Tuesday, January 19, 2010

Catching Real Time Stock Market Sentiment

Note how NYSE TICK (above) and the moving average of TICK (blue line) have stayed above the zero line throughout the morning. At the same time, Cumulative Delta from the open is over +60,000, meaning that more than 60,000 contracts have transacted at the market offer than at the bid: quite a total for this time of day.

What that tells us is that sentiment across the broad list of stocks (NYSE TICK) and within the S&P 500 Index futures has been aggressively bullish. At those times, it makes sense to buy dips in TICK and Delta and watch for trades to the R1, R2, and R3 price levels (and to the prior trading session's highs).

A large part of intraday trading success boils down to quickly identifying and exploiting short-term market sentiment and its shifts.