The Bullish Percent Index is a market indicator that helps to measure the breadth of a market. A market can be an exchange such as the NYSE ($BPNYA) or an index such as the S&P 500 ($BPSPX). The "$" is added to the symbol for use on stockcharts.com.
For those who wish to understand the Bullish Percent Index Calculation, please see the end of this article.
Bullish Percent Index
The Bullish Percent Index is a popular indicator that investors use to identify changes in the trend for the period being evaluated. When the Bullish Percent Index gives a reading above 70%, it is considered overbought. Even stronger overbought signals are given when the Bullish Percent Index rises above 80. When the index reverses course and turns down, it considered an indication the trend is also turning down.
A reading on the Bullish Percent Index below 30% is considered oversold, with a reading of 20% considered a better signal of an oversold condition. In this case, when the index turns up, it is a sign the market will also turn up, reversing its trend.
The direction of the Bullish Percent Index is most important, as it is proportional to the direction of the market. When the Bullish Percent Index is trending up, so is the market. The same holds when the Bullish Percent Index is trending down. This makes reversals in the Bullish Percent Index important events, as they indicate the market is reversing its trend.
The Bullish Percent Index can be used for any time period, though it seems to work best for daily, weekly and monthly periods. In addition, many investors use a signal line to time the transition from an up trend to a down trend and from a down trend to an up trend. This signal line can be any indicator though the simple moving average, exponential moving average and parabolic SAR are the most popular.
As mentioned, the Bullish Percent Index can be used for to measure exchanges as well as indexes. The most popular being the NYSE Bullish Percent for the New York Stock Exchange or BPNYA. The Bullish Percent Index for the NASDAQ uses the symbol BPCOMPQ. The S&P 500 Bullish Percent Index symbol is BPSPX.
NYSE Bullish Percent
Below is an example of a daily chart of the NYSE Bullish Percent Index, showing the buy and sell signals using the 20-day moving average as the signal indicator. The best sell signals are given when the BPNYA is over 70 and the index falls through the 20 day moving average. As you might expect, the best buy signals take place when the BPNYA fell below 30 before turning up.
You should be more careful using the BPNYA when it does not reach one of the extremes (above 70 or below 30), as it can give premature signals. Periods where the indicator is experiencing high volatility also negate the utility of this investing tool.
BPCOMPQ
The bullish percent index for the NASDAQ offers a similar view, though the index never rose above 70 over the last three years. This does not invalidate the index from telling you of trend changes. Rather, you must adjust your perspective. In this case, much of the time the index turned down before reaching 70, as we were in a bear market. In addition, the MACD, the RSI and the Slow Stochastic indicators each helped identify buy and sell signals.
BPSPX
Below is a weekly chart of the bullish percent index for the S&P 500. In this case, I choose to use the 6-week moving average as the signal line. The selection of a signal line can vary, depending on what works best for the period being analyzed. Some people use the parabolic SAR, others use the exponential moving average.
Bullish Percent Index Calculation
A bullish percent index is calculated by taking each component stock of the index or exchange and charting it using the point and figure system. The stocks that have a point and figure buy signal are added together. This number is divided by the total number of stocks in the index or exchange. Theoretically, a bullish percent chart can span from 0% to 100% where no stock in the index has a point and figure buy signal or where they all do. this rarely happens, as it tends to oscillate between 70% and 30%.
Stockcharts.com performs the bullish percent calculation for you for the above mentioned indexes. You can create custom versions of the Bullish Percent Index is you one of the premium members of Stockcharts.com. Some of the other charting services also provide this service.
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