[isatrader]

I am about 30% invested and 70% cash. My short term indicators are negative. And the following long term indicator worries me.
It is the P&F bullish percent indicator (long term indicator) but plotted as a line chart. I also remark the divergence between the BPLine and the indexes (easier to see on the BP line chart then on the P&F BP chart, see lowest chart)
For people that are not familiar with the bullish percent (from the book of Jeremy Du Plessis): it measures the percentage of stocks in a index where the last point and figure signal was a double top buy (knowing that is doesn't matter how many colums back the signal occured, provided there has not been a subsequent double bottom sell!)

Du Plessis writes extensively about this indicator:
- Area above and beneath 70 (range 80-60) = normal bull market
- Area around 50 (a band of 3 % above and beneath) = trend change area
- Area between 70 and 30 = trend change area (if the BP oscillates above and below the 50 band, without ever reaching 70 or 30) it indicates uncertainty about the prevailing trend. But if, the BP falls to the 50 band and bounces back towards the 70 level, it is a reinforcement of the uptrend (I am waiting for that one...)

To be complete, here is the BP point and figure chart

Any other thoughts on the long term?

I post the Bullish Percent Charts for the NYSE and Nasdaq every week on Elite Board thread and so hopefully the members understand them, but it's been a while since I've explained them for the newbies, so thanks.

Dorsey has a useful playbook for the Bullish Percent which you might have seen before (See attached). But it's advice for the current situation is logical. i.e. defensive posture, reduce equity exposure, raise cash, Hold strong RS sectors, Sell weak RS sectors, Hold leaders (strong RS) stocks, Sell laggards (weak RS) stocks, Use trendline stops etc...

But until the BP reverses back to Os again, I'm still going to err on the cautiously positive for the long term still, as we still have the ball currently, and the October flush cleared out a lot of the over exuberance in the market, with the percentage of stocks above their 150 day MA's getting down below the key 30% levels in the US markets. But the short term is very shaky with the increase in volatility, and copper breaking down into a major Stage 4 decline isn't going to help with additional pressure from margin calls from those traders/funds who might have to sell stocks they own to cover the calls.

Interesting times...