Even More About The Bullish Percent Index

I’ve been getting questions about the bullish percent index, and playing offense or defense, like “if we’re on defense, will all stocks move down?” And “What if I don’t want to sell these stocks? I’ve owned them a long time.”

These are very relevant questions. First, will all stocks move down when the market is on defense? The answer is no. The odds are, however, that many stocks will move down. And we want to reduce the odds of losing money. So the less we have exposed to risk, the fewer chances we have of losing money.

Which stocks will do the best while on defense? Clearly, the stocks with the best relative strength will perform the best. Stocks with relative strength sell signals are moving down faster than the rest of the market (and often times will completely fall apart) when the market is on defense.

But the stocks with relative strength buy signals are moving up faster than the entire market. So, on the flip side, stocks on relative strength buy signals tend to perform a little better when the market is rocky.

But what if you’ve owned a particular stock for a long time. Do you need to sell those stocks too? Of course not.

But let’s be honest. Sometimes it’s better to own 3000 shares of Merck, and sometimes it’s better to just own 300 shares of Merck, and keep some money parked in a money market account.

And if that doesn’t work for you, perhaps buying protective puts would be the better strategy to take. We can discuss this individually and we recommend that you do contact the office to set up a time to talk.

By all means, when the market is on defense we need to be pro-active in preserving wealth. If you have any questions whatsoever please contact us and we look forward to talking with you soon.

Tom

Thomas Mullooly
Mullooly Asset Management LLC
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