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Strategies & Market Trends : Point and Figure Charting -- Ignore unavailable to you. Want to Upgrade?

To: The Perfect Hedge who wrote (7368)	9/16/1998 3:37:00 PM
From: Ms. X	Read Replies (2) \| Respond to of 34809

From DWA about NYSE BP.. You all should have seen this if you have a subscription to DWA. If you don't, go to dorseywright.com and sign up. Updates given daily. This week the NYSE Bullish Percent reversed up into a column of X's, putting the offensive team back on the field and with great field position. As we have pointed out in the past, the NYSE Bullish Percent doesn't get below the 30% level very often so the reversal up is certainly positive and it comes from great field position. The reversal up doesn't mean that we abandon our game plan. We received a call this morning from a client who said, "The NYSE Bullish Percent has reversed up, does that mean we shoot for the moon now." My answer was NO! You don't go out and just start buying willy-nilly. Even though the NYSE Bullish Percent has reversed up and we have the offensive team on the field again, if you buy stocks which have bad relative strength and awful chart patterns, the probability you are going to make money is still pretty slim. Remember your game plan. That means you stick with those sectors which have reversed up from below 30%. In those sectors you buy stocks that are fundamentally and technically sound. That is, the stocks are showing higher highs and higher lows and exhibiting good relative strength. If the stock is extended, then be patient and wait for a pullback. Again, you must stick to your game plan. A reversal up from below 30% does not mean that the NYSE Bullish Percent will just rally straight up to 70%. Going back to 1974, that has only happened twice in the seven times the NYSE Bullish Percent has gone below 30%. A much more likely scenario for the Bullish Percent is that it will rally up and then pullback. Don't forget the dissertation of the 1981-1982 market we outlined in the September 4th report. During 1981-1982 the NYSE Bullish Percent bottomed at 20% in September 1981. The initial rally up took the Bullish Percent to 46%. It then pulled back to 28% in March 1982 while the Dow Jones Industrial Average moved to a new low. Notice that the Bullish Percent was making a higher low which was a positive divergence. The NYSE BP rallied again to 46% in May of 1982 and then reversed down, though only falling to 32%. The Dow Industrials again went to a new low but once again the Bullish Percenet made a higher bottom. It wasn't until the reversal up in August 1982 that the market blasted off. During this 1981-1982 time, the strong stocks were making higher bottoms during each reversal down. Prepare yourself that is the type of market we will experience. If we do reverse straight up and go to 70% then, great, you'll be pleasantly surprised. But if not, then you will be ready for whatever happens. The bottom line is we have the football again and at great field position. Stick to the game plan of buying strong stocks in sectors which have reversed up from low levels and are both fundamentally and technically sound. Keep stop loss points in place and adhere to those.