Market Monitor

One of the tools that is used to get a sense of the market conditions is StockBee's  Market Monitor.  The market monitor seeks to ascertain what phase the market is in by looking at a number of indicators to gauge the health of the market.

Primary indicators:

• Stocks up 4%
• Up to 300 normal buying pressure
• 300-500 high buying pressure
• 500-1000 very high  (beginning of a bullish turn from a bearish phase)
• 1000 extreme buying pressure 
• 300 plus days are common in bear markets as short squeezes

Very High buying pressure

End of year 877 followed by 952 4% moves: over a 9% move on the Russell in 3 days. 

Extreme Buying

1000 extreme buying pressure -- most likely to come during a bear market  -- November 13, 2008    2242!  over an 8.5% day on the russell   

But this move did not stick as it made new lows -- see chart 1. It reversed the next day. 

DOWN:
up to 300 Normal selling pressure
300-500 high selling pressure
500 to 1000 very high selling
1000 plus extreme selling

Its been suggested that bear market rallies after a 1000 -- so a down day of that level would be bullish But is it? Consider 2010 there were a number of 1000 stock down days

5 day Breadth Ratio 
# of stocks up > 4% in last 5 days/#of stocks down > 4% in last 5 days

10- day Breadth Ratio
# of stocks up > 4% in last 10 days/#of stocks down > 4% in last 10 days
When market is in bearish phase first time ratio is  2 plus signals start of a bull move. 
Ratio below .50 signals start of a bearish move after a bull move has been in progress.

 2 plus readings are good for swing trading on long side.
.5 or less readings are good for swing trading on short side.

Number of Stocks Up 25% in a quarter
Market is in bullish phase while the # of stocks up>25% in a quarter is greater than # of stocks down>25% in a quarter.When this number goes below 200 it is extremely bullish. It indicates extreme bearishness. Rallies which start from readings below 200 are extremely powerful. 
EOD readings of below 200 are rare, most of the time 200 readings are reached intra day for few hours or minutes and market rebounds.

So when EOD readings drop to below 500 be on watch out for a reversal of bearish trend.

Number of Stocks down 25% in a quarter

Market is in bullish phase while the # of stocks up>25% in a quarter is greater than # of stocks down>25% in a quarter.
When this number goes below 200 it is bearish. It indicates extreme bullishness.
Readings below 200 are rare and happen only intra day. 
So watch for EOD readings of below 400.
Unlike end of bear market in bull market, markets do not turn immediately after such high readings.

There is a delay of 2 to 6 weeks before real selling might start and a top is formed.

50% in a month
This indicator tells you intermediate term extreme bullish phases and likely pullback/correction points
Readings above 20 are bearish 
They indicate high bullishness and tend to lead to correction.
Market resumes its bullish move once such high readings drop below 10.
Readings of below 3 are bullish.

I've noticed that fishhooks set ups in low priced stocks start working well between 15-25