This is a question I ask continuously through the trading day, as we see shifts in what I call efficiency: the ability of sentiment to move price. If you click on the chart above, you'll see in detail the NASDAQ 100 (NQ) futures from Friday morning plotted against the NASDAQ TICK.What we see early in the morning is that traders are hitting bids among the NASDAQ stocks and that is taking the futures lower. We get a second thrust down in the NASDAQ TICK around 9:54 AM ET and price only makes a marginal new low--and then bounces right back into the opening range. That bounce is followed by breakout highs in the NASDAQ TICK.
From that point on, price moves steadily higher with the positive TICK readings and significant pullbacks in the TICK occur at successively higher prices. In short, what we're seeing is, first, an inability of the negative sentiment (TICK) to sustain lower prices, then an upswing in sentiment (TICK), and then higher prices.
It is this positive shift in sentiment--a positive shift in the distribution of TICK values--that provides us with an alert for a rising price trend.
In this context, individual TICK readings are less important than the ability of TICK (sentiment) to facilitate price and whether the series of sentiment (TICK) readings is shifting in a positive, negative, or neutral direction. I find this very helpful in assessing and anticipating intraday directional moves.
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