NYSE BULLISH PERCENT AND SUMMATION INDEXES ARE STILL IN BEAR TERRITORY -- THREE HEALTHCARE LEADERS WITH GOOD CHART PATTERNS -- CELGENE HITS RECORD HIGH -- STRYKER NEARS 2007 HIGHS -- MEDTRONIC ON VERGE OF BULLISH BREAKOUT

ANOTHER LOOK AT BULLISH PERCENT INDEX ... One of our readers asked me to take a fresh look at the NYSE Bullish Percent Index (BPNYA). The BPNYA is the percent of NYSE stocks that are in point & figure uptrends. I wrote recently that moves below 50% are indicative of a bear market. After falling to overbought territory near 30, the Bullish Percent Index has rebounded back to the 50 level. It remains, however, well below its moving average. I would say at this point that move back over 55, accompanied by an upside break of its 50-day average (blue line), is needed to improve its overall look. Chart 2 shows a point & figure version of the BPNYA. It shows a three-box upside reversal taking place during August which reflected the market's rebound attempt over the last month. No buy signal has been given to date on the p&f chart.

Chart 1

Chart 2

SUMMATION INDEX STILL IN DOWNTREND... Another reader asked for an explanation of the NYSE Summation Index (NYSI). This is a more sophisticated version of the NYSE Advance/Decline line. Its main value is that it provides us with support and resistance levels as well as a way to measure bull and bear markets. Chart 3 shows the NYSI starting to drop in the spring of this year, which gave an early warning that market breadth was starting to deteriorate. Its break below 400 in July was a more serious warning of market weakess. After dropping to a six-year low this summer, the NYSI has bounced a bit but is still below its 50-day average. A move back above that line is a minimum requirement for an uptrend. I place more importance on the zero line. That's because moves above zero are symptomatic of bull markets. Chart 4 compares the NYSI (red line) with the S&P 500 (green line) since 2003. During the four-year bull market, there have been four previous dips below the zero line by the NYSI. In each instance, however, the NYSI moved back above zero to signal resumption of the bull trend. At the moment, the Summation Index is a long ways from doing that.

Chart 3

Chart 4

HEALTHCARE LEADERS ... Healthcare stocks have been showing good relative strength over the last month. Part of that is due to their defensive characteristics. I've turned up three healthcare leaders that have a good combination of absolute and relative strength. And they have attractive chart patterns. Celgene has become a leader in the biotech group. Chart 5 shows the stock breaking out to a new record high today. Chart 6 shows Stryker moving up to challenge its 2007 highs. A close above 70 would put the stock at a new record high. Its relative strength line has been climbing since the start of July. Medtronic is even closer to its 2007 high (Chart 7). Its relative strength line has been rising as well. The point & figure boxes in Chart 8 show MDT on the verge of a bullish breakout which would take place at 55 or higher. That would put the healthcare leader in position to test its 2006 (and near record) high at 59.

Chart 5

Chart 6

Chart 7

Chart 8

Chart 9