TECHNIQUE

First, a high degree of coincidence appears to exist between bullish tick index signals and bullish candlestick patterns

as well as the bearish combinations. For bullish patterns, I have found tick readings exceeding -800 intraday (the

minus sign indicates 800 more stocks were trading on a downtick than an uptick) appear near short-term market

bottoms.

Second, I look for a classic double bottom on the Standard & Poor's 500 daily chart where the second bottom of the

double bottom does not trade more than two and a half S&P points below the first. The tick index reading on the first

bottom must surpass -800; in fact, readings exceeding -800 are preferable. The tick index reading for the second

bottom can be greater or less than the first but should still reach an extreme level. When the tick index readings

exceed -800, preferably a reading of -1,000 ticks or more, the short-term bottoms are stronger. In addition, when the

second bottom is within five business days of the first, the signal generated is more reliable. Finally, with the buy

signal alert indicated by the tick index, I look for a bullish candlestick pattern before an all-out buy signal is

generated. For a sell signal using the NYSE tick index, I look for a double top on the S&P 500 daily chart where the second top

does not exceed the first by more than two and a half S&P points. The first top must have a tick reading of at least

+600 or more. The second top will usually have fewer uptick readings than the first, but the readings should still be

high. For a sell signal, a bearish candlestick pattern must be present at or near the second top. The best signals occur

when the span between the first peak and the second peak of the double top does not exceed five business days.