The NYSE TICK tells us how many stocks are trading at their offer price minus those trading at their bid. It is now available on NT with a live Kinetick feed, and goes under the symbol ^TICK.
It is a great measure of very short-term sentiment, because it captures the degree to which the broad market reflects aggressiveness of bulls (lifting offers) vs. bears (hitting bids). A 10-13 period moving average of the NYSE TICK removes much of the noise from the one-minute values. In the attached chart of Friday’s trading, a few things stand out:
1)You can often identify strong days to the upside and downside when the first hour's TICK is persistently positive or negative. This means we have skewed sentiment, with stocks aggressively trading on upticks or downticks. When TICK MA pullbacks can't even go into positive or negative territory you know that the sentiment is quite negative or positive. That's a hallmark of a trending day.
2) You can see the 13 MA of TICK is spending more time below the zero line, which tells us that the Cumulative TICK is running negative. The possibility of a trend day is evident because we're persistently below the zero line in the TICK MA. The moving average of TICK also helps us identify intraday turns in sentiment and trend, when markets shift from primarily above/below zero to primarily below/above. Non-trending markets will generally spend more balanced time above and below the zero level.
3) In a weak market, pullbacks in the 13 MA of TICK are often good short-term entry points. Notice that each time the 13MA (blue line) pulled back to the zero line it created a perfect selling opportunity. Even in a market that is about to change direction, we'll often get a retest of previous highs/lows after one of these TICK pullbacks/bounces, making it much easier to scratch trades.
Also note the distribution of TICK values over time. In the attached chart, we see the first hour of trade for Friday’s market. The center green horizontal line is placed at zero, and the blue horizontal lines are a 4 standard deviation regression channel. Notice that the bars are distributed more below the zero line and that the extreme bullish TICK readings peak at 600, while the extreme bearish readings peak at the -800 level. Clearly, the net distribution of TICK is skewed negatively, and we're seeing more bouts of significant selling than buying.
On average, the one-minute high value for TICK is around +250 and the average one-minute low value is around -250. The standard deviation is approximately 450. That means that two-thirds of all TICK values will fall between +700 and -700. About 95% of all TICK values will fall between +1040 and -1040, making values greater than +1000 or less than -1000 the exception.
Please note that while we are looking at a single days picture of the TICK, it's readings has implications several days out. Very positive trader sentiment over a several day period tends to generate strength over the next several days, and very negative sentiment tends to lead to reversals.
ADD - Second Panel
A very effective tool for identifying trend environments vs. range ones is the intraday NYSE advance-decline line. It tracks the difference between advancing and declining stocks on an intraday basis; and is now available on NT with a live Kinetick feed, and goes under the symbol ^ADD
Friday’s ADD opened flat and was -530 in the first 15 minutes, it then pulled back to the zero line and failed and was - 1570 within a relatively short period of time. In Friday's case we had the ES break below it's opening range, accompanied by a rapidly falling ADD, which signaled a possible trend day down.
The opening value for $ADD correlates with the value at the end of the first half hour of trade by .56. The median opening value for $ADD has been -1, with a standard deviation of 81. So when we see $ADD open at +150 or greater or at -150 or less, it is an indication that we might be in a trend day. By the end of the first half hour of trade, the median value for $ADD has been -346, with a standard deviation of 1378. So, within the first 30 minutes of trading, we should have a pretty good idea of what kind of trading day is ahead of us. If we're seeing $ADD with readings of +1500 or more or -1500 or more (negative), then there is a high probability of a trend day.
Thank you for this post. I think that watching market breadth indicators in parallel with index futures produces a real edge. Unlike the usual bunch of indicators, which is derived from price, the TICK, ADD and TRIN use information from a different source.
I agree on everything that you have written on the TICK, it is a very valuable information on short term sentiment. I use a 20-period SMA with fixed bands. When the ticks exceed those bands I am getting an acoustic signal. I have also experimented with a center line instead of a moving average (center line of Donchian Channel), and this gave similar results.
It is important to adjust the bands to the trend in order to catch the retracements and not the unwanted countertrend signals. This is what you have also done, as I can see the asymmetry between the two lines plotted on the chart.
The chart below shows six signals that were generated during the first two hours today, when the bands were violated. When using the SMA(20) as a trendfilter, five of the six signals were confirmed, one of them was invalid. The invalid signal, although it had one of the highest tick readings in absolute terms was dangerous to take.
The following 20 users say Thank You to Fat Tails for this post:
For A/D TWS does not display the data, but it is available using the API
This is very interesting, too bad it is mainly linked to difficult instruments (ES and NQ), although they relate to each other, I wish we had Tick and AD for TF and Dax. Look forward for the follow up.
The following user says Thank You to redratsal for this post:
I haven't corrolated the TICK with the futures contracts, but today I traded the SPY, and the TF. Notice on the attached chart of the SPY how, in this huge down day, the TICK consistently enables good counter trend trades. I scalp the market with and against the trend, I just highlighted the counter trend trades, because in a strong trend, the TICK will seldom hit the extreme going with the trend, as evident in the chart. The indicator plots a 'T' when a Tick extreme is reached.
The following 3 users say Thank You to monpere for this post:
Agreed...there were at least a half dozen sell signals that presented better opportunities to have extended gains, because you were trading with the trend on a huge trend day. Once again, it's not the frequency of the winning trades; it's the magnitude of the winning trades.
The following user says Thank You to tigertrader for this post:
I trade both with and against the trend, I actually had just as many entries with the trend, but I don't use the TICK to take trades with the trend, I only use it to confirm counter trend trades. Since this thread is about the TICK, I only showed the entries that were supported by the TICK. As you can see on the chart, the indicator had only 1 or 2 TICK extremes going with the trend. I am a scalper I try to take 6 to 10 ticks out every pullback and every continuation move and get out. I can't be in a trade for more then 3 minutes, or I will pull my hair out.
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