The New York Stock Exchange Bullish Percent (NYSEBP) ended the 3rd quarter at 65.96 down 2.3% from the previous week’s close. This drop is the worst weekly performance for this critical technical indicator since the first week in June. However, one week does not make a trend, and with a reading of nearly 66, it means that two-thirds of stocks are still on a point and figure buy signal—demand for stocks remains firmly in control. It will take a drop to 61.37 to reverse this reading. After the pullback in US markets over the past two weeks, the overbought reading of the S&P 500 has dropped to 33% indicating that markets are not significantly overbought at this time. Should the markets begin to correct, the key support level for the S&P 500 is 1350. This would reflect a drop of 6.3% from current levels.
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, Real Estate, Information Technology, and Health Care. US Treasuries and International Bonds are favored in the Bond category, while US and Developed Markets are favored within the International stock category.
RIP Taylor. You were a great companion on Saturday and Sunday mornings as I worked at my desk.