Wednesday, March 12, 2008

Tracking the NYSE TICK and Other Wednesday Thoughts

Tracking the TICK: Several traders have emailed and asked about easy ways to track the distribution of the NYSE TICK, which (as I mentioned yesterday) caught the afternoon rally quite nicely. One simple method (top chart) is to create a moving average of the TICK (mine is a ten-period average of five-minute bars) and then track: a) whether the average is dominantly above or below the zero (black) line; and b) whether the average is upwardly, downwardly, or non-sloping. We can see how the blue TICK MA line stayed positive (and upward sloping) for most the afternoon.

Double Bottom?: The Banking Index ($BKX; bottom chart), for all the woes of the financial sector, could not make new lows during the recent market weakness, creating a nice double bottom pattern. We're now rallying very sharply off that bottom. Headlines feature scary bank news, but markets are forward-looking and may be indicating a degree of stabilization. The key will be the ability of some of these troubled investment banks and broker/dealers to hold their recent lows.

The Next Bubble? - Check out links from Abnormal Returns, especially re: how the next bubble has to be large enough to rescue us from this one. Also note the post on generating superior returns by pursuing hot anomalies in markets.

Brief Observation - When people heatedly challenge your views on markets, but offer no evidence or analytical reasoning to back their arguments, you know that theirs is a defensive reaction. At some level they know they're wrong, and they're feeling threatened. It's one of the best market tells I've found, which is why I never discourage nasty emails and blog comments.