Season of Falling Prices and Percent Index Proves It!

By: Chris Vermeulen | Wed, Oct 5, 2016
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It's a known fact that Sept and October are typically weak times for US stocks. Going back 37 years shows us the tendency for investors to sell and rebalance their portfolios to try and perform better during the final quarter.

But that's not really the point of this article. The chart below shows a comparison between the SP500 bullish percent index and the SP500 index.


What is a bullish percent index?

in short, it's based on point-and-figure charts and is one of the oldest and simplest stock charting tools to help identify the overall market strength or weakness. This index shows us how many stocks have generated a buy signal within the group of stocks its tracks.


Bullish Percent Index Proves Market Is Weakening:

The chart below shows the bullish percent index at the top and the SP500 at the bottom. I think the charts paint a clear picture of what is taking place. Currently the BPI is trending lower and picking up speed, while the SP500 index has been rising. This means fewer and fewer stocks are holding the stock market up and this typically ends with a sharp market correction. The last time we saw this was in June.

In fact, the drop in gold miners of 10% on Tuesday and the pullback in the SP500 I talked about it happening the day prior in a conversation with Kerry Lutz and also shared what we should expect next.

S&P500 Bullish Percent Index 2-Hour Chart


The Time of Year Stocks Correct:

Below is the seasonal chart of the SP500 taking into account all monthly price movements over a 37 year period. September is usually weak which it close lower for the month and so is October.

S&P500 Seasonality


Concluding Thoughts:

In short, stocks are under pressure for the month of October. I expect increased volatility, and large intraday price swings to be more of the norm.

 


Stay tuned for my next update on the crashing metals and gold miners report next, and be sure to follow my trades at: www.TheGoldAndOilGuy.com

 


 

Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

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Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.

Chris' mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors around the world. He designed an automated algorithmic trading system for the S&P 500 index which solves his client's biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades' automated trading systems allows individuals to investing using either exchange traded funds or the ES mini futures contracts. It is supported by many leading brokerage firms including:

- Interactive Brokers
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He is the author of the popular book "Technical Trading Mastery - 7 Steps To Win With Logic." He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. His list of personal and professional relationships approaches 25,000, people with whom he connects and shares is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight pilots license. He resides in the Toronto area with his wife Kristen and two children.

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