Attributes of a Bullish Percent Chart: Many of the attributes you learned about for an individual equity chart also apply to the Bullish Percent. For instance, the letters or numbers in the columns denote the months of the year. The years are divided by a vertical line. Columns of X's and O's alternate and there are always at least three X's or three O's in a column. It is important to observe that time spent in a column of X's or O's is generally months and not weeks. The bullish percent chart will change columns using the same flow chart method as a stock. It is essential that you know how this index works so let's go over how the index rises and falls. Example: Let's say there are 100 stocks trading on the NYSE. Over the next week 12 stocks experience a new buy signal and 10 stocks experience new sell signals. The net result of the action for the week is two new buy signals or 2 percent more stocks are on buy signals. Remember that each box on the chart represents 2 percent, so a 2 percent net change in new buy signals allows the chart to rise one box. The only way to switch from one column to the next is through a three-box reversal. It would take a sum total of 6 percent net buy or sell signals to cause a reversal. Remember the box sizes, in this case the box size is 2 percent and therefore a three box reversal is 6 percent, in either direction. Reversing from one column to the next is tantamount to losing or gaining possession of the ball. We use the football analogy here a lot because it helps visualize how the NYSE BP works. The "playing field" runs from 0 to 100 percent, kind of like a 100 yard football field. Where you are on that field determines your "field" position. The column you are in tells you if you have the footbal and the field position tells you how much room you have to run.

There are two things we try to ascertain with this chart:
1 - Who has the ball?
2 - What is the field position?

The higher the index climbs, the more overbought it becomes. The lower it drops, the more oversold it gets. When the index is rising in a column of X's, we say you have possession of the football. When you have possession, you must run offensive plays. This is your time to attempt to score against your opponent, the stock market. When the index is declining in a column of O's, we say the market has the ball and your job is to try to keep it from scoring against you.

If you colored the chart above the 70 percent level red and the area below 30 percent level green, these would represent the two extremes much like the end zones of a football field.
When you are in the Green Zone, below 30% and in a column of X's you have a lot of room to run the ball. When you are in the Red Zone and in a column of O's you have a lot of territory to lose the ball. It isn't often the index moves below 30% or above 70%.

Thinking about this concept in terms of supply and demand, when the NYSE Bullish Percent goes near/below 30% the availability of supply to continue to push the market lower is severely limited. When the NYSE BP goes near/above the 70% level, the availability of demand to continue to push the market higher is severely limited.

We've talked a lot about using the NYSE Bullish Percent as a way to assess risk in the market. Here are just some of the different ways one can play offense (wealth accumulation) and defense (wealth preservation). It is important everyone creates their own playbook.

Sample Offensive Playbook	Sample Defensive Playbook
Increase equity exposure by buying stocks, funds, or ETFs Buy calls Focus on strong relative strength sectors Allow for more liberal stop loss points Positive relative strength stocks, funds or ETFs should be the focus	Come off margin Reduce equity exposure Buy protective puts Sell laggard, weak relative strength holdings Tighten up stop loss points Inverse funds can be considered to reduce equity exposure. Short positions can be taken in weak relative strength stocks

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