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Bull Correction

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Stock futures are slightly higher this Monday morning, with Dow futures up 15, and Nasdaq futures up 7. HL Camp is reporting fair value for the S&P 500 at 2.86, with buy programs set at 4.44, and sell programs at $1.28.

The Nikkei Stock Average in Tokyo fell 187.60 points, to its lowest close in 17 years. Technology and communication stocks led the decline on concerns over Japanese exports being affected by a weak U.S. economy. The U.S. dollar is up slightly against the yen.

S&P 500 bullish percent reverses

One of our major market indicators found in the S&P 500 bullish percent ($BPNDX) from www.stockcharts.com has reversed back into bull correction status with last week's activity. This reversal back into "bull correction" status from "bull confirmed" should have traders and investors playing some defense in their portfolios and near-term trading.

S&P 500 Bullish Percent - 2% box

The S&P 500 bullish percent shows that 47.47% of the stocks for this market currently show a buy signal on their point and figure charts. Undoubtedly, some stocks that recently gave buy signals to get this indicator up to the 54% level before Friday's reversal have pulled back, while there are those that continue to march higher. Stock that remain on a "buy signal" on their point and figure charts and trade above bullish support are most likely to remain a focal point of bullish traders in the coming sessions. This week, we'll be doing some stock screens, looking for stocks where relative strength remains strong (relative to the S&P 500) as potential bullish candidates.

Traders should also be identifying stocks that are rallying to resistance trends as good short/put candidates. If those stocks relative strength remains weak, then those stocks become more susceptible to further declines as they most likely lack sponsorship.

For now, the defensive team should be on the field for most stocks in the S&P 500 and traders should remain very selective in their trading.

Jeff Bailey
Senior Market Technician

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