FTD Detector

Follow-Through Day (FTD) Detector

The FTD Detector implements William J. O'Neil's framework for identifying market trend changes. It monitors major equity indices for price gains accompanied by volume expansion following a market low.

What is a Follow-Through Day?

Attempting to predict market bottoms during extended corrections carries significant risk. Short-term counter-trend rallies ("dead cat bounces") often lure buyers before indices resume downward trends.

William J. O'Neil, founder of Investor's Business Daily, developed the "Follow-Through Day" (FTD) methodology to identify when broad market rallies show institutional participation rather than short-lived retail buying.

Under O'Neil's framework, an FTD requires specific criteria:

1. An index reaches a multi-week or correction low (designated as Day 1 of a rally attempt).
2. The index holds above that low for at least three consecutive trading days.
3. Between Day 4 and Day 20 of the rally attempt, the index gains 1.5%+ on higher trading volume than the preceding day.

When these conditions are met, the FTD signals that institutional buyers are increasing equity exposure, marking an environment where growth and trend strategies historically show improved performance.

The FTD Detector automatically tracks index price and volume data to evaluate these conditions.

How Pierce AI Executes It

When you request an FTD evaluation, Pierce AI evaluates price and volume history across the S&P 500 (SPY) and Nasdaq (QQQ):

1. Rally Attempt Identification: Pierce inspects recent price history to locate the low point of the current correction, designating the first up-day as Day 1 of a rally attempt.
2. Low-Price Verification: It verifies whether the index held above the Day 1 low on Days 2 and 3. If the low is broken, the rally count resets.
3. FTD Criteria Evaluation: Between Day 4 and Day 20, Pierce evaluates daily price moves and volume metrics, checking for an index gain of 1.5%+ on expanded trading volume.
4. Market Breadth Confirmation: Pierce cross-references index moves with market_breadth metrics to verify if broad market participation supports the index gain.

Key Metrics & Deliverables

By running the FTD Detector, you receive a clear market regime assessment:

• FTD Status: Reports whether the market is in a "Confirmed Uptrend," "Rally Attempt," or "Correction."
• Date Stamp: Identifies the specific date an FTD was detected, if applicable.
• Breadth & Trend Context: Combines FTD status with internal market breadth data to inform market exposure decisions.

Example Prompts & Use Cases

You can instruct Pierce to monitor market trend confirmation using prompts such as:

• "The QQQ is bouncing. Run the FTD Detector to check for a Follow-Through Day."
• "We are 6 days off the recent lows in the S&P 500. Are we in a confirmed rally?"
• "Has William O'Neil's FTD criteria been triggered recently on major indices?"
• "An FTD occurred yesterday. Does internal market breadth support the move?"

Methodology Notes & Limitations

The Follow-Through Day is a widely studied trend confirmation tool, but has important limitations:

• Historical False Positives: While major market bull runs are typically preceded by an FTD, O'Neil's research noted that approximately 30% of FTDs fail to produce sustained uptrends.
• Rally Window: Valid FTDs typically occur between Day 4 and Day 20 of a rally attempt. Late-stage volume spikes occurring past Day 20 are evaluated with lower statistical confidence.
• Invalidation Risk: If an index breaches the original Day 1 low after an FTD triggers, the rally attempt is considered failed and broad market risk increases.

Structured Market Trend Validation

No market signal guarantees outcome certainty. The FTD Detector provides a systematic, objective tool to evaluate trend confirmation rules and help investors manage market exposure consistently.

Note: The FTD Detector requires historical index price and volume analysis and is included in the Preferred tier and above.