Trader’s Narrative

Over the past few months I’ve received this question more than any other:

Where do you get your bullish percent data/charts?

So instead of answering each person individually, let me write about it so everyone will benefit - and leave me alone!

There are quite a few places to get bullish percent data but I use StockCharts.com. They not only track bullish percent charts for 18 different indices and sectors, they have an impressive amount of historical data which comes in handy when you want to compare current market conditions with previous times.

StockCharts also allows you to create your own bullish percent index for any grouping of individual securities. So if you find that the 18 sectors or indices they follow:

• Nasdaq Composite Bullish Percent Index
• S&P Consumer Discretionary Bullish Percent Index
• S&P Energy Sector Bullish Percent Index
• S&P Financial Sector Bullish Percent Index
• S&P Healthcare Sector Bullish Percent Index
• DJIA Bullish Percent Index
• S&P Industrials Sector Bullish Percent Index
• S&P Technology Sector Bullish Percent Index
• S&P Materials Sector Bullish Percent Index
• Nasdaq 100 Bullish Percent Index
• NYSE Bullish Percent Index (the original and most widely followed)
• S&P 100 Bullish Percent Index
• S&P 500 Bullish Percent Index
• S&P Consumer Staples Sector Bullish Percent Index
• S&P Telecom Services Sector Bullish Percent Index
• DJTA Bullish Percent Index
• TSE Bullish Percent Index
• S&P Utilities Sector Bullish Percent Index

…isn’t enough, just make up your own bullish percent index! or replicate an existing index (first, you’ll have to obviously find out all the constituents).

This is a great feature if you follow an obscure sector like say, palladium stocks or gaming/gambling stocks, etc. Or if you simply want to create a bullish percent index for the stocks you hold as long term investments to know when to lighten up and when to add to your positions.

The only disadvantage is that this feature is not free. You’ll have to subscribe to StockCharts. But their rates are very reasonable so if you are serious about technical analysis, you shouldn’t hesitate.

The other online resource for bullish percent charts is Tom Dorsey’s website. He wrote the bible on point and figure charting, which is the foundation of BP index charts.

Only problem is the website (behind the subscription firewall) is incredibly clunky and difficult to navigate. It seems like something his 12 nephew threw it together on a weekend… in 1994.

A quick follow up to gold and gold stocks:

Although both the yellow metal and related equities have continued to rise, something is conspiring to keep a tight lid on the rally. And no, it isn’t a wide reaching and vast conspiracy involving central banks, hedge funds, the Easter Bunny and Mossad.

Last week, gold sentiment skyrocketed to 81% - as measured by MarketVane’s Bullish Consensus. That is the highest it has been this year and not too far off historic extremes.

According to contrarian analysis, there is way too much excitement about this little latest rally. When the vast majority of those who are interested are bullish (and act on the opinion by buying) the tragic conclusion is that there isn’t any real buying pressure left to propel prices higher.

This is what happened last May when bullish gold sentiment reached a crescendo of +90%. Gold peaked at $725 and the AMEX Gold Bugs Index (HUI) at 400. Neither have seen those levels again. And if the bullish sentiment continues, there is less and less probability they will.

The only argument that I can see for a continued rally in gold is the bullish percent index for the sector. According to the BP index kept by Dorsey, Wright & Associates, there is a possibility that we could see gold break out from this multi-year trading range.

In mid August, along with the rest of the market, gold got clobbered. That caused the bullish percent for the index to fall to 16% - a very, very low number. So far, it has recovered from this depth to 30%. As you can see from the chart (below), the BP index has quite a ways to go before it reaches overbought territory.

So take your pick: keep gold longs because bullish percent is still quite low or pare positions and tighten stops because sentiment is getting too bullish. Personally, I’m going with sentiment - via contrarian avenue.

Click To Enlarge Graph:

Graph Credit:Technical Watch

Thanks to Moises, a reader in Barcelona for the link (please have a bocatta on me and don’t forget the tomate drenched pan)