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Selling in Treasuries has reversal of fortune for stocks

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Selling in Treasuries has reversal of fortune for stocks After a slightly positive tone for Treasuries in the early morning, that bullish tone was lost and reversed into selling. That action has stocks rebounding from their lows and now challenging yesterday's highs on a move that looks to be driven by trader talk that pension funds are becoming more aggressive sellers of Treasuries and looking to fund their pension funds with stocks that look to have found a bottom this month.

The move comes just a day after Dorsey/Wright and Associates' NYSE Bullish % (BPNYSE) reversed back higher to "bull confirmed" status at 30%. This is perhaps the most institutionally watched and monitored bullish percent indicator and reflects market internals where demand is now firmly back in control. The NYSE Bullish % ($BPNYA) at stockcharts.com did not reverse higher yesterday, but my observations from the past is that it often follows Dorsey's bullish % within a day or two, as www.stockcharts.com adjusts their point and figure charts to reflect dividend payments.

NYSE Composite Chart - $5 box

Traders and investors have probably heard the term "cyclical bull market." While confusion to some, a point and figure chartist that understands the bullish % charts knows too well how various markets and sectors internals, as depicted by the bullish % do a very good job in explaining a "cyclical" bull and bear market. It's still to soon to say that we're in a longer-term bull market, but yesterday's reversal back higher in the NYSE Bullish % at Dorsey/Wright and Associates gives internal confirmation to the external appearance of the NYSE Composite Chart (NYA.X) above.

For a longer-term bull market to be realized, at some point we would need to see a new relative high and low in both the bullish % indicators, COMBINED with the indexes. However, the large spread double-bottom in the NYSE Composite chart at 420 and COMBINED relative low reading of 26% in the bullish % give good hint that the bottom may be in place. Time will tell and very easy to follow.

Jeff Bailey

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