Detecting market tops and bottoms

[Tom K]

ps,

I think of indicators as either "trend" (following) or "contra-trend" (overbought/oversold). Most indicators have both attributes, it just depends on how you use them.

Contra-trend indicators give the earliest indication of a possible trend reversal. One of my favorites the A/D Ratio selling climax. Volatility indexes such as VIX and VIN are also excellent at spotting reversals early on.

Trend following indicators can also be coupled with short-term OB/OS indicators to find turning points. For example, whenever the Summation index or BPI reach overbought or oversold levels, you can use Bollinger Bands to fine-tune your actual entry and exit points.

Check out my Nasdaq model for examples - I track several intermediate indicators.

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID368318