POINT AND FIGURE BULLISH PERCENT CHARTS

BPI BASED ON POINT & FIGURE BUY SIGNALS... Back on October 5 I wrote a piece on how to use the Energy Bullish Percent Index. I explained that the Bullish Percent Index (BPI) for any group is based on the percentage of stocks that are on point & figure buy signals. I'm revisiting the subject today with the actual BPI point & figure charts which you can find on the Stockcharts Market Summary page. [P&F is the preferred format, but you can also plot a BPI line chart]. I'm also going to show how the BPI looks for the Basic Materials Sector and three of the major market indexes. BPI readings over 50 are bullish. A BPI over 70 is overbought; under 30 is oversold. Which brings us back to energy. Chart 1 shows the traditional three-box reversal point & figure chart for the S&P Energy Sector BPI. For those not familiar with p&f charts, the x columns represent rising prices while o columns represent down movement. A p&f buy signal occurs when a column of x's exceeds a previous column of x's. The Energy BPI is in an up column and has recently given a buy signal. The problem is that it's very overbought at 90. The highest box was 92. In order to reverse into the o (down) column, a three-box reversal requires a drop to 86 (each box is two points). The red number to the right of the chart shows the current reading (which is just over 88). [The red numbers and letters in the columns are the months of the year. A represents October]. Right now, the Energy BPI is still in an uptrend, but is in very overbought territory. A drop to 86 is needed to give a sell (or profit-taking) signal.

Chart 1

MATERIAL SECTOR BPI STILL IN UPTREND... I'm showing the S&P Materials Sector BPI because it's also high up in the BPI rankings and has suffered a setback lately. The Materials BPI is in overbought territory over 80. But its trend is still up after having just given a p&f buy signal at 80 during September. That's when the latest column of x's exceeded the previous column of x's. The red number to the right shows its value dropping to 80.80. In order to reverse over to the o (down) column, the Materials BPI would have to drop three boxes to 78 (fractions don't count; it has to actually hit 78). So it's in overbought territory, but still in an uptrend.

Chart 2

S&P 500 BPI IS RISING, BUT NO BUY SIGNAL YET... The S&P 500 BPI is in an x (up) column which is good. And it's value at 60 is well over 50 which is bullish. That means that 60% of the 500 stocks in the S&P are on p&f buy signals (uptrends). In order for an actual p&f buy signal to take place, however, the S&P BPI needs to exceed the previous x column which is at 66. Since each box is worth 2 points, that means the BPI needs to reach 68 to issue an S&P buy signal. As of today, it's pulled back to 60.60 from 64. For a three-box (6%) reversal to occur to the o (down) column, the BPI would have to drop from its recent peak at 64 to 58. Right now, the S&P 500 BPI trend at 60 is up. But it needs to reach 68 to issue a buy signal.

Chart 3

DOW BPI IN NEGATIVE COLUMN ... The Dow BPI value at 54 is just barely holding onto its uptrend (over 50). It is also the only stock index in a down (o) column having suffered a three-box downside reversal during October. Since the lowest o is at 54, the Dow BPI would have to move back up three boxes to 60 to put it back into the x (up) column. It would have to reach 62 to exceed the previous x column at 60 to issue a new buy signal.

Chart 4

NASDAQ 100 NEARS BUY SIGNAL ... In my opinion, the Nasdaq 100 BPI is the most promising. First of all, it's in an x (up) column which is good. It recently moved up from 26 (oversold territory under 30) in August to a current reading at 46. It still needs to hit 52 to exceed the previous x column at 50. A move up to 52 would also move the Nasdaq 100 BPI from bear territory (under 50) to bullish territory over 50.

Chart 5

MORE SECTOR BPI READINGS ... The Utility BPI has reversed down from an overbought 96 to 84. The Consumer Staples BPI has fallen to 64 and is on a sell signal. The Financial BPI has reversed down to 58. The Healthcare BPI has dropped to 48. The Consumer Discretionary BPI is at 52 and rising. The Telecom BPI is at 68 and rising (Chart 6).

Chart 6