The market filter: GOOD, CAUTION and BAD days

William O'Neil estimated that about three out of four stocks follow the general market. A perfect chart in a falling market usually fails. So before any stock is looked at, the market itself is scored.

The checks

Each check passed adds a point:

1. The Nifty 50 is above its 50-day average.
2. The Nifty 50 is above its 200-day average.
3. The 200-day average is rising.
4. India VIX (the fear index) is below 20.
5. No panic in the last session (no very large fall).
6. Breadth: at least half of all NSE stocks are above their own 200-day average.
7. Fewer than 5 distribution days in the last 25 sessions. O'Neil's distribution day: the index falls on higher volume than the day before, a sign of big funds selling.

What the score means

• GOOD: normal-size trades.
• CAUTION: half size, only the best setups.
• BAD: no new trades, except at most two market leaders (top 10% relative strength, near their highs), at half size.

Does it work?

The backtest splits every pick by the market mood on the day it was made. Picks made on BAD days did clearly worse than picks on GOOD or CAUTION days in the November 2026 test; the results page always has the latest numbers. The filter does not make a losing method win, but it does cut the worst trades.