Chapter 8 – Point and Figure’s Contribution to Market Breadth

Market breadth indicators are so called because they measure the action of a group of instruments – either the constituents of a sector or the whole market itself. Breadth, therefore, measures the market trend by looking at the action of all the instruments within a market index or sector each day.

The key to understanding the basis of breadth indicators is that they are calculated using the number of instruments that have fulfilled a predetermined condition. Therefore, every day, the number of shares fulfilling the condition is totalled, and this total used to plot the breadth indicator. The calculation is simple, but the management is complex. Ideally it should be performed every day or every week, and the total stored for use when required, but often this is not possible and so the calculation has to be performed in a sweep ofmany days to obtain the totals required to construct the breadth chart.

It is important to understand that breadth indicators do not and cannot analyse individual shares because they don’t analyse the price. Furthermore, although breadth indicators tend to be used for the general analysis of equity markets, because indices are usually made up of shares, breadth can be assessed on any set of data, no matter what the make-up is. This is because breadth, in effect, creates an alternative index using the same constituents.

There are many indicators that measure breadth in slightly different ways, but the thinking behind all of them is the same. The advance decline line is one of the most popular. It calculates the number of shares that have advanced on the day and the number that have declined. The difference between the advances and declines is added to or subtracted from a running total, which is then plotted. Advance decline lines are drawn as line charts, but they can of course be drawn as Point and Figure charts. As they are not based on Point and Figure, however, they have no place in a book on Point and Figure charts. There is, in fact, only one breadth indicator that is purely Point and Figure and that is bullish percent, discussed below.

The point of breadth indicators is that they are an independent measure of the market or sector index. For example, if, on a day when all shares in the NASDAQ 1 00 fell or remained unchanged, one of the biggest shares in the index rose by 5%, the index itself would rise. Would that index rise be a true reflection of the market for that day? It would, in fact, be misleading. Market breadth, on the other hand, would count 99 shares down or unchanged and only 1 share up, giving a strong downward bias on the day. It brings another dimension to the analysis of indices and markets. If 99 shares have fallen and only 1 has risen, surely the direction of the market should be down rather than up. The essential difference between breadth and an index is that no account is taken of the amount by which a share has risen, only that it has risen. Breadth gives an equal weighting to every constituent.

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A caveat

Before going any further, it is just as well to draw your attention to an important caveat. One of the maj or problems with any market breadth indicator, not just bullish percent, is that it is calculated by adding up, on a daily basis, the number of shares in an index, group or portfolio fulfilling a particular condition. That in itself is not a problem, provided that the constituents of the index remain constant. The fact is they don’t. So assessing the bullishness or bearishness of a stock which is in the index today, and using it to construct a bullish percent chart is not a problem, unless at some stage in the past the share was not in the index or group. Traditionally, the calculation of market breadth indicators was started many years ago and a running total was kept for a few key charts, usually American indices. Doing it this way ensures that, each day, only those shares which are in the index on that day are assessed. The problem comes when you want to construct a market breadth indicator for an index or portfolio which has never been done before. You could, of course, find out the changes to the index constituents over the past ten years and then calculate your breadth indicators day by day, ensuring the correct constituents are used and name changes, mergers and de-mergers are accounted for. The alternative is to assume that the constituents have not changed over the years and construct the history based on today’s constituents.

The former method is correct, and the latter is flawed, but the former is so difficult and so time-consuming that it is unlikely that anyone would take the time to do it. Does this mean that the breadth indicators should be avoided? The answer is no. What should be avoided is any index that changes its constituents regularly. The FTSE 100 Index, which is used as London’s benchmark, is one such example. It only has 100 constituents, which are revised every 3 months, based on market capitalisation, making medium-term analysis ofany market breadth indicator based on the Index meaningless. The best option with the FTSE 100 would be to start a new breadth chart every 3 months and only look back to the revision date. It cannot be stressed strongly enough, that indices like the FTSE 100 should not be assessed for any market breadth index, other than for the recent period for which the components have remained unchanged.

The bullish percent charts used in the next few pages of the broad FTSE All Share Index are not perfect, nor are its constituents constant, but what is important is that the vast majority do not change from one quarter to the next. It is, therefore, feasible to use it when constructing any market breadth chart of the London market, although it still suffers from constituent changes. In a similar vein, the S&P 500, Russell 1000 or NASDAQ Composite indices are feasible to use for US markets. Some would say that London’s FT30 and New York’s Dow Jones Industrial Average, although consisting of only 30 stocks, remain fairly consistent and can be used as well, although both have had a few changes in recent years. Essentially, indices that have a larger number of constituents will be better for market breadth calculations. Even though changes may still be regular, a smaller fraction are moving in and out of the index.

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There are those that will find this unacceptable, If you are one, then you have two choices. Either use the market breadth indicator only for the period for which the index constituents are constant, meaning no medium- to long-term analysis, or accept that using a wide index with its current constituents is flawed, but is better than no breadth chart at all. If neither of these is acceptable, start recording the figures manually today so that in ten years’ time, you can look back on an accurate breadth chart in the hope that some other index has not replaced the one you have been following.

Bullish percent

Point and Figure charts are either bullish or bearish – that is a major advantage of them – there is no half measure. A bullish Point and Figure chart is one where the last signal generatedwasatleastadouble-topbuysignal. Seepage 115 foranexplanationofthedouble­ top buy signal. It does not matter how many columns back the signal occurred. Provided there has not been a double-bottom sell since, (in other words, provided a column of Os has not fallen below the previous column of Os) the double-top buy remains valid and the Point and Figure chart remains bullish.

Bullish percent was devised by A.W. Cohen of Chartcraft, and measures the percentage of shares comprising an index or a market, with charts showing bullish Point and Figure patterns. Because the double-top is the signal that decides the bullishness ofthe chart, bullish percent charts may only be constructed from 3-box reversal price charts, the reason being that double-top buy signals are a 3-box signal and not a I-box signal.

To construct a bullish percent chart, therefore, you have to draw a Point and Figure chart of every share in the index you wish to study, on the day you wish to study it. You then have to count the number of shares that have, as the last signal, at least a double-top buy. The number is then expressed as a percentage of the total number of shares in the index. The resultant percentage is then used as the next data point to construct another chart, which is the bullish percent chart. The next day, the whole procedure is repeated, making the creation and maintenance of any breadth indicator a tedious task. Furthermore, in order to obtain back history, the procedure has to be carried out every day for which the history is required. It is here that a problem exists, which is explained in the caveat section above. Bearing in mind the caveat, computers can be used to calculate bullish percent on any index, even if it has never been done before.

It is traditional to draw a bullish percent chart as a Point and Figure chart, however, a line chart is also possible and practical. Each method adds something to the analysis.

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Analysing bullish percent as a line chart

A line chart of bullish percent is not used often, but it should not be ignored by Point and Figure aficionados, because it can show things that the Point and Figure version does not. The main reason it is used is that it can be plotted below the index itself and thus compared on a day-to-day basis. Remember that although a line chart is plotted, the foundation of the indicator is still in Point and Figure because it uses the percentage ofbullish Point and Figure charts each day throughout the entire history.

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Chart 8-1 : Price line chart of FTSE All Share Index with line chart of bullish percent based on 2% Point

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The bullish percent Chart 8-1 is constructed as follows:

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A log scale28 2% x 3 Point and Figure chart is drawn of each share in the FTSE All Share Index.

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Chapter 8 – Point and Figure’s Contribution to Market Breadth

Each day, total the number of shares that display a bullish pattern (last signal a double­ top buy).

Express that number as a percentage of the total number of shares in the FTSEAll Share Index.

Plot the bullish percentage each day.

Before trying to analyse the line, think what the chart is telling you. A rising line means that the number of shares with bullish charts is increasing, whereas as a falling line means the number of bullish charts is decreasing because more are turning bearish.

The bullish percent line chart can be regarded and analysed as if it is an overbought/oversold29 oscillator, where anything above 70% is considered overbought and anything below 30% is considered oversold. These critical levels do vary from index to index. A break below 70% is not a sell signal. ‘Overbought’ itself is not a sell signal, just as ‘oversold’ is not a buy signal. Strong uptrends can stay overbought for months, even years. Provided the bullish percent remains above 70%, the uptrend in the underlying index is strong and intact. It means that 70% of its constituents have bullish Point and Figure charts. A break below 70% shows a slowing down and perhaps a weakness in the uptrend, but does not signal that the uptrend is at an end. Trends cannot accelerate forever; they need a period where the speed of the rise is constant or even slowing. A break below 70%, therefore, simply tells you that some of the overbought nature has been relieved by some shares turning bearish – most likely the overextended ones.

Because of their very nature, indices tend to remain overbought much longer than they remain oversold. Therefore, dips below the 30% level into oversold territory are usually short-lived, and a break back above the 30% level is a strong new bullish signal. It means that only 30% of stocks have bullish patterns but that number is increasing. The fact that it is increasing means that more charts are becoming bullish and less are turning bearish.

You will often see the line oscillate above and below the 70% level; this is normal bull market action where the market runs from being overbought to being neutral. This is clearly shown between the years 1 995 and 1 997.

It is the 50% line, however, that is the real indicator of trend change. A break above 50% indicates a change to a bull trend and a break below 50% indicates a change to a bear trend. It would, however, be wrong to assume that trends change atthe ‘flick ofa switch’ and so sticking rigidly to the 50% level as the indication ofa trend change is unwise. It is better to draw a 2.5% band either side ofthe 50% level, as shown in Chart 8-1, and regard the crossing ofthe band edges as the signal. Ifthe bullish percent falls to the band and bounces back towards the 70% level, it is a reinforcement ofthe uptrend in the index. It means that the previous overbought

29 Overbought is a condition that occurs when a price has risen too far, too quickly, and is due for a pause or a correction. Oversold occurs when the price has fallen too far, too quickly.

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nature has been removed by a correction, which reduces the number of bullish charts, but then the number of bullish charts has started to increase again. If, alternatively, it penetrates the band, but does not immediately bounce back again and instead falls towards the 30% level, this indicates that the uptrend has come to an end, as shown in 1998.

The area between 70% and 30% is the trend change area. If the bullish percent oscillates above and below the 50% band without ever reaching 70% or 30%, this indicates uncertainty about the prevailing trend, suggesting that it is ending and is in the process of being replaced by a trend in the opposite direction after a period of sideways movement. At this time, positions in the market are best avoided until the trend becomes clear again. This is shown between mid- 1 999 and early 200 1 , when the line eventually penetrated the 30% level. Notice that the period below the 30% level was short-lived, as is normally the case, and the line went back up through the 50% level but did not reach the 70% level. This indicates weakness. It means that, although the number of bullish charts increased, it was due to a short-term oversold situation rather than a resumption of the bull trend.

The strongest trend change signal that bullish percent can give is when it breaks below 70%, then goes on to break below the 50% and then the 3 0% level without much interruption. It is a clear signal that a bull trend has ended. The reason is that there is a steady decrease in bullish Point and Figure charts and consequently increase in bearish ones. To turn a bullish chart bearish requires a double-top buy signal to be reversed into a double-bottom sell signal. That is not as simple as it sounds. You may think that it requires a reversal of 3 boxes but that is not the case.

Once a double-top buy signal has been generated, the chart becomes bullish. In order to reverse the buy signal and turn the chart bearish, a double-bottom sell signal must be generated. In order to do that, the price must reverse by a minimum number of 5 Os as shown in Figure 8- l (a). The chart turns bullish when it breaks above the blue line and turns bearish when it breaks below the red line. In order to reverse from a bearish chart to a bullish chart, a double-bottom sell signal must be converted into a double-top buy signal. This also requires a minimum rise of 5 Xs as shown in Figure 8- 1 (b). Remember, this is the minimum condition; it could be many more boxes. If your individual stock charts are 2% x 3 Point and Figures, it means the price must reverse by 10% (5 x 2%) to change from bullish to bearish and vice versa. Therefore, once a sell signal has registered, the bias is down and only the strongest bull market can turn it around and make it bullish again.

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Ifbullish percent breaks above 30%, then through 50% and 70%, this is a clear signal that a bear trend has ended for the same reasons as given above. To keep increasing the number of bullish charts, more shares must be turning by 10% or more, which is bull market action. Examples ofthis are found in Chart 8-2 in 1994, 1998 and 2003. The move from oversold in 2003, straight through the 50% level and up to the 70% level without a pause, was the clearest indication of the end of the 2000 to 2003 bear market and the start of a new bull market. Notice that, in early 2004, the indicator broke below 70% and reached the 50% band where it turned and went straight back above 70%, confirming the resumption of the bull trend.

As with all oscillators – bullish percent is an oscillator – divergence with the price is another indication of strength or weakness. This divergence is impossible to see when bullish percent is plotted as a traditional Point and Figure chart because it cannot be lined up with the index.

Divergence occurs when the price is in a rising trend making higher highs, but the oscillator is falling, making lower highs. The price, in this case, is the underlying index, and the oscillator is the bullish percent that measures the percentage of shares with bullish Point and Figure charts on a day-to-day basis. The converse is true for downtrends; the price making lower lows but the oscillator making higher lows is a sign of strength.

Divergence tells you whether the rises or falls in the index are being supported by the number of bullish or bearish charts of the underlying shares in the index. Divergence itself is not a signal; rather it is a warning that the trend is experiencing weakness. Unlike normal oscillators, divergence above 70% and below 30% is not important, because these show strong trends. Divergence in the 70% to 30% trend change area is, however, important because in this area there is already uncertainty. Ifthat uncertainty is coupled with an inability to regain the 70% level, this indicates weakness. This is shown in the years 1999 to 2000. Notice that the bullish percent chart broke below 70% and then 50%, signalling the end of the uptrend. It then immediately broke back above 50%, signalling a resumption of the uptrend, but did not break back above 70%, although at this stage the index itself was at a

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new high. This means that less than 70% of stocks in the FTSE All Share Index were bullish, despite the fact the index was making a new high. That is a worrying sign. The bullish percent broke below 50% again, and again it broke back up, but could not get near the 70% line.

Divergence is always easier to read after the fact, which makes it difficult to apply. As for all Technical Analysis, try to put yourself beyond the chart and try to understand what it is showing you. In this case, it was clear that there was divergence and clear that it was showing signs ofweakness.

Adjusting the sensitivity of bullish percent

You will already know that you can adjust the sensitivity of any Point and Figure chart by adjusting its parameters, most especially the box size. Chart 8- 1 was constructed by drawing 2% x 3 Point and Figure charts of all the constituents of the FTSE All Share Index. You can take a more sensitive, and hence shorter-term, view by reducing the box size to 1 %. Chart 8- 2 is a bullish percent constructed by drawing 1% x 3 Point and Figure charts of the constituents. Notice that the volatility of the bullish percent chart increases because to reverse from bullish to bearish, and vice versa, the price of any instrument must reverse by only 5% instead of 10%. This means that it is easier to tum from one condition to the other. Exactly the same observations apply with regard to the various levels.

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Analysing bullish percent as a Point and Figure chart

The original and traditional way to view bullish percent is to draw a Point and Figure chart of the percentages each day. The immediate disadvantage is that it is now impossible to compare the underlying index, because the Point and Figure columns will not line up with the price Point and Figure, but that does not mean you should ignore the Point and Figure version, as it has other important indications.

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Chart 8-4: 1 x 3 bullish percent of the constituents of FTSE All Share Index based on 2% Point and Figure charts

Chart 8-4 is a Point and Figure version of the bullish percent line shown in Chart 8- 1 . It is based on 2% x 3 charts of the constituents and the bullish percent chart itself is a 1 point x 3 of the percentages. Since there is no time-scale in Point and Figure charts, keys dates have been placed on the chart. The same observations about the 30% and 70% level apply, but the fact that it is a Point and Figure chart can help you in your analysis of the chart.

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Normal Point and Figure patterns and trend lines apply, so signals are easier to interpret. A double-top buy on the bullish percent chart is a signal to look for buying opportunities within the constituents ofthe index. A double-bottom sell is a signal to look for selling opportunities. The strength of these signals is defined by where they are on the 0 to 1 00 scale. A buy signal below 30 is a strong signal to buy shares, whereas one above 70 is a cautious buy with a quick exit strategy in place. Only stocks giving buy signals with positive relative strength should be considered at this level. In the same way, a sell signal above 70 is a strong signal but below 30 is a weak signal.

The 2% version of bullish percent shown in Chart 8-4 does not show many signals either below the 30 or above the 70 levels. In fact, there are always more above 70 than below 30. The dates ofthe important tops are shown and most coincide with a double-bottom sell above the 70 level. The only strong buy in the chart is the double-top buy in 03/03. It is for this reason that many switch to looking at the 1% version, in Chart 8-5, where the share charts are 1 % x 3 instead of 2% x 3 .

The power ofthe Point and Figure version ofbullish percent is that the last column tells you the current status. If the last column is a column of Xs, this is bull status. A rising column of Xs indicates that more of the constituent Point and Figure charts are becoming bullish and reversing from bearish. Remember, a Point and Figure chart is either bullish or bearish; there is no middle position. To tum from bearish to bullish it must reverse by 5 boxes (see page 3 8 5 for a full description), which in this case is 1 0% – a strong turnaround. If the last column is a column of Os, this is a bear alert status. A falling column of Os indicates that more constituents are turning bearish.

If a column of Xs has given a buy signal by rising above a previous column of Xs, opportunities to take long positions are sought. If, however, a reversal into a column of Os takes place, this is an indication to stop any buying and wait for one of two things to occur: Either the column of Os falls below a previous column of Os, signalling that you should close long positions and look for shorts, or the column of Os reverses back into a column of Xs, indicating a resumption of the uptrend and buying can commence again. All the time, the positi�n on the 0 to 100 scale tells you the risk ofacting.

The 50 level is the dividing line between a bullish and bearish market breadth. If, after giving a buy signal below 50, a column ofXs rises up to and then through 50, this confirms a strong bullish status. This is shown after the 03/03 bottom and the subsequent rise. The converse applies when a column of Os falls through 50. This is shown after the 05/92 top, down to the 08/92 bottom.

If the rising column of Xs stops at the 50 level and reverses, this is a sign that the bullish nature has halted. You should be cautious, as you are on the borderline. All buying should cease. Short-term profits should be taken. Longer-term positions can remain open. It is a signal that the bulls do not have full control. Often it means that a second, lower bottom is about to be made. This is shown in 12/02. If, however, the reversal is short-lived and the

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column of Os is reversed into a column of Xs, at the same time giving a double-top buy signal, this is very bullish; having been pushed back, the bulls have re-asserted themselves and turned more shares bullish. This is shown in the rise from 09/98, which was rebuffed at the 50 level temporarily. The converse applies when sell signals are given above 50 and the column of Os falls and stops at the 50 level. If it turns back into a column of Xs, it means that the uptrend has resumed.

Although bullish percent based on 2% x 3 Point and Figure charts of the constituents is in common use, one based on 1% x 3 charts is actually more useful to the medium-term investor. Chart 8-5 shows the bullish percent calculated on 1 % x 3 Point and Figure charts of the constituents. The key dates are again marked to allow comparison. In many cases, the 1 % is better because it shows more double-top and bottom signals.

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Chart 8-5: 1 x 3 bullish percent of the constituents of FTSE All Share Index based on 1% Point and Figure charts

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Log or arithmetic scaling

All the bullish percent charts shown above are constructed by drawing log scale charts of each share, but you are aware that there are two ways to scale Point and Figure charts. Arithmetic scale uses the same number of points for each box, whereas log scale uses the same percentage. The question arises whether bullish percent charts can be constructed using arithmetic scaling of the individual shares. Arithmetic scaling presents a problem if a long history is being observed, because the box size is a fixed points size. As the price rises, therefore, so the chart becomes more sensitive because the box size is too small for the price level. This means that bullish percent should never be calculated using arithmetic scale (points box) when drawing Point and Figure charts of the constituents. Log scale should always be used.

Close only or highllow data

All the bullish percent charts drawn above are constructed using the daily close only for each of the individual shares. They could just as easily have been based on high/low data. A.W. Cohen, the inventor of bullish percent, used high/low charts because they were also his invention. There is no doubt that provided your high/low data is spike free, the high/low version of bullish percent contains more detail. Chart 8-6 is a bullish percent constructed using 2% x 3 Point and Figure charts of the constituents on high/low data. Compare and contrast this with Chart 8-4 using close only data.

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The point you should understand is that there is no single bullish percent chart for any index, as many believe. The variables are the box size of the individual share charts and whether they are constructed using close only or high/low data. You will find, as you do with all Point and Figure charts, that varying the parameters can often expose patterns in one chart that may not be obvious in another.

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The Definitive Guide to Point and Figure

Chart 8-7 below is a bullish percent chart of the German Dax 30 Index constituents. Once again, key dates have been inserted on the chart, which may be compared with the line chart of the Dax 30 Index itself, in Chart 8-8.

Chart 8-7: 1 x 3 bullish percent of Dax 30 Index constituents: constructed with data courtesy of Bloomberg

Notice the double-top buy signal in March 2003 below the 30 level. This is the strongest signal you can get from a bullish percent chart. Not only is the double-top buy important, but also the fact it is below 30 makes it more so. It is a signal to start accumulating positions in shares that make up the Index. Notice too that after the double-top buy, the column ofXs rises strongly, without pausing, through the 50 level and up above the 70 level. Compare and contrast this with the double-bottom buy in August 2002, which also occurred below the 30 level, but which stopped short of the 50 level, only to tum down and make a new low in October 2002. Double-top buys below the 30 level are indeed the strongest signals but it is vital that they carry up through 50 to confirm a new bull trend. In August 2002, this failed to happen and the column of Os puts a stop to any stock accumulation.

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After the strong buy in March 2003, the bullish percent runs straight through to 100%. This is unusual but can easily occur when bullish percent is calculated on indices with only a few constituents, in this case 30. It means all 30 stocks have bullish Point and Figure charts. This is a strong indication of the start of a new bull trend; however, reaching 100% leaves newcomers to the market with nothing to buy, so it is an obvious place to take profits, or at least stop buying. Notice that the correction away from 100% is short-lived, and only to the 82% level, before it pushes higher, giving a repeat double-top buy signal. In August 2003 , a double-bottom sell above 70% is an important signal to close long positions and look for short positions. Notice, however, that although a second double-bottom sell occurred, it failed to push below 70%. Instead, it bounced off 70% giving another double-top buy, albeit in an overbought area. Bounces off the top side of 70% are bullish and are a signal of a resumption of the bull trend.

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In February 2004, another double-bottom sell signal above 70, combined with the column of Os going through 70, signals the end of the bull run. Remember that the 50 level is the dividing line and the bounce off 50 is encouraging for the resumption of the bull trend. To signal the resumption, however, a column of XS must give a double-top buy, which it was unable to do. Instead, a new column of Os forms, giving another double-bottom sell and falling below 50%. This means that more than half the Dax 30 Index stocks have bearish Point and Figure charts and consequently a bear trend is confirmed. This continues until early September, when the column ofOs is halted above the 30% level. Anew column ofXs forms and rises above 50%, confirming the resumption of the bull trend again. To confirm the new trend, however, a double-top buy is required and the column of XS needs to rise through the 70% level.

Bullish percent on other indices

Bullish percent is not reserved for main market indices. It may be calculated on any group of shares, including shares in an industry sector, or a portfolio, bearing in mind the caveat above. All you need to know is the shares which comprise the index or portfolio on which you wish to calculate the bullish percent.

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Summary

Bullish percent is another way of looking at the market. Its power is that it is constructed by looking at the status, either bullish or bearish, of the constituents of any index or market group. It performs two tasks: it tells you how overbought the market is, as well as flashing you signals to accumulate stock or dispose of it. Although its construction is based on Point and Figure charts, its representation may be either as a line chart or as a Point and Figure chart, which is the traditional way. Each has advantages and disadvantages. A line chart of bullish percent has the distinct advantage that it may be lined up below the price and read like any other oscillator. This is particularly useful for spotting divergences.

The more common Point and Figure version of bullish percent cannot be lined up with the price chart but it has two advantages: firstly, normal Point and Figure double-top and bottom signals apply; and secondly, the last column tells you the status ofthe market. A rising column of XS means the market is bullish and is continuing to be so. A falling column of Os means the market is bearish because an increasing number of shares are turning bearish. This is far more important than simply a rising or falling line on a line chart, because, in order to change a column of Os into a column of Xs, the bullish percent chart itself must reverse by 3 boxes, or 3%, which means that 3% more share charts must be bullish than before.

A.W. Cohen, the originator of bullish percent, only used the Point and Figure version and never the line chart. His rules for reading it were simple:

A rising column of XS below 50% is a bull alert signal.

When the column of XS crosses above the 50% level, the bull trend is confirmed.

However, if the column of Xs is below 50% and issues a double-top buy then the bull trend is confirmed earlier.

A falling column of Os above 50% is a bear alert signal.

When the column of Os crosses below the 50% level, the bear trend is confirmed.

However, if the column of Os is above 50% and issues a double-bottom sell then the bear trend is confirmed earlier.

He added that any tum up from below 1 0% is a signal for a new bull market.

Earl Blumenthal expanded on Cohen’s work and produced six states of the bullish percent chart:

Bull confirmed – occurs when there is a rising column of XS after a double-top buy signal.

Bear confirmed – occurs when there is a falling column ofOs after a double-bottom sell signal.

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