Here is where we stand with the point and figure bullish percent indicators for equities, based on Investors Intelligence data.Here is a chart I am looking at from an Elliott Wave Perspective.
- NYSE Bullish Percent: Os (Negative) 9% - lowest since 1987
- S&P 500 Bullish Percent: Os (Negative) 7.9% - exceeds 2002 and 1998 lows
- Nasdaq Composite Bullish Percent: Os (Negative) 13.4% - lowest since 1987
- Nasdaq-100 Bullish Percent: Os (Negative) 4% - in 2001, this indicator actually reached 0
- Russell 2000 Bullish Percent: Os (Negative) 14.1% - equals January low
- NYSE High-Low Index: Os (Negative) 2.5%
- Nasdaq High-Low: Os (Negative) 2.8%
It is easy to be bearish given the circumstances, but the fact of the matter is these indicators are so washed out and so low that the probabilities increasingly favor a sustainable rally. Given the macro headwinds combined with approaching earnings season, it is doubtful this is THE bottom, but we are nearing, or at, a low. Keep in mind, these are probabilities. The market may simply continue lower. Yesterday's action was not capitulation in the traditional sense.
Based on some additional technical work I have been looking at SP 960 as a downside target with the intention of buying on moves below 1000.
$SPX Monthly Chart
click on chart for sharper image
If this is a wave 5 decline, the target for wave 3 would be near 966 (1.618 * Wave 1).
In Elliott Wave terms, crash wave 3 may be nearly finished. Of course that means wave 4 (a correction up) and wave 5 (yet another move lower) are coming up.
Risk reward is no longer on the short side even if longer term fundamental issues to the downside are not finished. This is a good place to be lightening up on shorts, taking profits on PUTs, and heading for the sidelines for further directional clues.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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