Sunday, October 26, 2008

Gauging Intraday Swings With NYSE TICK


If you click on the chart above, you can see the ES futures (blue line) from October 23rd and 24th plotted against a 2 hour moving average of the adjusted NYSE TICK (pink line). I've found this intraday moving average of the NYSE TICK to be helpful in several respects:

1) The slope of the TICK moving average line tells me whether buying or selling interest is increasing or decreasing over the short term, providing a gauge of intraday sentiment;

2) The peaks and valleys of the TICK moving average line act as rough intraday overbought and oversold measures;

3) The degree to which the TICK moving average line spends time above or below the neutral zero line tells me whether the cumulative TICK over the entire period charted is moving up or down; i.e., whether buying or selling sentiment is dominating the period.

Some of the best selling opportunities occur when you get short term overbought readings in the TICK moving average when the cumulative TICK is falling. Good buying opportunities occur when you see short term oversold readings in the moving average when the cumulative TICK is rising. When very oversold readings are followed by very overbought ones and vice versa, we often see a sentiment shift that accompanies a change of trend.

Methodological note: The adjusted TICK is computed by taking the one-minute average high-low-close price for TICK and subtracting from that value the average one-minute TICK reading over the past 20 days. Once I adjust current TICK readings for the 20 day average, I then calculate a 2 hour moving average of those adjusted TICK values. By adjusting TICK readings for a 20-day average, you're measuring with the zero level whether the present level of buying or selling sentiment is greater or lesser than that seen over the last 20 days. This provides a *relative* sense for whether buying or selling pressure is rising or falling.
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4 comments:

minoo said...

Brett, I am not sure about the divergence of the tick-plot and ES-future at close

Was it due to ES-futures closes 15minutes after NYSE or due to Sentiment Change or it just being Friday

Even though the ES Globex-only was halted for limit-down, the tick-plot reflects not even a blip
Instead within the first hour of friday open it had reverted to zero-line
Is there something technically a miss here ? or afirmation of strong sentiment shift

I am not sure I am interpreting this correctly, Could you please elaborate / annotate your chart on some points.

Many thanks
Minoo

GS751 said...

Im guessing the tick is something futures day traders must pay a lot of attention too.

Charles said...

Does anyone know a way to view the adjusted TICK in Tradestation's platform? Thanks!

CharlesTrader said...

Charles:

I have a code that appears to be a good representation of Brett's Two-Hr $TICK MA. See:

http://esanalysis.blogspot.com/2008/10/bretts-two-hour-tick-ma.html

Before inserting the Indicator, make sure your $TICK chart is formated with 30 days of data.

CharlesTrader