Looks like a good time for me to show my stuff...
Prof. Succo mentioned the unusual market action yesterday, namely regarding the large positive TICK readings we were seeing (the TICK is a snapshot of the number of stocks that just traded at a price higher than the trade immediately prior minus those that last traded at a lower price).
The intraday range of the TICK has expanded over the years, and I have no doubt it is due to increased program trading activity. However, that doesn't mean that it has lost its usefulness as a tell, and it remains one of my favorite tools.
One of the ways I like to track it is on a very simple summation basis, using intraday bars. I keep a moving 5-minute and 30-minute sum of the last one and three days worth of TICK readings, and it serves to highlight exhaustion points in equities when it reaches true extremes.
We hit one of those true extremes at the close Wednesday on the Nasdaq, with the summed TICK reaching one of its highest levels in years. We actually saw a similar thing on September 13th, which coincided with the end of the big momentum move in the NDX as it sputtered higher over the next few days before giving back those gains in a hurry.
In a generally down-trending market, very overbought readings like this are consistently successful short signals. In an uptrend, however, they're less consistent and more useful as an indication that things are most likely to simply slow down and go through a short-term digestion phase.
Typically, any further gains made from this point are temporary as at some point in the following week we trade through the price where the TICK became so stretched in the first place. It's not a foregone conclusion, of course, but it's consistent enough for me to watch for it every time.
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