That phenonmon is called a cloud inversion. It happens in mountainous areas when a layer of warm moist air passes over cold valley floor. So initially the valley is full of cold air:
\ cold /
In certain circumstances (an approaching warm front) a layer of warm moist air will pass into the valley and will be forced above the cold air (warm air rises and is less dense, etc)
\ warm /
\ ------- /
\ cold /
The valley sides and the warm air trap the cold in the valley bottom. Where the warm and cold air touch water is condensed from the warm air to form clouds (
---). The warm air acts as a "cap" preventing the cold from escaping (Capping inversion)
what are good indicators or conditions that would create situations
Your looking for a warm front meeting a cold air mass (high pressure in winter) in a mountainous area. Strong winds will "mix" the air masses, so ideally it should be calm.
This typically happen around dawn and tend to burn off as the valley bottom is heated, though they can last for long periods of time if the conditions are right. The larger the tempaterature difference (between the cold and the warm masses) the better chance of this happening so look for a warm front where the temperature infront of it, is a lot colder than that behind it (all warm fronts have this to a degree)
BTW the mountains don't have to be particualry high, this does happen at quite low levels, I've seen it on hills no more than a couple of hundred feet.