Technical Indicators Looking Up

Technical Indicators Looking Up

June 23, 2022
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The market is looking promising. Yesterday, the Bullish Percent for the Nasdaq-100 (^BPNDX) crossed back above 20%. This is a rare occurrence that has happened 21 times since 2001 and only 14 times when excluding clusters (occurrences that happened within one month). These 14 occurrences are shown on the chart below.

 After the Bullish Percent for the Nasdaq-100 has crossed above 20%, the Nasdaq-100 returns are mixed on a short-term basis with only 46.15% of returns within one week or one month being positive. Farther out, returns improve with 75% of occurrences positing positive returns one-year later. When ^BPNDX crosses back above 20%, the market types have been unfavorable for the most part including 2001-2002, 2008, and 2022 which all would’ve classified as bear markets for the NDX. Instances outside of these time frames see much more positive returns, so the broader market type is something to be aware of when trying to contextualize this indicator. One point to keep in mind when looking at the ^BPNDX is it only looks at 100 constituents which is a small universe compared to most bullish percents, so the indicator is highly volatile compared to its counterparts.

 Using technical indicators like the ^BPNDX helps to remove the emotion from investing. The historical behavior of the market does not guarantee that the current market will behave in the same manner, but it does give more color to the overall picture.