A tool to help confirm the overall market trend is the Bullish Percent Index (BPI). The Bullish Index is a popular market “breadth” indicator used to gauge the internal strength/weakness of the market. Like many of the technical market internal indicators, it is used both to confirm a move in the market and as a non-confirmation and therefore divergence indication. Over the past eighteen months Nasdaq stocks have led market direction.
We have been saying recently “…It is reasonable not to expect the major equity indexes to return to their highs until the BPCOMPQ breaks out into a sustained uptrend…” The orange line in the current chart below confirms the BPCOMPQ reversed course into an uptrend and is leading stocks to new highs as we thought it would.
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