All charts courtesy of StockCharts.com
This post will hopefully help you add another tool in your technical analysis toolbox. So, what is bullish percent? Bullish percent refers to the percentage of stocks within a particular index that are on point and figure buy signals. Point and figure refers to a certain type of charting, and if you would like to learn more about it, I would recommend visiting StockCharts.com and clicking on their chart school tab.
I only recently got into point and figure charting, and StockCharts.com's section on this subject is where I got started, myself. They have written a better explanation than I probably could. Anyway, the good thing is that even if you have never heard of point and figure charting, you can still interpret what I am about to say.
So, if you refer to the above chart, you will see that on the very top we have RSI, and below that we have the BPTSE, the bullish percent index of the Toronto Stock Exchange. After that, we have a chart of the TSX itself, and, finally, on the bottom, there is an MACD histogram of the BPTSE.
The interpretation of this chart is quite easy. Simply notice that whenever the RSI of the BPTSE goes overbought or oversold, it represents good entry points for the TSX. I have highlighted some excellent buy signals in the above chart. Because the TSX is in such a bull market, I would put more emphasis on the buy signals than on the sell signals.
Another great way to use this chart is to pay attention to divergences between the MACD Histogram and the TSX. I have drawn blue diagonal lines on the MACD to illustrate this, and to show how they have some good sell signals, which could be used if you were daring enough to go short in this market.
This chart is very helpful in understanding movements in the TSX, but since the TSX and gold stocks are only mildly correlated, this chart may be of limited usefulness when it comes to finding entry points for that market. However, through ETFs, you can still play this market directly. The ETF that represents the TSX has the ticker symbol XIU.
In addition, there are bullish percent indexes for many other markets. If you would like the symbol for a particular exchange, send me an email, and I will get back to you.