In my recent post, I illustrated a short-term trending pattern in the intraday money flow data. In Wednesday's market, I tapped Home Depot (HD; blue line) for this same pattern, as it opened higher in a mixed market (thanks to favorable housing news) and then proceeded to rise on strong money flow (red line). Around 10:30 AM ET, however, it was clear something was wrong. A few large trades lifting offers in HD had taken money flow to daily highs, but price was no longer participating. Readers will observe that this is the same inefficiency pattern that we see in the NYSE TICK data at market tops in the indexes.
From there, price moved steadily lower in HD, even as the broad market registered fresh highs. Interestingly, money flow bottomed out around 11:15 AM, well ahead of price. That is also a bottoming pattern we frequently see in the NYSE TICK, as selling pressure dries up on new price lows.
It makes sense that patterns in the money flow might mirror patterns in the NYSE TICK, as money flow is really a volume-weighted TICK measure for each individual stock. (More on how money flow is calculated can be found here).
I strongly suspect that this can be a powerful tool in the arsenal of the intraday trader of individual stocks. (Note: data from RealTick, charted in Excel).
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