One distinction that can be difficult to make is the one between genuine buying and short covering. I find the NYSE TICK useful for this purpose, as genuine buying will bid up the great majority of NYSE stocks, not just bump the most liquid names higher. (See the NYSE TICK primer for more background).
When we see a buying burst in the ES futures, then, that is not accompanied by a commensurate rise in the Cumulative NYSE TICK, it tells us that the majority of shares are still trading on downticks, even as there is covering among the S&P 500 issues.
Seeing Cumulative TICK fail to budge on market bounces helped keep traders on the right side of the market today, fading those bounces rather than assuming that they were the start of lasting reversals. That was especially helpful during the morning session, when sharp short covering rallies made it look like the bear would reverse, as has happened so often lately.
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