Monday, February 01, 2010

Catching the Day's Sentiment With the Cumulative NYSE TICK Line

One of my favorite intraday sentiment indicators is a cumulative line of the NYSE TICK. I take an average of the high/low/close TICK readings for each minute and simply add each minute's total to a running sum. Although volume was on the low side for much of the day and the ES futures (blue line above) traded in a range, you can see that buying sentiment dominated on the day, as stocks persistently traded on upticks vs. downticks. That sentiment was finally realized in the late day break to the upside.

Note how successive lows in the ES futures came at higher levels in the Cumulative TICK line. That is one way that I track whether sentiment is shifting toward bears or remains on the side of the bulls. In general, I've found limited success trading against a TICK line that is moving directionally.