How to Spot Market
Bottoms
What is a Follow Through Day?
Be Ready: The biggest winners break out first
Red flags
What is a Follow-Through
Day?
 Spotting a Follow-Through Day
 When the market is in a correction and makes a new
low, look for the first day the market closes up from the
previous day. This is normally day one of a rally
attempt. As long as the index remains above the
previous low, the attempted rally is in place.
Follow-Through Day
 Key Elements of a Follow-Through Day
 At least one major index closes up around 1.5% 2% or more on volume heavier than prior day.
(Volume does NOT have to be above average; just
higher than the previous day.)
 Typically occurs on Day 4 or later in rally attempt.
Follow-throughs can happen as early as Day 3, but
generally the first 3 days of an attempted rally are too
soon to judge if the market direction has truly changed.
Follow-Through Video
 http://ibdtv.investors.com/Default.aspx?mediaID=55011
7&mrt=1
 http://ibdtv.investors.com/446177/200807291335/Marke
t-Timing-How-To-Spot-A-New-Market-Uptrend.aspx
 Today’s Market
Bill O’Neill Interview
 http://ibdtv.investors.com/479704/200906101725/When
-To-Get-Into-and8211-And-Out-Of-and8211-TheMarket.aspx
Red Flags for Follow-Through
Days
 One red flag is distribution days that arrive soon after a
follow-through day. (A distribution day involves a
decline in a major index in higher volume than the prior
day. It indicates institutional selling.)
 Research shows that a distribution day within several
days of a follow-through usually results in renewed
market weakness.
 http://education.investors.com/article/535602/20100527
1600/watch-for-red-flags-in-newuptrends.htm?Ntt=follow-through-day-fail&p=full
What to do when new Market
Uptrend begins
 Identify leading stocks breaking out of sound bases
 Get back in gradually
 50% of normal position
 Up 2% add 30% to 35%
 Up another 2% add rest of your position
 http://ibdtv.investors.com/446179/200808111316/Marke
t-Timing-Find-The-Best-Stocks-In-A-New-Rally.aspx
Summary
 Track general market indices daily
 IBD Big Picture very helpful
 Watch for FTD & Distribution days
 Keep watchlist up to date
 Get back in gradually