The New York Stock Exchange Bullish Percent (NYSEBP) fell 1.03 to close Friday at 65.33. This marks the third down week in the past four following two very strong weeks in early September. I sense that momentum is waning and that this indicator feels like a plane stalling at the apex of a climb. For now, however, there appears to be enough power in the engine to keep the plane right where it is, but I will be watching to see what direction the bullish percent moves from here. The CBOE Volatility Index (VIX) has increased slightly over the past couple of weeks, but remains at a subdued 16.14. Finally, the Standard and Poor’s 500 index is now 3% oversold, meaning that the current value of the index is about neutral based upon the past ten weeks of activity.
The Dorsey Wright & Associates analysis of the markets indicate that US stocks and Bonds are the two favored major asset categories followed by Foreign Currencies, International stocks, and Commodities. Middle capitalization stocks are favored, as is growth over value, and equal-weighted indexes over capitalization weighted indexes. Equal-weighted indexes are those where each stock in the index is weighted the same, while in capitalization-weighted indexes the larger stocks have the largest weighting consistent with their size relative to the other stocks. The relative strength sector weightings favor Consumer Discretionary, Health Care, and Real Estate. Information Technology has fallen from third position to sixth on a relative strength basis. US Treasuries and International Bonds are favored in the Bond category, while US and Developed Markets are favored within the International stock category. Energy and Agriculture are the favored sectors within the Commodities asset category.
Paul L. Merritt, MBA, AIF®, CRPC®