Hello Fellow ChartWatchers!
Welcome to 2008! The start of a new year is always a good time to look for the big-picture perspective on things and few things say "Big Picture" better than the Bullish Percent Indices. By condensing the technical picture for 500 important stocks down into just one number, the S&P 500's Bullish Percent value ($BPSPX) gives you a great indication of the overall health of the market. Check it out:
Starting in 2004, the BPI settled down into a nice little pattern - rallying after hitting 50% (green arrows) and then reversing soon after passing 75% (red arrows). It repeated this pattern four times as you can see. At the start of 2007 however, something changed - the BPI bounced between 70% and 80% a couple of times, then fell sharply and didn't bounce at 50% for the first time in years (blue arrow). When it finally bounced in September, the BPI was down around 33% (purple up arrow) which was its lowest reading since March 2003. The biggest warning sign came soon afterwards when the BPI was only able to rally back up to 70% before falling again (purple down arrow). That was its lowest "peak" in years and a real sign of weakness. The weakness was confirmed in December when the BPI only rallied back up to 56% - a very troubling sign indeed.
Remember, these numbers represent the charting "health" of the 500 biggest stocks in the market - and the diagnosis isn't looking promising right now.
