|  JUN 1988

NYSE technical indicators: diagnosing market bottoms by Thomas Aspray

NYSE technical indicators: diagnosing market bottoms by Thomas Aspray By definition, significant market bottoms or tops seem to catch the majority by surprise, especially the fundamentalists. When an important low is formed, I try to review the many technical studies that I use to determine which ones worked well and which ones didn't. On a daily basis, I run more than 250 studies on the stock market, including cash indices, advance/decline, high/lows and futures. I weight my indicators using past experience, pattern recognition, etc. In this article, we'll take a close look at how some of these studies performed at the lows in late 1986 and other important market bottoms. First of all, a review of the indicators and their formulas is appropriate. About the charts I overlay the NYSE Composite bar chart with a 21-day moving average and a +/- 3% trading band. This moving average length is a time-tested period and the positioning of the trading band speaks for itself. The NYSE Advance/Decline line represents the cumulative difference between advancing and declining prices. Besides watching for breaks through trendlines or support/resistance levels, divergence from the price movement is also important. Often you will see the A/D line move above its previous highs or below its previous lows, and prices generally follow. Both the 10-day ARMS index (TRIN) and oscillator need a daily calculation of the ARMS index:

by Thomas Aspray