Thursday, March 20, 2008

Tracking Market Transitions With Market Delta and NYSE TICK

In my recent post, I suggested that the relationship between the NYSE TICK and the Market Delta for a broad index provides a multidimensional view of short-term sentiment. If you click on the chart above, you'll see a nice setup from this morning's trade. The ES volume at bid vs. offer is within each of the bars in the Market Delta chart. The five-minute high and low values for NYSE TICK are in black beneath each bar.

Note how the NYSE TICK actually started drying up on the breakout move, ahead of price and Market Delta. That was an early clue that a large number of stocks weren't participating in the upmove. (Energy and materials stocks, among others, failed to confirm the highs). Once we made the new price highs at the top of the day's range, however, note how volume at offer vs. bid and NYSE TICK dried up. That provided plenty of advance warning for the retracement back into the recent range.

These transitional patterns play themselves out on multiple time frames and can be found just about every trading day.


Identifying Transitional Structures

My Guiding Principles of Short-Term Trading