Saturday Bullish Percents
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ECRI still hasn't declared a recession despite the fact that their leading economic indicator is very weak. Some sectors are retaining enough strength to indicate that the economy is still growing. Their leading inflation indicator remains subdued.
HeadlineCharts remains in cash despite continued encouraging sentiment survey results and the ability of the market to hold on to important support levels. The problem is that the credit market has yet to resolve itself. The TBill rate is still at its lows and US Treasuries continue to outperform corporate bonds. Also worrisome is the trend higher in new lows which started with the NASDAQ and has now spread to the NYSE.
Energy, commodities, industrial, rails continue to dominate. Water utilities moved up quite a bit. Water may be one of the next natural resources to get investor attention. One of the deeply oversold groups showing some encouraging signs is the now forgotten Uranium and Nuclear energy group. There is now an ETF for the stocks, symbol NLR, and the commodity ETF is U.TO. It may be too early to jump back in, but this area seems well worth monitoring.
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 bullish percents are not showing much strength, but there are some subtle encouraging signs. First, the bullish percent of the Dow Industrials issued a buy signal and the S&P 100 shifted to an uptrend. Disappointing is the lack of movement in the S&P 500 and NASDAQ 100, but the fact that the bullish percents in general are holding steady in the 20-30 range, and churning with shifts up and down is a sign of base building for the entire market.
Energy is now in the overbought range, and this happened very quickly as oil prices ticked up and down at the $100 level. Actually, all the energy commodities showed strength and this probably pulled all the energy stocks higher in broad fashion, not just the leading stocks in the sector.
What I find the most encouraging is the uptick in the technology bullish percent, the bit of strength showing in the discretionary stocks, and that the financials are retesting, and so far holding above their lows. As often stated, the financials and discretionary anticipate economic growth, and the signs of life in these sectors are a really important market signal.
The technology group responds a bit later once the economy actual starts growing again. This group has been killed even though it is full of top quality companies with excellent balance sheets... and terrific prospects if the economy cooperates. This is the area I'd be interested in once convinced that the market has really bottomed out and is ready to move forward again.
Financials and discretionary don't interest me. The risks are too high in the financials with too many land mines. Besides, these two areas have probably already entered long-term secular weakness as individuals, municipalities, companies, hedge funds and nations all attempt to reduce their debt load and risk levels in the years ahead. The American consumer is no longer the driver pulling up the world economy. That role has shifted to the emerging middle class in the BRIC nations.
Larry Nausbaum at Millionairenowbook.blogspot.com asked the question whether the bullish percent has issued a buy. As mentioned above, the Dow Industrials are showing a very nice buy signal right at the 30% level. Consolidations of the bullish percents under the 30% level, with follow through shifts above 30% are the best buy signals. The oversold consolidation shows a bounce, then a retest that holds above the lows, then a shift back above 30% and also above the previous high. Very nice technical action with excellent field position.
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