Have you ever watched a sharp market decline finally start to reverse, only to hesitate on pulling the trigger because you weren't confident the bottom was in?

Or worse—have you jumped into what looked like a reversal, only to get stopped out when the market resumed its downtrend?

You're not alone. Identifying genuine market turning points is one of the most challenging aspects of trading, but also potentially the most profitable when done correctly.

At GammaEdge, we've developed a systematic framework to identify these critical inflection points using our proprietary tools. Today, we're sharing our exact methodology for spotting market bottoms—specifically focusing on the transition from bearish to bullish market structure — and how you can come to recognize this shift to make real money.

Note: While this article provides a thorough overview of our market turning framework, each tool deserves its own deep dive. We've linked to additional resources throughout for those wanting to better understand what each tool unlocks for your trading.

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Why This Framework Matters

Markets don't move in straight lines – they oscillate between periods of bullish and bearish control, and it’s this tug-of-war that creates the uptrends and downtrends in price action (which we then trade). Understanding where we are in this cycle gives you a tremendous edge.

Think of market reversals as a series of dominos falling in sequence, not a single event. First comes a shift in real-time buying pressure, followed by changes in options positioning, and finally, price confirmation of the new trend. By tracking these dominos systematically, you can:

1. Spot potential reversals before they appear on price charts
2. Confirm whether market behavior aligns with your bullish or bearish thesis
3. Manage risk by identifying early when conditions change
4. Position yourself ahead of the crowd, rather than chasing moves after they're obvious

Let's now walk through our systematic approach for spotting these market turning points—a framework that combines momentum analysis with options market positioning to give you a comprehensive view of market structure.

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Framework Overview

Our market turning point framework is built on two foundational pillars:

1. Broad Market Momentum: Helps us understand when the trend shifts from selling to buying in real-time. In any market reversal, the first domino to fall is always a change in underlying buying and selling pressure. Before price charts confirm a reversal, we can detect subtle shifts in the balance between buyers and sellers entering the market.
2. Options Market Positioning: Since options markets are inherently forward-looking and where the bulk of speculator transact within modern markets, monitoring how traders position themselves gives us an understanding into market expectations before they manifest in price.

Our framework consists of four key components, which we'll cover in detail:

1. Market Trend Analysis: We first identify shifts in buying momentum using our Market Trend Model (MTM), looking for clear "linear up" days, which suggest shifts from selling to buying in the immediate term timeframe.
2. Options Structure Evaluation: We then examine how positioning within the options markets evolves over time, honing in specifically on the balance between calls and puts speculation above and below current price levels.
3. Transition Zone Monitoring: We pay close attention to whether price breaks through and holds above key structural levels within the options market structure we call "transition zones." These are key zones of reference, for when price breaks through to the upside, we expect to see continuation.
4. Other Supporting Indicators: Additional tools such as (i) our proprietary scans, (ii) the GEX Ratio, and (iii) True Delta/Gamma Zeros further evaluate the balance of call vs. put speculation in the options structure and provide us additional ways of confirming when sentiment shifts are occurring and bullish breadth is expanding.

As we walk through each component, you'll understand not just what to look for, but also unlock why each tool/signal matters and how they work together as a cohesive framework to identify genuine market turning points.

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The GammaEdge Turning Point Framework

Step 1: Market Trend Model Analysis

The Market Trend Model (MTM) often gives us our first signal of changing market conditions. This tool is built on the Tick Index, which measures real-time buying and selling activity "under the hood" of the market. When looking for a potential turning point from bearish to bullish, we focus on four key elements:

• The Cumulative Tick (CT) "Linear Up" Day: A “linear up” day occurs when the Cumulative Tick shows consistent upward momentum throughout a trading session (and preceded by a prior downtrend), creating a clear 45-degree angle trajectory. This signals to us steady, persistent buying pressure throughout the day and most importantly, reverses the prior downtrend. You can see this exact signature in the visual of the Market Trend Model provided below.
• “Railroad Tracks” Formation Higher: After the initial buying surge via the “linear up” day, we next look for continuation of that buying through the trending higher of our short-term moving average ribbon. Specifically, we look for the "Railroad Tracks" signature to develop (shown for you in the graphic below). When this signature develops, it confirms the initial buying impulse of the Linear Up Day.
• Filtered Tick Confirmation: For additional confirmation, we look for the Filtered Tick (FT) to show buying coinciding with the Linear Up Day. The Filtered Tick (bolded cyan line in the visual below) measures significant buying and selling pressure, so when it moves up in tandem with the CT, it signals that significant players are participating in the buying.
• Sequential Confirmation: Remember that reversals happen in stages, it’s not a single event. First comes the reversal from selling to buying pressure via a "linear up" day, followed by continuation that forms our bullish Railroad Track signature, all of which should be supported through significant buying entering the market as measured through our Filtered Tick. Not all "linear up" days lead to sustained rallies, but all meaningful rallies begin with this exact signature.

NOTE: The MTM works not just for spotting potential market bottoms but also serves as an excellent intraday tool for distinguishing between trending and choppy days—critical information for any active trader. Refer to this article (click HERE) for a deeper dive into how the MTM can elevate your intraday trading (and filled with actionable examples).

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Step 2: Options Market Structure Analysis

While the MTM shows us momentum shifts, we also need to understand if speculators are changing their positioning. This is where options market analysis becomes crucial.

Why focus on options? Because options markets are inherently forward-looking – speculators place bets on future outcomes. In today's markets, a significant amount of speculation flows through options, making them a critical barometer of market sentiment.

NOTE: Don't worry if you don't trade options yourself – our framework makes this analysis straightforward and applicable to any style of trading.

Our options market analysis is focused on the SPX options market – given its size and liquidity offered, it’s a great way to measure the pulse of the general market.

As for our market turning framework, we focus specifically on the presence of calls and puts in the complex. During periods of downtrends, we see put speculators come to dominate the market structure; therefore, when the market starts to potentially make its turn higher, this takes the form of put speculators leaving the complex and call speculators start to flood in, overtake put speculators who were previously dominating the structure during the downtrend.

To understand this shifting balance, we disaggregate the options market into two separate components for our analysis:

• Left-hand plane (below spot price)
• Right-hand plane (above spot price)

Left-Hand Plane Analysis (Below Spot Price)

The Left-Hand Plane (LHP) represents all strikes below the current spot price. Here, we're watching for In-The-Money (ITM) start to overtake Out-of-The-Money (OTM) put speculators. The key point to understand when this happens is that put speculators are closing their position (no longer willing to commit capital to further downside bets) and their influence within the complex is diminishing.

We track this shift using two key tools:

1. Web App Dashboard: Shown in the visual below, this tool is a literal visualization of the options structure and how speculators are positioned. As it relates to this analysis, we leverage the "Net Delta" column, which is a difference between call and put delta in the complex. We use this visualization to watch for when green strikes (i.e., call-dominated) start overtaking red strikes (i.e., put-dominated) below spot price. This transition signals that ITM calls are starting to dominate and OTM puts are drying up.

The visual below is an example of a completely put-dominated SPX structure and we’ve highlighted for you the Net Delta column in the blue box. Spot price is the thick yellow line so below that represents the left-hand plane and above it is the right-hand plane. As you can see, just about all strikes above and below the yellow line (spot price) are red, indicating that puts were in control of those strikes and the market structure as a whole.

The next visual below now shows the opposite structure, that is a call-dominated above and below spot price. This is what a healthy/bullish foundation in terms of options market structure looks like and an environment where we expect to see a propensity for price to appreciate overtime, assuming all else equal.

It’s our view that speculation is driven by out of the money options. Therefore, when markets transition from bearish to bullish control, the first part of the structure to change is the removal of OTM put speculators, which occurs below spot price. From there, the next progression is then to see OTM call speculators start to overtake ITM put holders, which indicates to us that speculators are committing capital with the expectation of higher prices to come.

To help us further understand when those shifts in structure occur, we leverage our Delta Balance command as well.

1. Delta Balance: The $dbh command is another way we visualize who’s winning the battle above and below spot price – above 0 indicates calls are in-control and below 0 indicates puts are in control. A bullish turn often begins when the LHP line (orange in the visuals) shows two key characteristics:

• A positive slope trending higher
• A cross from below 0 to above 0

When this happens, ITM call holders are overtaking OTM put speculators, signaling that call dominance is entering (and put influence is leaving) below spot price.

The first visual shows the $dbh command during a bearish phase. Two important observations:

• When price declined in mid-February 2025, notice the LHP line trending lower—signaling weakening ITM call speculation and increasing OTM put positioning.
• The future expirations (highlighted in the red box) show little ITM call speculation expansion. For a bullish turn, we'd want these future expirations to trend higher above the 0 line and push towards 1 (the upper limit of the oscillator).

The second visual below demonstrates what a bearish-to-bullish transition looks like. In early August 2024, the LHP line (orange) flipped from trending lower to trending higher (crossing above 0), indicating calls were entering and puts were leaving the complex below spot price. This positive trend continued in subsequent weeks as price advanced. This is exactly the action we want to see – that is, the initial shift from bearish to bullish and then the follow through.

Right-Hand Plane Analysis (Above Spot Price)

Similarly to what was discussed for the LHP, the same can be applied to the Right-Hand Plane (RHP) – all strikes above spot price. Specifically, we want to see:

1. In-The-Money put holders leaving the complex
2. Out-of-The-Money call speculators entering

This combination indicates a growing appetite for upside exposure while bearish positioning decreases.

Remember: In a market turning from bearish to bullish, the first part of the structure to change is typically the removal of OTM put speculators below spot price, followed by OTM call speculators replacing ITM put holders above spot price.

Visualizing this transition is the exact same as what we have discussed so far in this article:

• Using the Web App Dashboard, we want to see green dominated strikes start to populate above spot price.
• Using the $dbh command, we want to see the green RHP line trend higher and above the 0 line.

For a deeper dive into the use of the Delta Balance command, refer to this deep dive (Click HERE).

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Side Quest: Understanding the Different SPX Contracts

As previously mentioned in this article, the SPX options market is a major component of our market turning point framework. This is due to the fact that it’s the largest and most influential options market within the US equity market. Something unique to GammaEdge is that we separate our SPX analysis into its two distinct components, that is the AM and PM settled contracts. The reason for this is because different types of traders transact within the two complex, so understanding each separately provides key information into the two trader classes:

• SPXP (PM-settled contracts) includes all expirations except the monthly and quarterly. These daily/week contracts, particularly 0DTEs, are dominated by short-term traders and active speculators. SPXP is our day-to-day focus because these contracts turn over quickly, often showing structural changes first—like a speedboat that can change direction rapidly.
• SPXA (AM-settled contracts) covers monthly and quarterly expirations and are primarily used by institutions for longer-term positioning. Think of SPXA as a super-tanker—slower to change course but representing significant institutional commitment when it does move.

This dual analysis unlocks for us powerful market information: SPXP signals typically emerge first, showing immediate sentiment shifts, while SPXA confirmation suggests institutional backing for sustained moves. Without SPXA alignment, SPXP signals may lead to short-lived moves that fail to develop into meaningful trends.

A true market turning point typically shows SPXP changes first, followed by alignment in SPXA structure—when both "vessels" are heading in the same direction, the odds of a sustained market move increase significantly.

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Step 3: Transition Zone Analysis

The third key component of our framework is monitoring whether spot price crosses above (and holds) key transition zones identified within the options structure. These transition zones represent critical areas where control shifts between call and put speculators.

Think of transition zones as the market's "neutral territory" - areas where neither bulls nor bears have clear control. Inside these zones, you'll see call and put dominance constantly shifting back and forth, resulting in choppy, directionless price action.

What makes these zones so powerful is what happens when price breaks out of them. When spot price moves decisively above the top of a transition zone, it enters territory clearly dominated by call speculators. Similarly, when price drops below the bottom of a transition zone, it enters put-dominated territory.

For our market turning framework, we track two specific types of transition zones:

1. DEX Transition Zone: Based on net open interest (the distribution and balance between calls and puts at each strike)
2. GEX Transition Zone: Based on gamma exposure (how rapidly options positions change in value)

When these transition zones align—meaning their upper and lower boundaries are at similar price levels—it creates an especially powerful signal.

In a market turning from bearish to bullish, we typically watch for this sequence:

1. Spot price breaks through the top of the 0DTE (zero days to expiration) transition zone
2. Then it breaks through the top of the full complex transition zone (when all expirations are included)

For a sustained market rally, seeing price hold above the full complex transition zone is crucial. Also pay attention to the zone's width:

• A wider zone indicates uncertainty and potential volatility
• A narrower zone suggests a well-defined market structure—ideal for a bullish case

When spot price breaks above these transition zones and call dominance is clear throughout the options structure, we have strong confirmation that the market turning point is genuine rather than just a temporary bounce.

Here is an example of a call-dominated structure where spot price is above both the GEX and DEX transition zones.

Here is an example of a put-dominated structure where spot price is below both the GEX and DEX transition zones.

NOTE: To see how these transition zones are used as part of our SPX 0DTE trading strategy, refer to the deep dive we did HERE.

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To recap our market turning framework, three key signals must align to confirm a genuine shift from bearish to bullish market conditions:

1. Momentum/Trend Shift: The Market Trend Model reverses and begins trending higher, starting with a "linear up day" that shows consistent buying pressure throughout the session. This momentum continues, forming the distinctive "Railroad Tracks" pattern as short-term moving averages align and trend higher.
2. Sentiment Shift: Within the SPX options structure, we see call speculators overtaking put speculators in both the left-hand and right-hand planes. This transition shows market participants shifting their bets from downside protection to upside opportunity.
3. Structural Confirmation: Finally, spot price moves through and holds above the top of the SPX full complex transition zone, entering territory clearly dominated by call speculators.

When these three conditions are met, we have a solid foundation for a bullish market stance. While no framework guarantees success on every trade (markets can always surprise us), all sustainable uptrends begin with this signature pattern of shifting momentum/trend, sentiment, and structure.

What makes this approach powerful is that it helps you identify these shifts early—often before they become obvious on price charts alone. You're essentially tracking how the market transitions from sellers (put speculators) to buyers (call speculators) in real time.

Beyond these three core components, we've developed several supplemental tools that provide additional confirmation and insight into market conditions. Let's explore these next.

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Step 4: Additional Tools

While our core framework provides a solid foundation for identifying market turning points, these additional tools offer valuable confirmation signals and deeper insights into market conditions:

Breadth Analysis Through Scans

Our proprietary scans help identify broader market shifts by tracking the number of stocks showing bullish vs. bearish characteristics:

• $calldomdel: Shows stocks dominated by calls above and below spot price
• $ncalldomdel: Shows stocks newly dominated by calls above and below spot price

During market turning points, watch for expansion in the number of call-dominated stocks day over day. This breadth confirmation indicates the reversal isn't limited to a few names but represents a broader market shift.

Pro-tip: Beyond sentiment analysis, stocks appearing on these scans should be prioritized on your watchlist as they already display call dominance—making them prime candidates for potential long trades.

True Zeros

True Delta Zero (TDZ) is a theoretical balance point of an options complex where put delta and call delta are balanced. It's not price-sensitive and may better indicate where average dealer delta levels transition from net positive to net negative exposure (and vice versa). When we start to see this metric shift from a downtrend to an uptrend, it’s suggestive of calls starting to increase their influence within the options complex, which is exactly what we want to see.

True Gamma Zero (TGZ) represents the theoretical balance point where put gamma and call gamma are exactly balanced. Like TDZ, it's not price-sensitive and helps indicate transitions in dealer gamma exposure. Again, we want to see this line trending higher over time.

*NOTE: Remember to analyze TDZ and TGZ separately for both SPXP and SPXA contracts for a comprehensive view of short-term and institutional positioning.

GEX Ratio

This ratio measures total call gamma relative to put gamma across the options complex. Unlike the traditional put/call ratio, the GEX Ratio incorporates TIME through gamma, making it a superior sentiment indicator.

When this ratio trends higher, it signals that incremental call speculation is outpacing put speculation—a key confirmation for our bullish thesis. Pay attention to:

• The ratio's absolute level (above 1 = calls dominating)
• The direction of the trend (rising = increasing bullish sentiment)
• The rate of change (steeper slope = stronger shift in sentiment)

Each of these tools provides a different perspective on market structure, helping you build conviction in your market view before committing capital.

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Putting It All Together

The power of this framework lies in confirmation across multiple tools. No single indicator is sufficient, but when several align, the probability of a genuine market turning point increases significantly.

Remember that these signals appear in sequence, not simultaneously:

1. First, we typically see changes in intraday momentum via the Market Trend Model
2. Then, options market structure begins shifting as put speculators exit and call speculators enter
3. Finally, price breaks above key technical levels (our transition zones) and holds them

Practical Application: A Simple Checklist

To implement this framework in your own trading, follow these steps:

1. Monitor the Market Trend Model daily
   • Look for "linear up days" following downtrends
   • Confirm with short-term moving averages forming the Railroad Tracks pattern
   • Verify institutional participation via Filtered Tick buying
2. Track options structure changes
   • Use our Web App Dashboard to monitor call vs. put dominance
   • Check the Delta Balance command for shifts in the LHP and RHP lines
   • Watch for transition from red to green strikes across the structure
3. Identify key transition zones
   • Note where the GEX and DEX transition zones align
   • Watch for price breaks above these zones
   • Confirm price holds above these levels on subsequent sessions
4. Seek additional confirmation
   • Run breadth scans to track expanding call dominance
   • Monitor the GEX Ratio for uptrends
   • Check TDZ and TGZ lines for upward momentum

Start by focusing on the core three-step framework before adding the supplemental tools. As you become more familiar with the process, you'll develop an intuitive sense for how these indicators work together to signal genuine market turning points.

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Unlock More in Our Detailed Video Training

For a complete walkthrough of this framework with real market examples, watch our detailed video below. You'll see these concepts in action and unlock how to apply them in your own trading.

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Final Thoughts

Market turning points represent some of the most profitable trading opportunities, but they're also among the most challenging to identify. By combining momentum analysis with options market structure, our framework gives you a systematic way to spot these inflection points before they become obvious on price charts.

Remember that no framework is perfect—markets can always surprise us. However, by focusing on the sequence of signals (momentum shift → sentiment shift → structural confirmation), you'll position yourself to catch major market turns more consistently than relying on price action alone.

Until next time,

Taylor
GammaEdge Co-Founder

P.S. The examples shown in this article are from a past date and don't reflect current market conditions. Be sure to run these commands yourself to get the most up-to-date and accurate information for your trading decisions.