Monday, November 08, 2010
One of the StockBee members (CKBergin) mentioned this market breadth indicator a week or so ago and I thought it was an easy-to-read breadth indicator worth sharing.
In short, Market Breadth Indicators tell us the underlying strength of the market or any given index. Stockcharts.com describes the Bullish Percent Index as:
The Bullish Percent Index (BPI) is a breadth indicator based on the number of stocks on Point & Figure buy signals within an index. Because a stock is either on a P&F buy or sell signal, there is no ambiguity when it comes to P&F charts. This makes BPI a straightforward indicator with clearly defined signals.
Basically, you are watching for the daily index line to cross over or cross under the 10 day moving average. When the you get a cross above, you would move in to the market, cross under you move back into cash.
You can watch the indicator for all of the major indexes:
$BPCOMPQ - Nasdaq
$BPNYA - NYSE
$BPSPX - S&P 500
$BPINDU - Dow