) decline, which will set the bottom for the next few months. (Comment this)