The New York Bullish Percent Index was created by A.W. Cohen, the first editor of Chartcraft, in 1955. Mr. Cohen was trying to create a market indicator that was bullish at the bottom and bearish at the top. A worthy endeavor. Trend charts are always bullish at the top and bearish at the bottom. So are our emotions. When more than seventy percent of the New York Stock Exchange stocks are on buy signals,we have a bullish situation. When the P&F chart reverses to a column of Os and breaks below 70, this generates a bear signal. According to Thomas Dorsey (Point & Figure Charting) this is a high risk condition, calling for defensive measures, such as puts, not buying stocks, going short, etc. This indicator gave a "Bear Confirmed" signal on June 24. So the light turned red. The index dropped as low as 64. Today, however, the chart reversed to a column of Xs, closing at the 70 percent mark. Hence the designation "Bear Correction on null," since 70 is the null point that must be crossed.
What does it mean? The way I read it, the stockmarket still looks toppy to me. The bias is bullish once again, but things could go either way as soon as the next week.
I'm preparing to send the offense back in. I remain short the AUD/USD, despite the dollar's fall after Bernanke's dovish comments, yesterday. The main story is still the Fed's next move, when it will be and what it will be.
