The NYSE Bullish Percent Indicator Says ‘Buy’

Tom Dorsey of Dorsey Wright has a book that he published called Point and Figure Investing (second edition, Copyright 2001). In this book he spends a lot of time developing his main indicator which is the NYSE Bullish Percent. The Indicator was developed by A.W. Cohen in 1955. It was designed as a barometer for the market that could identify overbought or oversold conditions and generally identify the field position of the market. Readings above 70 were considered overbought and below 30 were considered oversold. The actual BP looks at the % of stocks trading on the NYSE that are showing Point and Figure Buy Signals.

Generally speaking, when the indicator is below 30% in a column of O’s and it reverses up into a column of X’s, this is considered a “Bull Alert” status. This week the NYSE moved into Bull Alert Status - Indicating a BUY. It’s also interesting that Friday Warren Buffet came out and announced an “all clear”, with respect to investing in equities at these levels. There was an article in the NYTimes today in the OP ed section by Buffett.

During the 1987 Crash, the NYSE Bullish percent got to a low of 6 and then reversed straight up to 28, then reversed down to 20 and moved straight up to 72 without another reversal. The Bullish Percent last Friday 10/10/08 got down to a low of 2.76%. This is the lowest that it has been since 1974. It reversed up this week, providing an indication to buy. It is possible for the BP to reverse back down. If it does reverse down, then a bull confirmed status will be attained when the subsequent column of X’s exceeds the prior column of O’s.
NYSE Bullish Percent for the Week Ended 10/10/08:

NYSE Bullish Percent Chart for the Week Ended 10/17/08:

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