By Ask Gil

January 10, 2012

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.

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