Wednesday, December 14, 2005

Selling On an Up Day

The S&P 500 was up Tuesday by over .4%, but my Adjusted NYSE TICK showed greater selling on the day than buying (i.e., more stocks trading on downticks than upticks). This typically occurs when the buying is stronger in the large caps than the rest of the stock universe. It is also not common. Since July, 2003 (N = 609 trading days), it's only occurred 22 times.

Overall, the three-day average change for the sample is .12% (360 occasions up, 249 down). After an up day with net selling, however, the next three days bring an average loss of -.06% (9 occasions up, 13 down). This is one of the reasons why, despite pushing toward new highs, I am not aggressively bullish on this market. Another reason: We registered the highest number of stocks trading in intermediate-term downtrends since November 17th--despite it being an up day, with averages near recent highs.

2 comments:

BDG123 said...

Brett,
Just popped across your blog. Thanks for the free educational info. :) I am rather curious as to what your adjusted TICK calculation is and how it compares to regular TICK data.

I'm sure you also watch the TRIN but it appears some sneaky selling is under way. We are at four year highs and we are starting to significantly expand on the new lows side again after a week or so they magically disappeared.

I don't hold much merit in the Hindenberg Principal but after options expiration, will we start to see the market crater?

Thanks!

Brett Steenbarger, Ph.D. said...

Thanks for the note. The Adjusted TICK is an average of all intraday TICK values, transformed so that it has a zero mean. I'll be following market weakness in my Trading Psychology Weblog. It does concern me, indeed, that on a day such as today (Wed.) we can be up in the ES, but not in the NQ or Russell. I'll have more on this topic shortly. While I'm not sure about the market cratering, I do think we have decent odds of returning to the trading range from earlier this month.