Last week, investors took profits in some financial stocks and drove consumer discretionary stocks to oversold levels. For this analysis, we are looking at the Bullish Percent Index (BPI) from StockCharts.com. This indicator is calculated by dividing the number of stocks in a given group that are currently trading with Point and Figure buy signals, by the total number of stocks in that group.

4/17/09

4/24/09

Consumer Discretionary

78.20

81.37

Materials

76.40

78.82

Info Tech

72.29

77.11

Energy

73.33

71.91

Industrial

64.41

64.41

Finance

83.75

62.50

Consumer Staples

51.96

50.65

Telecom

46.67

46.67

Healthcare

50.30

44.97

Utilities

15.49

16.90

After being in overbought territory for two weeks, the BPI of financial stocks fell sharply. While the BPI indicates the financial sector BPI is still in an uptrend, it is definitely not an area that conservative investors should look at to deploy new money.

This indicator is telling us that the end of the recession may be near. This stands in contrast to many of the economic reports that have recently come out. The market does discount the future, and will turn higher ahead of strengthening economic reports.

Investors seeking confirmation of the recent market action should watch the Conference Board Consumer Confidence Index to be released on Tuesday. Last month’s reading showed a slight increase, raising the Index from an all-time low. However, the Index is still down by 60 percent compared to a year ago. The consensus estimate is for a relatively sharp increase of nearly 10 percent. Historically, this indicator has bottomed two or three months after the stock market, so an increase this month will offer support to the belief that stocks have bottomed.