Bill O’Neil of Investors Business Daily has a good process for determining a solid market bottom. Wait three days after the reversal day before judging a low. The idea is that short covering or bear market rallies can last three days. But most markets that make a new high after the third day are good candidates to watch for a bottom. I have read Bill’s books several times and recommend it to anyone who considers themselves an investor or a trader.
I think the three day rule is a good start for bottom watching, but I extend the observation period to 11-12 trading days and watch for a new high following this time frame. This time span is 1/8 of 90 days. I then watch for a new high after 23 trading days. A market that continues up beyond 23 days will usually go up at least 90 calendar days. This is just a rule of thumb and not an absolute. There are very few (if any) absolutes in trading.
The number of new highs minus new lows is increasing but is still negative. Any real uptrend needs more new highs than new lows.
Chart courtesy of Stockcharts.com
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The low was last Friday, so today was actually the first follow through day.