Malkiel

NYSE Bullish Percent Index Saying The Party's Over

The problem with these kind of pure chart-reading exercises is that they make no reference to real-world demographic drivers, such as, how much cash is out there in the hands of Funds needing to find a home? Pension funds, mutual funds, hedge funds, IRA's, 401k's, you name it, all payroll deduction format money must go somewhere. If the cash inflows are large, it doesn't matter what any subjective "overbought" or "oversold" indicators say. Cash investments like bank accounts and cd's are manifestly inferior in the current interest rate environment, so all new money will go in the market regardless of risk. The relevant question is, "how much money is in the pipeline"? Chartist overbought/oversold indicators are a quaintness with predictive power only for the superstitious...