Sunday, August 2, 2009

Bullish Percentage Index

Another great tool for spotting trends and tops and bottoms is right here in the bullish percentage index of the SPX. Here is a daily chart, I throw a 5 day EMA as well as part of a crossover system. Also the top of the chart is the daily of SPX alongside, take a look and see how good this reading is at spotting trend changes and tops and bottoms. If we traded this as a crossover system on its own we could have made money (However I would advise against using this by itself!) But even if you did you would have caught the majority of the move to the upside and the selloff as well.

Take this along with our Summation Index and McClellan Oscillator that I showed in a previous post and you have a great way to spot and follow trends. As you can see first off we are close to making new highs in this index and second look at the previous times it has failed at this high of a level. Aagin something to keep in mind while trading, for me I will limit my exposure on the short side, if any unless/until we get a bearish cross on this index, then it may signal a short term reversal. But again, SPX > 970ish = Bull Market, it's as easy as that. Until that number gets taken out to the downside the trend is UP!

Good luck trading this week everyone, I will probably be staying up real late tonight to catch the action and maybe get some good positions opened for the day session tomorrow, we will see.