Note two dynamics in intraday sentiment thus far today:
1) We've traded largely below zero in NYSE TICK (note blue moving average of TICK) throughout the morning, as stocks have persistently traded on downticks vs. upticks. Noticing that (and tracking the themes among USD, currencies, and sectors) was key to seeing that we would break below the important 1137 area support mentioned in the morning briefing;
2) TICK levels have seen progressively higher lows, suggesting a potential drying up of selling pressure over the course of the morning. If that can be followed up with an expansion of buying--and TICK that stays dominantly above zero--we could see significant short covering add to any bounce. We need to start registering TICK values of +800 or greater, however, to suggest that fresh buying, not just short covering, is coming into the market.
The lows from 1/12 and 1/13 represent important support; a break below those would likely bring significant selling interest.
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3 comments:
Not exactly sure why short covering couldn't easily get us into big tick numbers.
Dr. Brett...I have recently been studying all of your posts about your method of trading and the combination of variables that you trade. Today, I was paying close attention to exactly what you pointed out: how we are trading within the recent range in the S&P. One point of confusion for me today relates to a cumulative TICK line that continued to decline until 14:50 EST while TICK didn't make new lows and prices held above the lows. My question is: when you see a divergence like that between what current tick readings are telling you and the cumulative tick, how do you interpret the meaning?
My view of it was that since cumulative tick continued down, we were seeing a persistently negative tick over the course of the day, but since TICK was not makng new lows the selling was not intensifying...but rather, just continuing. That combination with an apparent higher low in prices confused me a little bit: thus what is your interpretation of that situation? Logically, I would think that the persistent selling increases the risk that we sell off to new lows...but the opposite happened, meaning price actually bounced...help understanding this would be apprecaited! Thank you.
Dr. Brett, one more follow-up question to earlier comment: did you take the trade that you outlined? And, if so, did you practice your typical entry strategy of buying on a pull back in TICK after (a)TICK exceeded ~800, (b)Cumulative TICK begain to rise, and (c) day lows (and consolidation lows) held? I will be extremely intersted to see if you did take that trade because it was a counter trend trade late in the day with, in my view, limited apparent evidence of buying follow through.
Thank you, of course, for the generosity in your sharing.
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