The Bullish Percent Index for the S&P 500 (BPSPX) just triggered a sell signal.
This is only the third sell signal in as many years. And, if this one plays out like the previous two, then stocks may be in for a rough spell in the days ahead.
A bullish percent index is another indicator of overbought or oversold conditions. It measures the percentage of stocks in a sector that are trading with bullish technical patterns. And, since it’s a percentage, it can range from zero – meaning no stocks have bullish patterns – to 100 – meaning all stocks in the sector have bullish patterns.
For the S&P 500, any reading above 80 on the BPSPX is considered overbought. And, when the index turns down from overbought conditions, it generates a sell signal.
The BPSPX turned lower yesterday – just as it turned lower prior to the decline in late January, and the decline in February of 2018. Take a look…
The red arrows point to the BPSPX sell signals. The S&P 500 fell 10% in one week following the sell signal in February 2018. The index dropped nearly 4% in one week after the sell signal this past January.
In the Crash Course video class I offered this Monday (Alliance subscribers can access a replay here), I pointed to the overbought condition of this indicator as a reason to be at least a bit cautious on the stock market in the short term. The BPSPX was at 91 on Monday. That’s the highest reading of the past decade.
It turned down from that level yesterday, thereby generating a sell signal.
Think about that for a moment… One of the most reliable indicators I follow reached its most overbought level in ten years and then generated a sell signal.
It seems to me the stock market is going to have a tough time pressing even higher from here. In fact, I’ll bet stock prices are more likely to be lower in the days ahead.
Best regards and good trading,
Jeff Clark
P.S. Did you catch the first video of my new Crash Course that launched live on Monday?
In my Crash Course, every Monday for the next nine weeks, I’ll be livestreaming my trading process for you. I’ll take you through my routine before the market opens, show you what ideas I have in the works, and talk through any actions as they happen, step-by-step.
Members of Jeff Clark Alliance will be able to access all 10 sessions of my Crash Course – and I’ve also made a special exception that all paid subscribers will be able to access the first three.
If you’re not yet a paid subscriber, the best way to join is through my monthly options advisory, Jeff Clark Trader.
At just $19 a year, you’ll receive monthly options trade recommendations, an archive of trading resources and videos to teach you how to get started, and the first three sessions of my Crash Course. Click right here to learn more.
Reader Mailbag
Today in the mailbag, we hear from Jeff Clark Trader subscriber Jim in reference to a comment in last Friday’s mailbag…
Unfortunately, I agree with Robert. I’ve only been with Jeff Clark Trader since last fall and the 3-Stock Retirement Plan hasn’t been working for me. Overall, I’m upside down several thousand, and I’ve used less than a $1K sizing.
And, I noticed that the publisher is promoting it again for new subscribers. You should publish all the feedback, so others can decide whether to trust you or not. Full disclosure would be appropriate.
Meanwhile, I hope that you can be more successful using the ETF’s. Still wishing for some success, I remain connected.
– Jim
And Delta Report subscriber Thomas shares his thoughts on Jeff’s new Crash Course…
That Crash Course was excellent. Really well done and well prepared! I’ve followed Jeff since the mid-nineties… He is honest about his good and bad moves. A younger Larry Williams.
– Thomas
Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at [email protected].