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What does the Bullish Percent Index Measure?

July 15, 2007 by Thomas Mullooly

https://media.blubrry.com/invest/p/mullooly.net/public_html/wp-content//MoreabouttheBullishPercent.mp3

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More about the Bullish Percent

A question that’s often asked is, “if your signals suggest we are on defense, why does it seem like the market is still going up?”

Over the last few years, we’ve seen many pullbacks in the range of 5% to 8%. So it’s quite normal (and to be expected), that when we move to defense an initial 6% drop has already taken place.

So we sometimes see a pause (or even a brief rally), as soon as we get the signal to move to defense. It’s this pause, or lull, that often makes us inattentive. That’s exactly what we’re trying to avoid.

When we move to defense, it’s because more money is flowing out of stocks. The money sometimes flows out of the whole market. And sometimes the money flows out of the stocks or mutual funds that you and I own, and runs into the stocks in the Dow Jones.

So the Dow can stay flat (or even go up) even when your account falls apart. Which makes you think there’s something wrong with you: it appears you’re the only person losing money. Not true!

When the bullish percent index signals defense (as it is now), we need to begin focusing more on wealth preservation than trying to make as much as possible in the market.

See, when you lose 10%, you need an 11% increase to get back to where you began.

When you lose 15% in your investment, you need about an 18% increase to get back to where you began. And when you lose 20%, you need a 25% increase, just to get back to where you started.

The most important thing we can do with our investments is avoid losses. It’s glamorous to make a lot of money in the stock market. But it can be far more devastating to lose money.

Tom

Thomas Mullooly
Mullooly Asset Management LLC
Our Only Business Is Fee-Only Investment Advice
www.mullooly.net
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Filed Under: Asset Management, Point and Figure Tagged With: buy signals, short term indicators

About Thomas Mullooly

Thomas Mullooly is owner and founder of Mullooly Asset Management, Inc. In 2002 Tom opened Mullooly Asset Management, a fee-only investment advisory firm. As an investment advisor, and not a broker, Tom works strictly for his clients. With the help of point and figure charting, Tom builds a realistic game plan for clients.

1971 State Route 34, Suite 102
Wall Township, NJ 07719

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The information on this website and blog do not involve the rendering of personalized investment advice. A professional advisor should be consulted before implementing any of the options presented. None of the content contained in this website should be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

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