Market turning points

What is a good way to detect a market low for a ‘buy the dips‘ strategy using momentum selection?

When the McClellan oscillator goes below -50 and recovers 20 points, the low is near:

blog figs

This breadth-based oscillator is ratio-adjusted to eliminate long term drift.  The calculation is described here:

Ratio Adjusted Net Advances (RANA): (Advances - Declines)/(Advances + Declines)

McClellan Oscillator: 19-day EMA of RANA - 39-day EMA of RANA

A link to the real-time version is on the chart page of this blog:

More important to long term returns is avoiding recessions and buying the market segment with highest 12 month momentum.


3 thoughts on “Market turning points

    • Its harder because the underlying processes are different: tops are often formed slowly and fast for bottoms. Stockbee has some good metrics to watch for a rally overheating: a large number of stocks up 50% in a month is one of the key ones.
      The best approach for a long term investor though is to avoid recessions and own momentum, which is the subject of most of my posts.

      • Thanks! I agree I’m not into s/t trading either. The key is to do a few right things and otherwise do nothing with stock investments.

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