Wednesday, December 31, 2008

When Program Selling Cannot Push The Broad Stock Market Lower




The blue lines represent 10 period moving averages for one-minute charts of the ES futures (top chart); Dow TICK ($TICKI; middle chart); and NYSE TICK ($TICK; bottom chart); click on charts for detail. One of my very short-term setups occurs when we get selling pressure in $TICKI that is not matched by commensurate selling pressure in $TICK. This typically occurs when program selling affecting large cap issues are not pulling the broad market lower. By waiting for the program selling to abate, as it did prior to 2 PM CT, we can often catch a nice pop up in the ES futures, as the large caps catch up to the broad market strength.
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4 comments:

Jeff Pietsch CFA Esq said...

Excellent!

Mark said...

Excellent indeed!

Brett, do you also have indications that the opposite is also true (i.e. program buying in the Dow cannot move the broad market higher)?

Regards,

-Mark-

Brett Steenbarger, Ph.D. said...

Hi Mark,

Yes, in downtrends it's not unusual to see TICK rally from negative toward zero, with relatively strong Dow TICK. Program buying is not accompanied by buying across the broad market and ultimately can't move the market to new highs.

Brett

SeekMocha said...

Not sure I see the signal described for this setup. The middle chart, $TICKI, is offset 30 minutes from the other charts, so interpretation is difficult from what's displayed here. I copied all three charts into a graphics program so I could move them around and make the time frames line up. Then I see the moving average for $TICKI falling -13 points between 13:33 and 13:35 while $TICK remains flat during the same period. Is that the program selling period you are talking about, just 3 minutes long? And if so, it seems a lot more significant that $TICKI average rises +29 points between 13:36 and 13:52 while $TICK stays fairly flat. Should I assume there was program buying occuring during that period?