Market Outlook Considerations
Early this week, the longer term Point and Figure indicator, the NYSE bullish percent indicator, reversed downward. In simple terms, this means that the percentage of NYSE issues on buy signals had declined more than six percent from its previous high level. The shorter term indicators are all negative also at this point.
This particular indicator has been historically accurate in predicting downswings in the market. It does not call tops, it does not call bottoms. But it is pretty accurate at projecting future direction.
The Point and Figure charts for the internet sector show it extremely oversold, so some could see buying opportunities here. I think the buying opportunities will get even better for investors. For traders who are nimble, keep buying those dips, but in my view, the P&F indicators are telling me there is great risk out there, and I for one will be very careful on the long side. The DOT is around 500 right now. When the market peaked in July, 1998, the DOT was around 290. It bottomed at 140. I'm not sure that the DOT, the NASDAQ, or the broader market has hit its bottom.
David |
