The nonchart indicators I look at on a weekly basis are as follows:

1. The NASDAQ bullish percentage
2. Percentage of NASDAQ stocks trading above their 10-week moving averages
3. The hi-lo index

The NASDAQ Bullish Percentage

Let us first look at the NASDAQ bullish percentage. This is an indicator that crosses the boundary between charting and noncharting indicators. The bullish percentage figure is simply the percentage of NASDAQ stocks that are on a point-and-figure buy signal. In this case, the buy signal is defined as a security whose point-and-figure chart is in a column of Xs that has exceeded the level of the previous column of Xs. Once you have found the value for the bullish percentage, you turn to a point-and-figure chart of the bullish percentage figure itself to determine what your market posture will be. This indicator was originally designed for the NYSE by A. W. Cohen of Chartcraft, and was later refined by a Mr. Earl Blumenthal by breaking things down into six categories:

1. Bull alert
2. Bull confirmed
3. Bull correction
4. Bear alert
5. Bear confirmed
6. Bear correction

The bull alert state occurs when the point-and-figure for the bullish percentage chart has reversed from a column of 0s to a column of Xs, with its value below 30 percent. This is an alert to start looking for long opportunities, primarily securities that have reached an area of significant support on the bar or line chart, or those resting on the bullish support line on the point-and-figure.

The bull confirmed state is an extension of the bull alert state, as its name would suggest. This is when the point-and-figure chart for the bullish percentage is in a column of Xs and has exceeded the high set by the previous column of Xs. This condition gives a strong signal to look for longs, provided it occurs below the 70 percent value in the bullish percentage figure.

The bull correction state has the bullish percentage point-and-figure chart in a column of 0s and reversing down at a level that is below the 70 percent value. This is a warning to be cautious when taking long positions and to get out earlier, rather than later. This does not signal the end of the bull market, but it signals that until the bull run resumes, more caution is called for when entering long positions.

The bear alert state looks similar to the bull correction state. With the point-and-figure chart in a column of 0s, a bear alert is defined as the column of 0s taking the chart from above to below the 70 percent line. When this occurs, you need to be cautious when assessing both long and short opportunities. It signals a potential change in the direction of the market.

The bear confirmed state occurs when the point-and-figure chart for bullish percentage is in a column of 0s and drops below the low of the previous column of 0s. Anytime this occurs, you should be cautious about longs. If this happens when the value of the bullish percentage is at or near 70 percent, you should just be thinking shorts.

The bear correction state is typically a temporary pullback in the downward trend. This is similar to the bull alert in that the point-and-figure chart is reversing from a column of 0s into a column of Xs, but it occurs when the value of the bullish percentage index is above the 30 percent line.

The Percentage of NASDAQ Stocks Trading above Their 10-Week Moving Averages

This is also good indicator of the general health of the market. It is usually a better short-term indicator than the bullish percentage state, which changes relatively infrequently. As its name suggests, this indicator just calculates the percentage of stocks on the NASDAQ that are trading above their 10-week moving average figures. If this indicator reverses down to a level below the 70 percent figure from a level that was above 70 percent, the outlook is negative and shorts are preferred. If, however, the value starts off below 30 percent and moves above 30 percent, the outlook is favorable for longs. Most commonly, you look for agreement between the bullish percentage reading and the percentage of NASDAQ stocks above their 10-week moving averages to provide the strongest signal.

The Hi-Lo Index

The hi-lo index is calculated by taking the number of NASDAQ securities reaching new highs and dividing it by the number of securities reaching new lows for each day. The resulting figure is interpreted the same way as the previous indicator. A reversal from above to below the 70 percent mark is negative, and a reversal from below to above the 30 percent level is positive.

When using these indicators, remember to not get too caught up in analyzing them on a daily basis. As a day trader, you need to be most concerned with what is happening that day. You increase your chances, however, when you are trading in harmony with the overall market direction. As stated previously, these indicators are only worth tracking once or so a week, to keep the appropriate bias in your search for opportunities. The result this analysis should have is that if you see equally attractive opportunities to go short or long, you choose the one that is in harmony with the market's direction at that point.

Some Other Nonchart Indicators

If I am considering trading a set of stocks in the post-open Phase 2 market, I will also consider the relative strength of the sector of the stocks I am tracking, as well as the relative strength of the stocks themselves.

An example of how to use relative strength is as follows. Suppose your overall market analysis tells you we are in a bull market. You would first look for sectors that are gaining in relative strength compared to the overall market. Then you look for securities within that sector that are gaining in relative strength compared to the sector itself. The aim is to generate a list of the strongest stocks from the strongest sector. Once you have this list, you look for one of the selected securities to exhibit a sustainable upward trend on the one-minute tick chart, buy it, and hold it until the upward trend gives a signal (break of trendline, failure to make new high, etc.). Of course, the reverse is true if the market is head ing down. You then look for the weakest stocks in the weakest sectors for shorting opportunities.

If you are interested in this indicator, the calculations are performed by computer and are available from many sources. As an example of how it works, consider a theoretical sector and look at its relative strength compared to its index. Suppose the security is trading at $50 and the index of the sector of which it is a part is trading at 500. Dividing the stock price by the index value gives us a value of 0.1. If, the next day, the security declines to $49 and the index declines to 450, the new relative strength figure is 0.109, rounded to 0.11. Even though both instruments have declined, the relative strength of the security has increased. When you get a series of these values, you can plot them on a regular chart or a point-and-figure chart, depending on your preference, and look for breakouts—a high that is higher than a previous high or a low that is lower than a previous low. Although initially attracted to this indicator, I seldom use it these days. It tends to perform better as a long-term indicator.

Finally, there are two indicators that I look at as the day progresses to get a feel for how the market is trading that day. First is a one-minute tick chart of the NASDAQ Composite. Second is a one-minute tick chart of the net ticks figure. The NASDAQ Composite should be familiar to you. It is the index of all securities on the NASDAQ exchange. When I can, I trade opportunities that are in harmony with the direction of the Composite that day. The same is true of the net ticks value. This indicator shows the net number of securities that are on an uptick, i.e., the number of securities that have a bid price higher than the previous bid price. This is a broad market indicator. When positive, it can indicate widespread buying in the market.

In all of this, assessment of the overall market must only be viewed as secondary to what is happening on that day in the actual securities you are considering trading. Do not get too caught up in doing excessive analysis of the overall market. It will only confuse your trading decisions.