The Market Indicators thread

[treefrog]

What Is a Market Indicator?
Like a technical indicator, a market indicator is a series of data points derived from a formula. In this case, however, the formula for market indicators is applied to the price data for multiple securities within the market, instead of just one security. Price data can come from open, high, low or close points for the securities, their volume, or both. This data is entered into the indicator formula and the data point is produced.

Unlike technical indicators, market indicators are not charted above or below the chart. Market indicators are what is being charted, and as such have their own ticker symbols. There are often many symbols that apply the market indicator formula simply to different markets. For example, the $BPSPX and $BPNDX track the Bullish Percent Index for the S&P 500 and the NASDAQ 100 respectively.

Bullish Percent Index (BPI)
The Bullish Percent Index (BPI) is a popular market breadth indicator that is calculated by dividing the number of stocks in a given group (an exchange, an industry, etc.) that are currently trading with Point and Figure buy signals, by the total number of stocks in that group. Bullish Percent levels that are above 70% are considered overbought, whereas levels below 30% are considered oversold. Strong buy signals occur when the Bullish Percent Index falls below 30% and then reverses up by at least 6%. Conversely, promising sell signals occur when it goes above 70%, and then reverses down by at least 6%.

It is important to note that the Bullish Percent Index is not something that can be applied to a single stock but rather an index that is calculated for a group of stocks.

The most popular version of this chart is the NYSE Bullish Percent ($BPNYA) which is mentioned prominently in Thomas Dorsey's book, Point & Figure Charting, however it is important to remember that the Bullish Percent index can be calculated for any grouping of stocks.

Because the NYSE's Bullish Percent Index is so closely followed, each day we also publish the list of NYSE stocks with P&F buy signals as well as the list of all stocks in the current NYSE "universe". Those lists can be found on our NYSE BPI Components page.

Traditionally, the Bullish Percent indicator is charted on a Point and Figure chart (example) using a 2 point box size. However, the indicator can also be charted and studied using standard charts (example) as well.

more at: http://stockcharts.com/school/doku.p...uction_to_mark

[treefrog]

The NYSE Bullish Percent Index
The NYSE Bullish Percent Index was invented by the estimable market technicians at Chartcraft in 1955 (now known as Investors Intelligence). The NYSE Bullish Percent Index is calculated by reading either a buy or a sell signal from the point and figure chart of each of the 2800+ stocks on the NYSE each evening. (For a review of the P/F technique take a look at this article on Stockcharts.com.) The value of the index represents the percentage of stocks listed on the NYSE that signal a buy. For example, if 2100 stocks signal buy and 700 signal sell, the value of the NYSE Bullish Percent Index is 75. Since it incorporates every NYSE listed company, it is easy to see how useful this index can be.

Bullish Percent gives buy and sell signals just like any other point/figure chart. In fact, the chart of Bullish Percent is always in one of six phases. These six phases determine the underlying market condition and therefore indicate an appropriate trading strategy. Below are the six phases and an explanation of the associated market strategy. Remember, the index is always in only one of the phases.



Bull Confirmed - Bull confirmed is, just as it sounds, the most bullish signal the index emits, giving traders a green light to take on multiple long positions with confidence. In the bull confirmed phase, the Bullish Percent Index has a column of X's on its right edge, and this column must have surpassed the next column of X's over to the left by at least one square. Since a market that is in bull confirmed mode is upwardly trending, directional indicators such as MACD are more appropriate than oscillators during this phase.

Bear Confirmed - Again, just as it sounds, the bear confirmed phase is the most bearish signal the index gives. In this mode, the Bullish Percent Index has a column of 0's on the far right edge of the chart, and this column must surpass the next column of 0's to the left by at least one square down. Since a market in the bear confirmed mode is trending downward, only short positions should be considered during it, and directional indicators are again the weapons of choice.

Bull Correction - The bull correction mode, following only a bull confirmed phase, is a sideways market or a market experiencing a correction after a bull confirmed phase. The chart features a column of 0's on the right edge that has yet to pass the last 0's column. Long positions should be taken with caution because a bull correction can reverse into a bear confirmed. During the bull correction mode, look to oscillators like stochastic for insight into timing trades.

Bear Correction - A market in the bear correction phase, following only a bear confirmed phase, is also a sideways market, and it is experiencing a correction from bear confirmed. A bear correction features a column of X's on the right edge of the chart that fails to surpass the last column of X's. Again, use short positions with caution, and use oscillators instead of directional indicators with the charts.

Bull Alert - The final two phases of the Bullish Percent Index involve overbought or oversold conditions. On the Bullish Percent chart, readings above 70% are considered overbought, and readings below 30% are considered oversold. The bull alert phase is simply a reversal into a new column of X's from below 30% on the chart, and it indicates that the index is oversold and due for a bounce. As soon as the index signals a bull alert, traders can take long positions with caution until the X's cross back above the 30% line.

Bear Alert - A bear alert is simply the opposite of a bull alert, except to signal a Bear Alert, the index must be crossing below the 70% line with a column of 0's. It is important to remember that for a bear alert to signal, the column of 0's must actually cross back below the 70% line. During a bear alert the market is overbought and due for a sell-off. Take short positions with caution until the market reverts back to bull confirmed. During Alert phases it is a good idea to take quick profits (10-15%) because there is a good chance the market will reverse.


Here are some charts showing each of these phases:





Now that you have an idea of how to read the NYSE Bullish Percent Index, take a look at the actual chart and see if you can tell what phase the market is in from this daily chart on the Investor Intelligence website.

http://www.investopedia.com/articles.../04/080404.asp

[motorway]

The problem with trends is that they end !

Quote: that what was needed was some sort of soulless barometer that would become negative at market tops and positive at market bottoms. A contrary indicator that would afford the investor the ability to become less aggressive as the market reached high risk levels and more aggressive when the market reached low risk levels.

[motorway]

Both forms are useful...

You can see a number of nice divergences on the second chart
The red line ( B% ) , The index and Volume..

yesterday Price tried to go down
But volume was lower and bullish % stayed much the same ..

At the ultimate top
B% made a lower high
Price made a higher high

Very clear divergence from April 2007
Price struggling Up in an expanding Oscillation
B% Falling

. such behaviour ( divergent / inharmonious ) is not sustainable
Such behavior is a red flag that will resolve.

motorway

[motorway]

A look at how a stock becomes counted on the B%

On the bar chart the red arrows point to the "last point of supply"

. This is the last point of resistance

The blue arrows point to the "last point of support " ( demand )

Now these points are constantly changing
They are evolving over time.

becoming closer and further apart..

If BHP moves up a little more it will become a "vote" on the B%

The Price will be above the last point of supply
( what chartcraft call a "buy signal" -- maybe )

You can see how that looks on the actual P&F ( 2% x 3 ) That builds the B%

Every stock on the XAO has an equal Vote ( unlike the Cap weighted index )

motorway

[Timmy]

Great thread Treefrog and Motorway, thank-you both.

[motorway]

http://208.149.108.6/cgi-bin/foxweb....=index4_2.html

hope that link works.....

Those interested will find a lesson on B% charts


Here is another one to ponder

% of stocks above their 10 week mov averages

Quote: One of the criticisms often leveled against technical analysis is that charts, in a very general sense, look best at the top and worst at the bottom. Obviously, it would be far more valuable if charts looked their worst at the top and their best at the bottom.

[motorway]

Wrong chart

The one above is % making new highs

here is the % above their 50 day mov average

motorway

[treefrog]

appreciate the plain english speak motorway
I take it that your platform doesn't give %B for other aussie indexes such as banks, industrials, miners etc but just for the XAO

if so, the B% may help if only trading the XAO, but early indication in the different sectors is usually the best information for managing stocks held in those sectors

always good to have 20/20 hindsight but will include a bit of foresight as well in the next bit
first the hindsight:
common factors for the following weekly charts are;
the Linear regression indicator of 30
the relevant bull run for each sector since early 03
the fibonacci levels applied to the start and finish of the bull runs to foresee potential support levels

Utilities index gave the first SELL signal at week 21 - it was a total uncontested reversal - ie no double top - and it is still heading south
Financials next at w23 but the bulls were having none of it - not their beloved banks!! After the bulls ran out of puff (and money) it was all downhill quickly - 50% retraced at this time
Industrials next at w27 - but a DT resulted to confirm the dirrectional change as for the financials
The XJO/XAO didn't give a sell signal until w30
So what?? well there is nothing odd about an increasing number of indexes reversing one after the other until they collectively pull the overall index down
but it is how this might be used to indicate a recovery or further slide that is interesting
that bit of foresight I promised
assume that first down could well be first to recover - provided the others making the current effort to hold the market up aren't starting to falter (mining,energy), that may be the start of a recovery
but at this time they are heading south with a full tank of gas, and holders of stocks (long) in these indexes should ask themselves - why have I been holding stocks for three-six months in a clearly downtrending index
time to consider buying only when the worm turns white and the little green arrow pointing UP appears
and while it is easy from my position in this tree to see, it usually is best to be long in stocks in an index that is rising and short in the ones that are going the other way
and then its always hard to find a reason why I am holding after the trendline has been broken (if you are not partial to worms)

[motorway]

Quote: appreciate the plain english speak motorway I take it that your platform doesn't give %B for other aussie indexes such as banks, industrials, miners etc but just for the XAO if so, the B% may help if only trading the XAO, but early indication in the different sectors is usually the best information for managing stocks held in those sectors

[treefrog]

Quote: =motorway;262412]1) The software will do a B% of any sector

[Timmy]

Quote: Originally Posted by treefrog didn't clearly see "stand out" entry and exits with your B%

[Timmy]

Quote: Originally Posted by motorway Each stock gets one vote ( the more stocks in the "election" the better )

[Timmy]

Quote: Originally Posted by treefrog the term "Bull confirmed" says to me "buy with confidence"

[treefrog]

Quote: Originally Posted by Timmy And another thing... Sorry for the hat-trick of posts, just a very good topic. Treefrog, in your opening post +1 you gave the link to http://www.investopedia.com/articles.../04/080404.asp where they show a break of a double top on a P&F chart and label it as "Bull Confirmed". I think it is very dangerous to equate "Bull Confirmed" with "buy with confidence", as the next post (from m/way) points out we need to have regard to many other factors than just a simple break of a double top on a point and figure. I think of the case, specifically where there is a break of a double top after a very long column of "x" the market may be well long by then and the break of the top has been triggered so as to enable an easier offloading of some of these longs?

[Timmy]

Treefrog - that definition of Bull Confirmed is also given in your post 2 in this thread? Is it from Dorsey's book, webiste, or elsewhere? Regardless, I would be very wary of relying on one input, such as the B% ... or any one input for that matter, as 'giving the green light'.

Motorway points out that the B%

Quote: Originally Posted by motorway ... has to be integrated with other analysis ( price Volume & Time ) .......... The B% is like a calendar.. It forces one out of a linear mode of thinking when to look for Signs of Weakness When to esp look for Signs OF Strength

[treefrog]

Quote: Originally Posted by Timmy Another thing that occurs to me is that an indicator (like B%, or any other), and of course and more importantly, price itself, do of course switch from one mode to another, and sometimes very quickly indeed. Qualifying B%, or anything else, with analysis of price, vol and Time can be very helpful in assessing the likelihood, and timing, of any switch.

[motorway]

Quote: think the B% is probably a good but very limited indicator

[treefrog]

Quote: =motorway;262732]Those two indicators are just the same price information represented in another form as the index... The B% is derived from totally different information. This is an important point indicators are just the same information as a price series.

[motorway]

Quote: sorry, but have difficulty seeing it as usuable on an instrument such as $A/$US after your explanation of needing multiples of those within an instrument