I'm writing this early in the afternoon on Thursday, July 26th. The S&P 500 Index has been down by over 50 points during the day thus far, making it one of the weakest days we've seen in quite a while. The chart above shows the distribution of the NYSE TICK during the day, with a blue, horizontal line at the zero level. That zero level has been a mean value for the TICK ever since the repeal of the uptick rule changed short sales and led to a downward shift in the TICK (reflecting the ability of sellers to hit bids).
You can see from the chart that the distribution of TICK values below the blue line is much greater than that above the line. That is also reflected in NYSE Advance-Decline figures that went steadily downhill over that period. Clearly, it is dangerous to go bottom fishing when you see large traders persistently hitting bids and keeping the TICK negative. Indeed, as I've emphasized in my intraday comments, selling bounces during such periods of risk aversion has been the best strategy of all.
The takeaway is that sentiment matters. A large move can get larger when sentiment becomes highly one-sided. Trying to anticipate a shift in sentiment risks catching the proverbial falling knife. Waiting for that shift to materialize and riding it while the other side is frantically covering positions is a far more promising alternative.