Tuesday, May 26, 2009

A Quick Look at Strong Buying Pressure


I've talked with several traders who were trying to sell the market this morning, only to lose money. Here is where it's important to track the distribution of the NYSE TICK. You can see that, all day, the moving average of TICK (blue line) has stayed above the zero line (black). As I stressed in the intraday Twitter posts, we had no TICK readings below -600 all day into the early afternoon. What that tells you is that institutions are not actively executing sell programs, so that large numbers of shares are not downticking at the same time. Until that dynamic changes, it is difficult to sell such a strong market for more than a scalp trade.
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8 comments:

sandp said...

Thank you for the good work.

Please note that we had bearish Harami breakdown on weekly chart last week.
I expect to test 929.50 this week.

BalaB said...

You posts continue to be extremely informative. Thanks for the continued generosity.

Curtis said...

The trick today was to realize that it was likely that we would have some contrary moves because of the shortened trading week. Tuesday's are also bullish. The down move on declining volume might have, also, tipped you off.

If you can sell at the right time then you can surely buy at the right time. But, whoa to the man who can not sell at the right time for he can neither buy nor sell at the right time.

JDMoodie said...

Interestingly I had a sell bias going in but that changed within 10 minutes of the open as I recognized the significance of the market breaking above Friday's low. Then breaking the close at 16 mins, the pivot point at 30 mins, R1, Friday's high, and R2...and all before 1100h with stiff volume at 1000h.

I have Brett to thank for helping me to have a very flexible view of the market, and now knowing what factors to look at to help determine what kind of day to expect as it unfolds and to trade accordingly...although my trading day was stymied today due to phone calls...there is always another day to trade though.

Jeff.

Randy said...

Was it not odd that the bulls felt it necessary to take some profits prior to the holiday weekend and the very next day buy back in? It just makes no sense, had there been conviction by the bulls, why the profit taking into the close last Friday?

SellPuts said...

Informative post, iv been following you for a while, you make feel feel as if i have a lot to learn still.

asdf said...

Hey Doc,

I've been a fan of the site for several months now as i've begun my trading career and, like many others already have, I have to thank you for the consistently informative posts. Your site's archives reads almost like a textbook. Seriously.

Your advice on TICK readings was extremely valuable today and I was able to use them to my advantage. Towards the end of the day the market began to sell off sharply. Is there any sort of tell in the TICK that can alert us traders that trouble is ahead? The TICK was registering some -800s, the 10MA was moving towards zero but I don't think it actually went beneath it, and the SPY looked steady but then WHAMO! sharp sell off.

Any sort of insight would be helpful. Myself, along with some other novice traders on the floor, were all surprised a bit by the downward move towards the end of the day.

Love the site, check it every day.

Thanks doc.

JDMoodie said...

From one newb to another...I have found a few things in TICK alone to indicate potential changes in state of the market.

Yesterday:
tracking the moving average of the high and low TICK values separately (100 and 195 minute) gives a nice moving band. This started dropping off after 1300h. MAs of the HLC/3 delineated the last decent rally from 1330h to 1410h then dropped to the bottom of this band for the rest of the day...nice sell signal.

Plotting these averages without the TICK data gives a clearer picture than with all the noise of each minute, or even decreasing the opacity of the TICK data to see the averages clearer helps.

There were a few other indicators in TICK, sector ETFs, SPY volume and SPY price MAs and they all coincided to some extent for a EOD correction.

Jeff.