Q: In addition to a follow-through day and individual stock leadership, what are your primary indicators for analyzing market bottoms?
G: I focus primarily on price/volume action in the indexes and leading stocks. Leadership is probably the key component, and the number of set-ups I pick up each week, e.g., stocks in nice, tight bases, can often tip me off to a strong market rally developing very soon. Sentiment and oversold indicators, particularly the % of stocks above their 150-day moving average, are also taken into account, but for the most part I let the tape tell me the story.
One indicator I’m not so sure about anymore is the Public/NYSE Specialist short interest ratio, since the NYSE specialist has become less and less of a force as trading has moved away from specialists and market makers and towards the almighty ECN.