Is a Short-able Bounce Coming?
By John Del Vecchio and Brad Lamensdorf
The NYSE Bullish Percent Index has been in freefall.
The beauty of the Index is that it represents a one stock, one vote system. Unlike market cap weighted indexes, we can easily see how the average stock is performing. The Bullish Percent Index is based on point and figure charting, which is objective. A stock is either in an uptrend or a downtrend.
While the broader indexes have been making a series of higher highs, the Bullish Percent Index was making a series of lower highs.
That divergence is a warning sign. Demand for stocks has simply been waning.
Recently, the market has sold off. In the short-term, the broader indexes are oversold. The average stock is very oversold.
We have shown the Short-Term Composite before. This indicator, courtesy of Investors Intelligence has just plummeted to 5.2 from around 80 just a month ago.
As you can see, a reading of five is quite oversold.
We would expect a bounce.
However, the average stock is likely to continue to be mired in a downtrend. This condition is unlikely to change any time soon. By the time investors go after Apple, Microsoft, and other leaders, we will be well on our way to a nasty bear market in the average stock.
The coming bounce represents an opportunity to add to hedges before the next down wave comes.
To learn more about how these indicators can help manage risk in your portfolio, book a call with Brad.
DISCLOSURE: LAMENSDORF MARKET TIMING REPORT
Lamensdorf Market Timing Report is a publication intended to give analytical research to the investment community. Lamensdorf Market Timing Report is not rendering investment advice based on investment portfolios and is not registered as an investment advisor in any jurisdiction. Information included in this report is derived from many sources believed to be reliable but no representation is made that it is accurate or complete, or that errors, if discovered, will be corrected. The authors of this report have not audited the financial statements of the companies discussed and do not represent that they are serving as independent public accountants with respect to them. They have not audited the statements and therefore do not express an opinion on them. The authors have also not conducted a thorough review of the financial statements as defined by standards established by the AICPA.
This report is not intended, and shall not constitute, and nothing herein should be construed as, an offer to sell or a solicitation of an offer to buy any securities referred to in this report, or a “buy” or “sell” recommendation. Rather, this research is intended to identify issues portfolio managers should be aware of for them to assess their own opinion of positive or negative potential. The LMTR newsletter is NOT affiliated with any ETF’s. Active Alts is affiliated with Lamensdorf Market Timing Report. While LMTR uses charts from SentimenTrader, they do not have a financial arrangement with SentimenTrader Past performance is not indicative of future results.