Chris Rowe

Is the Market Reversing?

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Unlike the popular major indices that people follow, like the Dow 30 (DJI), the BPI is an index that reflects what is happening, and right now it's showing that bulls have taken control and stocks (unlike the Dow and Nasdaq) are moving higher.

Below is a three-year chart of the S&P 500 (SPX). The green arrows show times when this has happened in the past. Obviously the market rallied every time it happened; granted, some occasions more than others.

Now check out a chart from year 2000-'03 below. The green arrows also point to times when the magical indicator (BPI) signaled that the bulls had taken control.

I want you to focus on the two short-term rallies in 2000. These were only small rallies. In fact, the first one lasted two weeks and the second only a week and a half.

So, you might wonder if that would happen in the current market. It could. But you should understand the following key factor:

The market wasn't nearly as oversold as it is today.

There is an enormous amount of cash sitting on the sidelines, and most of the institutions that are sellers have already sold. Unlike the two occasions noted above, the current signal from the BPI (showing that the bulls have taken control for the time being) came after the BPI showed extremely oversold readings.