NYSE BULLISH PERCENT INDEX TURNS UP

BPI BOUNCES OFF SUPPORT ... On May 25, I wrote a message about the NYSE Bullish Percent Index bouncing off support near 50, which kept the cyclical bull market intact (May 25, 2005). Chart 1 is an updated version of the chart in that earlier piece. To refresh your memory, the BPI number is the percent of common stocks that are on point and figure buy signals in an index. A move over 50 signals that bull market is in force. The bullish signal was given in the spring of 2003 (see circle). The BPI declines during 2004 and, more recently, in 2005 bounced off that support level (see arrows). As I pointed out a couple of weeks ago, the ability of the BPI to bounce off that support level was a good sign for the market. I also observed, however, that to confirm an upturn in the market, the BPI needed to do two things. One was to close back over its 50-day average (blue line). It's done that. The other had to do with its point & figure chart.

Chart 1

NYSE BPI MOVES INTO UP COLUMN ... Chart 2 is a point and figure version of the NYSE Bullish Percent Index. A p&f chart shows alternating x and o columns. An x column shows rising values, while o reflects falling values. The red numbers represents the start of new month. The BPI moved into the down (o) column in March from overbought territory over 70. It then successfully retested support at 54. That's where it stood on May 25 when I last wrote about it. In order to reverse to the up (x) column, the BPI needed to rise three boxes. Since each box is worth 2 points, the BPI needed to reach 60 to move into the plus column. As Chart 2 shows, it's done that since the start of June. That means that the NYSE BPI has fulfilled the two requirements for a turn to the upside. That doesn't tell us how high the market will go, but it does tell us that the market has taken a turn for the better. The BPI won't reach an overbought extreme until it climbs over 70. That leaves it more room to run to the upside. The BPI numbers for all the major stock indexes and market sectors can be found on the Stockcharts.com Market Summary page along with their line and point and figure charts.

Chart 2