After Thursday and Friday’s action, the “NYSE Bullish Percent” has now reversed down into a column of O’s.
This reversal down into O’s means the defensive team is on the field. So we move into a wealth preservation mode from a wealth accumulation mode.
Does this mean the market will definitely crash?
Absolutely not! A crash is possible…but it also could mean we experience a market that takes one step forward, one step back, for several months…months…not making a lot of headway.
The bullish percent is a “risk evaluator” and not a “trading” indicator It tells us the level of risk in the market, not how far the market could fall.
The risk level has ratcheted up.
So, we need to reduce volatility in some way.
Sometimes a reversal (like we’ve had this week) can spur a market rally. Think about it: in order for the bullish percent to reverse down, there had to be a LOT of selling, right?
So when the “bullish percent” flips from offense to defense, it really tells us a few things:
1. It’s possible to still make money, but we’re now fighting a serious headwind (swimming upstream, if you prefer)
2. The market could tread in place for awhile – or it could crash –it’s a waste of time to predict what will happen.
3. We need to review everything and kick out the weaker names.
It’ll be interesting to see how this market plays out. The good news is we have indicators guiding us. We’ll continue to follow their direction, whatever that might be.
If you are confused, have questions, or just plain curious, CALL.
One more thing…take a look at the headline from last month’s newsletter: “Sometimes You Gotta Give A Little Back. I had written that headline with this day in mind. Everyone wants to get out at the exact top, and get in at the exact bottom. It just doesn’t work that way. We never know for certain things in the market have changed…UNTIL the market starts to pull back. So we make money, and then give back a little ground, before we get a clear signal to act.
Here’s the signal.