https://docs.cmtassociation.org/docs/2002DowAwardb.pdf
In Paul F. Desmond's award winning paper in 2002 entitled "Identifying Bear Market Bottoms and New Bull Markets", he proposed an indicator for panic buying and selling that can be used to determine major market bottoms.
The paper explains that in major bear markets, you should have at least one, or more than one multiple 90% down days. Recoveries out of bear markets, or beginnings of new bull markets, should have at least one of the following conditions:
1) At least one 90% up volume day
2) At least two back-to-back 80% up volume days
Up and Down volume are defined as:
1) 90% up volume - defined as 90% up volume / total volume (or 10% down volume / total volume)
2) 90% down volume - defined as 90% down volume / total volume (or 10% up volume / total volume)
Several scripts exist in Tradingview to show this indicator for Up and Down volume, along with arrows or indicators for green up days or red down days.
However, this script is an improved version as it allows you the option to customize a couple parameters:
1) You may chose whether you'd like to use volume or stocks - sometimes it's better to have confluence between volume and actual stocks at the 90% threshold
2) You may chose the exchanges to consider - in the paper the NYSE is discussed, but this allows the expansion into NYSE, NASDAQ, DOW, and even a combined NYSE + NASDAQ + DOW indicator
3) It uniquely codes in the ability to plot a buy signal for both 90% up days, but also two back-to-back 80% up days - which is in the spirit of the original paper
I hope you enjoy this script and please let me know if you'd like me to make any modifications or additions.
Thank you, sincerely,
Jim Bosse
In Paul F. Desmond's award winning paper in 2002 entitled "Identifying Bear Market Bottoms and New Bull Markets", he proposed an indicator for panic buying and selling that can be used to determine major market bottoms.
The paper explains that in major bear markets, you should have at least one, or more than one multiple 90% down days. Recoveries out of bear markets, or beginnings of new bull markets, should have at least one of the following conditions:
1) At least one 90% up volume day
2) At least two back-to-back 80% up volume days
Up and Down volume are defined as:
1) 90% up volume - defined as 90% up volume / total volume (or 10% down volume / total volume)
2) 90% down volume - defined as 90% down volume / total volume (or 10% up volume / total volume)
Several scripts exist in Tradingview to show this indicator for Up and Down volume, along with arrows or indicators for green up days or red down days.
However, this script is an improved version as it allows you the option to customize a couple parameters:
1) You may chose whether you'd like to use volume or stocks - sometimes it's better to have confluence between volume and actual stocks at the 90% threshold
2) You may chose the exchanges to consider - in the paper the NYSE is discussed, but this allows the expansion into NYSE, NASDAQ, DOW, and even a combined NYSE + NASDAQ + DOW indicator
3) It uniquely codes in the ability to plot a buy signal for both 90% up days, but also two back-to-back 80% up days - which is in the spirit of the original paper
I hope you enjoy this script and please let me know if you'd like me to make any modifications or additions.
Thank you, sincerely,
Jim Bosse
Versionsinformation:
I noticed that combining NYSE and NASDAQ produces really good results for bottoms in the last 13 years, so I added this as an option.
Versionsinformation:
Found a bug in the code where NYSE + NASDAQ down volume was incorrect, this is fixed.
Versionsinformation:
Fixed bug in the code where total NYSE + NQ + DJ down volume was incorrect, fixed.