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Futures mixed

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Stock futures are looking mixed this morning with S&P futures showing fractional gains to the upside, NASDAQ futures are higher by 21 points, but Dow futures are currently down 30 points. Yesterday we saw a pretty good round of selling in bonds and YIELDS moved higher. I'm noting that YIELDS did not take out previous. MACD on the 60-minute charts show this indicator is rounding out in the three major bond yield maturities we follow and we could see a slight higher yield bias in the next couple of sessions. I would also point out that recent high points for MACD on the three major YIELDS (5, 10 and 30 year) have been slightly lower. I use this observation to tell me that YIELDS are perhaps starting to find a range or level where they want to rest.

Getting close to "Bear Alert"

Point and figure aficionados know what "bear alert" means and how to read its symptoms. "Bear Alert" is when an index's or sectors bullish percent indicator reverses into a column of O's from above the 70% level to below 70%. In the case of the NASDAQ-100 (NDX.X) this would be a reading of 68%. Last night's reading for the NDX.X was 69%. This means that 69% of the point and figure charts of the 100 stocks that comprise the NDX are currently on a point and figure buy signal. I first started alerting traders to the QUANTITATIVELY "overbought" condition of this index last week when we hit the 80% level. After an NDX surge, the bullish percent just added 2% more to its reading. At that time, one would have thought the bullish percent would have increased. We have learned that the bullish percent is an indicator for risk and not necessarily future index direction. However, institutions are paid to manage risk and often times look to implement bearish hedge strategies to try and mitigate a decline. Currently the bullish percent for the NDX says, "bull correction", but one more sell signal net loss for the 100 stocks in the NDX would have us on "bear alert."

NASDAQ-100 Bullish Percent Chart - 2% scale.

Perhaps this will be the first test of the bullish percent chart for those that attended the Option Investor Expo earlier this month. We talked in depth on the use of bullish percent charts for various indexes and perhaps we can use this tool to help us trade the QQQs in the coming sessions. At the time of the Expo, the Bullish Percent chart on the NDX was in "oversold" territory.

At 09:30 EST other bullish percent charts

Later this morning I'll review some of the other major index bullish percents and give you my "two-cents worth" on what they may be telling us about sector and market risk. You can view more bullish percent charts at www.stockcharts.com.

Jeff Bailey
Senior Market Technician

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