There's weakness across the board today as bears look to be getting the upper hand. Recent deterioration in our bullish percent indicators has had the market internals looking suspect and recent bankruptcies and accounting issues are starting to weigh on investor's minds.
As speculation about potential accounting problems impacts shares of Tyco International (NYSE:TYC) as that stock falls 10% to $31.85, that very speculation comes into play in other sectors, specifically many of the major financial institutions.
Dow component and financial behemoth Citigroup (NYSE:C) is one of those stocks we've felt may succumb to selling pressure and today's trade at $45 has this stock giving a triple-bottom sell signal on its point and figure chart and looking like she may try and test bullish trend at $42.
Citigroup Chart - $1 chart
Citigroup's (C) point and figure chart has a "history" of triple- bottoms. In February of last year, the stock gave a triple- bottom sell at $51 and fell sharply to $46 before rebounding briefly. That sell signal and resulting column of O's gave a bearish vertical count of $35. The stock didn't achieve that bearish count, which was negated by the "buy signal" at $47.
Then in September of last year, once again C gave the triple- bottom. The terrorist attacks exacerbated the downward move and this time, share of exceeded a previous bearish count that had indicated a potential bearish price objective of $42.
Now we see another triple-bottom sell signal, this time at $45. What are the "probabilities" of this stock declining further? I'm running late with this update, but you can almost go back to the two previous triple-bottoms and get a "range" of percentage decline from those sell signals.
According to Professor Earl Davis' study at Purdue University, a triple-bottom sell signal in a bear market is profitable 93.5% of the time, for an average gain of 23% (for the bearish trader) in a 3.4-month average time span.
With the S&P 500 bullish percent in "bull correction" mode, we wouldn't get a bearish reading until on this indicator until it is most likely late in the game for most traders. This is why we stress the importance of monitoring the faster moving NASDAQ-100 bullish percent indicator when turned "bear confirmed" (a bear market for that market) in December.