chart: Bottom Finder

Courtesy of StockCharts.com

In the last three plus years there are five times when this indicator is in the same oversold buy area.  Each is highlighted in yellow.

Summary:
It is calculated by counting the number of Dow stocks whose short-term (daily) KST is in the winter and spring positions. The indicator itself is the differential between them. As progressively more groups experience winter relative to spring the indicator falls. When this differential starts to reverse to the upside the indicator bottoms, and a buy signal is generated. Note that the actual data is plotted inversely so that movements in the indicator correspond to those of the Dow, S&P or any other market average that it is being compared to.

In order for a reversal to qualify we must see the indicator fall to its oversold levels and then reverse. These signals are usually reliable, but by no means a perfect indicator. For this reason a more conservative approach is to wait for a positive MA crossover not shown in the above chart. The MA to be used is a 10-day SMA. Even so, in the vast majority of reversals that develop at or below the oversold condition do so in a slow deliberate manner with very little in the way of false upside reversals.

 This indicator is pretty good at calling bottoms, even counter-cyclical ones, but it’s important to note that this is its only function in life. Occasionally it can call a top with a timely reversal from an extended level but there are far too many exceptions to apply this approach, because the indictor has been specifically designed to identify short-term buying opportunities.

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This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions.  
Past performance is not indicative of future results