Monday, September 14, 2009

Midday Briefing for September 14th: Watching Selling Pressure

Stocks are continuing their rise from early weakness, moving toward their 9/11 highs. One nice tell for the market strength has been relative strength among the Russell 2000 stocks. When we see the smaller, more entrepreneurial companies outperform the blue chips, we know that equity investors and traders are acting on risk appetite. As of this writing, IWM is up 1.63% from the market open; SPY is up 1.25%.

Note how we've been seeing higher highs and higher lows in the NYSE TICK as we've moved through the day (chart above). That tells us that sellers have become less aggressive on the day (fewer stocks trading on downticks) and buyers have grown more aggressive. When we see such a shift in the distribution of TICK values, that tells us that we are likely to sustain a directional market move. Seeing TICK stay positive as selling pressure dried up was key to staying in the trade once we saw that we could not take out the overnight low.