Bullish Percent Index (BPI): A Tertiary Tool for Elite Advisors

The Bullish Percent Index (BPI) is a technical indicator that may help advisors assess the internal condition of a market. Unlike relative strength, which compares performance between sectors or stocks, the BPI measures the percentage of stocks within a specific index that are currently on Point and Figure Buy Signals. These signals are binary. A stock is either on a Buy Signal or it is not. This makes the BPI a clear and rules-based tool. A high BPI reading, above 70%, may suggest that a large portion of the market is exhibiting bullish patterns, while a reading below 30% could reflect widespread technical weakness. The most useful information may come from reversals. A shift from a column of Xs, indicating rising participation, to a column of Os, signaling declining participation, at elevated levels may represent a period of increased market risk. Conversely, a reversal from Os to Xs at depressed levels may highlight a period of diminished risk or potential opportunity. This structure may offer insight into internal market conditions and money flow that could precede changes in fundamentals or relative strength. While the BPI may not be predictive, it may offer context around market risk and help refine timing around entry or exit decisions. It is not intended to reflect outperformance. A positive BPI reading does not mean the market will outperform, but rather that internal risk may be declining. This is similar to a pianist using foot pedals. The pedals do not carry the melody, but they add important depth and tone. Advisors may use the BPI in this same way. It is not a primary signal, but a complementary layer beneath relative strength and fundamental strategies. Those who understand how to interpret bullish percent reversals may be better equipped to recognize potential shifts in market behavior before they become broadly visible.

On April 10, a notable shift in market internals was observed as the SIA Market Bullish Percent Index (BPI) began to move upward from a deeply oversold condition. At the time, the index reading had fallen to just 8%, indicating that 92% of the stocks in the index were on double bottom sell signals. This rare reading reflected an extreme technical washout. Following this signal, markets experienced a meaningful rally. The TSX Composite (TSX.I) rose 11.94%, while the S&P 500 (SPX.I) gained 13.53%. As the BPI climbed to 46%, it confirmed that a significant number of stocks had moved back to bullish formations on their point and figure charts. Although that level did not indicate overbought conditions, it reflected a broad improvement in technical strength and sentiment.As of today, market breadth appears to be shifting once again. Only 9 out of 31 sectors, or approximately 29%, continue to show positive bullish percent readings. The remaining 71% are technically bearish. Many sectors have now moved to the left side of the breadth curve, with declining bullish percent readings shown as lowercase letters. The remaining sectors with positive BPI readings include Real Estate, Retail, Leisure, Health, Chemicals, Banking, Metals and Mining, Electronics and Semiconductors, and Energy. Among these, all but Metals and Mining currently have favored relative strength ratings, which may place them in higher risk territory. Energy and Semiconductors, for example, are showing elevated BPI readings while also exhibiting low relative strength. In contrast, Metals and Mining maintains both strong bullish percent and favored relative strength, which may represent a more balanced technical posture until any reversal occurs. These developments suggest a shift from broad strength to a more selective environment, where close monitoring of technical signals may be helpful.

Much like a cliff diver watching the ocean swell, market participants may benefit from closely observing conditions before taking action. The diver waits for the moment when the rocks are visible and the wave is retreating, not when the water appears calm. Jumping when everything looks safe may prove costly if the wave has already passed, leaving the diver exposed to the rocks below. In markets, this is often the point of maximum opportunity, when sentiment is low, breadth is weak, and conviction is scarce. This dynamic played out in early April when the BPI dropped to rare lows and was followed by a strong market rebound.Now, the tide appears to have shifted. The wave is high, sentiment has improved, and many charts reflect extended bullish conditions. This is where the other side of the analogy becomes relevant. Jumping in when the wave is crashing against the cliff may feel safe, but by the time contact is made, the water may have pulled back, exposing risk. In market terms, this is when the BPI begins to reverse from elevated levels, which could signal that momentum is fading and that risk may be increasing. Markets may often appear most stable just as internal conditions begin to weaken.