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Tick Status / Interpretations
Since I'm becoming increasingly enamored with Billy's tick concepts, and since they have very little to do with GGT, I'm starting this thread here so to keep the tick system and GGT systems separate...
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Wednesday was a good day if you follow the intraday tick patterns. I especially like TradeStation's $TIKRL, which is the Russell 2K:
[ATTACH=CONFIG]10645[/ATTACH]
I entered a base short position in IWM shortly after the open, alongside another leveraged position in TZA (not shown), and it was off to the races. I jumped the gun a bit but I saw the TIKRL jump up then promptly reverse, giving me confidence to move into the markets on the short side.
The vertical line corresponds to the 10h MA slope change to the opposing side -- in this case to the downside, so by 10:45 I had further confidence to add to the positions (both -IWM and +TZA). As you can see, the rest of the day was a good day.
I closed all but 100sh of -IWM and +TZA a minute before the close as the markets sold off; depending on today's action I may add to the base positions or I may simply take the remaining profits off the table. We'll see.
The broader $TICK pattern whipsawed then moved aggressively lower on Wednesday, effectively resetting any bullish up leg interpretation:
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You can see the extreme selling with the 500 stock / min filter in the middle pane -- this filter is a great way to separate the noise from the real trend and has worked well for me as of late. With all of the slopes of the various tick MAs pointing downward there is no doubt that we are under bearish pressure, despite the futures being up as I write.
The $TIKSP, which tracks the issues in the S&P500, was far more volatile yesterday and I stayed away:
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While the slopes of the various MAs are all pointing downward it's important to note that the attempt at buying which started around 2 pm EDT and which lasted an hour would have really challenged you. We did not have a corresponding rally in the other markets in the 2 pm - 3 pm time frame so the buying here was not a reversal. I personally think it was people loading up on dividend paying stocks in anticipation of the end of the quarter, but it's hard to tell for sure. At any rate, I avoided any dabbling in the S&P due to the underperformance relative to the R2K ...
Futures are giving up some of their gains as I write, so it most likely will be another psycho day.
Regards,
pgd
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Update for Friday, September 30th
From a broad perspective, the buying algos turned on around 15:22 EDT and didn't let up through settlement at 16:15:
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Note the steady reversal of the cumulative tick patterns in the middle and lower panes. Despite futures being down as I write this I'm watching for a penetration of the 10d cumulative tick MA from below as well as any form of slope change of the 10d MA (right now the 10d MA slope is down but becoming less so pronounced as the cumulative tick moves upward).
The Russell 2K small cap cumulative tick cleared the 1d MA without looking back, which nearly reversed the entire drop for the day:
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Given that I will not be at my PC at market open this morning, and that the VIX is still way above 30, I decided to close my short IWM positions, as well as my long TZA positions at the close to lock in those gains. I can always get back in on the short side if warranted.
Somewhat ominous for the bears is that there was significant strength in the S&P500 yesterday, with the cumulative tick taking out the 10h MA from below.
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This is a bullish sign that can be interpreted various ways:
[LIST]End of Month/Quarter window dressing in the relative "safety" of dividend paying stocks[/LIST][LIST]Movement to lower beta positions in advance of an anticipated (continued) down draft[/LIST][LIST]Methodology to employ capital where yields are higher than Treasuries[/LIST]
Supporting the end-of-day move was a reversal of sorts in terms of LEV into the SPY:
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Note how the general down-draft in the most-liquid-ETF-on-the-face-of-the-planet reversed in the last 35 minutes .... Time to pay attention.
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My plan today with respect to the tick methodology is to
[LIST=1][*]Watch for a crossing from below on the $TIKRL (Russell 2K) small caps of the 10d cumulative tick MA[*]Watch for confirmation across $TIKSP, $TIKQ, and $TICK of the same ($TIKSP is already there -- will it hold?)[*]Enter base positions on the LONG side (SPY, IWM, QQQ) if momentum causes an inflection point in the slope of the 10h MA on each of the different indices.[/LIST]
I'll miss the first hour or so of the market this morning ....
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Update for Tuesday, October 4th
"The trend is our friend." Indeed.
Futures are down about -1% across the board, and in terms of the cumulative $TICK (or $TIKRL, $TIKSP, $TIKQ -- take your pick), there is little to suggest any hesitation to the selling that we saw yesterday.
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500 stocks/min-type selling started just after lunch and continued downward in an almost linear fashion throughout the afternoon, with only a slight pause at 14:00 EDT. We obviously sold off into (and after) the close, and the nervousness continues this morning.
If you're not short on the market (either by shorting or using a contra ETF), the rate of dropping here is largely unsustainable so I wouldn't jump in with both feet. You can see the impact of the rate of change of the selling -- the divergent spacing between the different length EMAs in the tick pattern shown in the bottom plot is spreading out as time advances, showing that we're falling faster intra-day than the length of the moving averages. This is important -- as long as the divergence continues to grow we can feel confidence in our short/contra positions, but when the change in the slopes start to abate and the lines become more horizontal, it's most likely time to take some profits off the table.
Read the [URL="http://www.effectivevolume.com/showthread.php?3488-GGT-System-Status&p=17267#post17267"]GGT system status today[/URL], as well as Pascal's commentary on the 20d MF. We're back into single-digit % long stocks out of a database in excess of 2800 equities -- opportunistic buying on the long side here has generally worked for a short-term play in the past.
Regards,
pgd
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Update for Wednesday, October 5th
Yesterday was a clear reversal day in terms of the individual markets -- SPX, R2K, NDX, but this behavior was not confirmed on the broader $TICK view:
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As with all my images, right-click on the figure to open in a new window or tab.
The presentation is shown in 6 windows within the workspace. Across the top, from left to right, is the SSO, IWM, and QQQ. Along the bottom are the indicators on the SPY/$TIKSP (SPX), IWM/$TIKRL (R2K), and QQQ/$TIKQ (NDX). You can see the "V" reversal which started around 15:00 EDT, and it is this type of reversal late in the day (up or down) that I've found is very powerful and sometimes signals a sea-change in sentiment.
In the lower panes you see a green line. This is Billy's suggested 10h MA on the cumulative tick, and historically, crossing over from below and closing above this value has been bullish in the short term. I note that the 10h MA on the SPX has actually changed slope whereas the R2K and NDX have not (but the R2K is closer to a change), so the buying algos were working harder on the SPX than on the others. Again, historically, when I look back in time, this has not been a great longer-term setup, as the R2K and technology typically lead off bottoms. Hence, I'm not overly optimistic for the longer term because of this imbalance.
Also causing me some pause here is that the broader $TICK indicator is no where near showing the strength of the narrower $TIKSP, $TIKRL, nor $TIKQ:
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Across the top I have TZA, which is a -3x inversed ETF on the Russell 2K. I exited early in the session when I saw TZA make a high, promptly reverse lower despite $TICK selling off, telling me the R2K was out of sync with the broader markets. Small caps have been hit hard in this recent down leg, so any divergence between the small caps and the larger markets is something not to play with leverage (in my opinion).
Somewhat ominous here is that the broader markets are not showing the strength -- the $TICK buying didn't take out the 1/2 MA, and until we see the participation here, nimble fingers are required...
Regards,
pgd
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Update for Friday, October 7th
There is an interesting divergence setting up and in looking back through a year's data, I can't find a close duplicate, so time to watch it unfold.
Primarily, the $TICK indicator is strong:
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As with all my images, right click to open in a new tab or window.
The cumulative tick pattern on the bottom is showing the "bullish rollover" that a ribbon band gives -- the instantaneous cume tick is in white, and the moving averages are in various shades of light purple (shortest) to dark purple (longest). The green line is the 10h MA line.
Immediately evident is that the first "breech" of the previous down leg occurred when the cume tick crossed the 1/2d MA from below around 10 a.m. on 10/5. It had not done this in several days, so this was an initial confirmation that the previous trend was in jeopardy.
The second head's up was the crossing of the 1d MA from below which occurred around 11 a.m. on 10/5. Note that both the 1/2d and 1d slopes had started to point positive shortly thereafter, and if the previous end-of-day-reversal didn't close your short positions, some backtesting that I've done with this "failsafe" slope method suggests that these two limit the downside damage if you miss an exit. These are not good exits by themselves, but they do help.
We all were challenged when the cume tick line reversed and headed down -- the aforementioned slopes also reversed which is why these are not a great exit indicator by themselves.
Finally, around 14:00 on 10/5 the cume tick line crossed the 10d MA from below, tested it a few times shortly thereafter, and then it's been off to the races since.
Of all the tests I've done all week, signals based on the cume tick line are the most robust compared to $TIKSP, $TIKRL, and $TIKQ or $TIKND. Hence, you'll see me using this more going forward (thanks Billy!).
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The aforementioned divergence is present in the $TIKSP (S&P500) and $TIKRL (Russell 2K small caps):
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The SPX is on top and the R2K is on the bottom.
Note how the price of the SPX was steady or moving upward and it's cume $TIKSP pattern was dropping, causing the majority of the cume MAs to reverse too. Also note in the middle of the SPX pane the intra-day filter on the SPX showed clear selling pressure starting like clockwork at 14:30 EDT and price held relatively steady. I don't like steady prices on selling pressure -- this is churning -- and it shows great indecision.
The bottom figure is the Russell 2K and while we're clearly above the 10h MA (green), we seemed to have stabilized around noon and then experienced a slow drift down in selling pressure while prices remained more-or-less constant. This reversed around 15:30 pm, but it didn't give me the greatest confidence about the internals yesterday afternoon.
Consequently, I took 2/3 of my profits off the table at the end of the day, and while I'm glad I left 1/3 on the table, as I write this (10:15 am on 10/7), we're not moving much.
I'm keeping my eye on the ball to see if we stall here or inch higher. There's no reason to sell to lock profits, but I've not seen any compelling reason to enter new long positions either.
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Regards,
pgd
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Update for Thursday, October 13th -- Crossroads
Overall, I think the markets are out of sync -- rationale is in my post [URL="http://www.effectivevolume.com/showthread.php?3488-GGT-System-Status&p=17642#post17642"]here[/URL].
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Overall, the cumulative $TICK remains very strong:
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Note that:
1) the cumulative tick in the lower pane is constantly above all the moving averages
2) all the moving averages have a positive slope
3) all the moving averages are more-or-less constant-spaced, which means we do not have acceleration
I consider this an orderly movement upwards of the broader markets.
If we take a deeper dive into the SPX, R2K, and NDX, we see that the SPX is showing the most cumulative tick volatility, the R2K is less so but still volatile, and the NDX is impressively strong:
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The SPX ($TIKSP) is on top, the R2K ($TIKRL) in the middle, and the NDX ($TIKND) on the bottom.
My view of what we're seeing here is a rotation from the SPX into the Russell and technology stocks, and this bodes well overall despite being very overbought at this level.
In my spare time (ha!) I have been working on strategies to trade these cumulative signals, and the most stable, longer-term in-sample/out-of-sample consistency appears to be using the cumulative $TICK as the primary market trending entity and entry signal, with additions and exits from those positions determined/confirmed by behavior on the individual cumulative $TIKXX indicators. The individual cumulative $TIKXX indicators are incredibly more sensitive to news events than the $TICK, but they do fare better than simply relying on the $TICK for exits. A further path for exploration here that I'm working on is to use the $TICK for confirmation of entry and using the individual security for timing the exit. This has worked better with the leveraged instruments than the unleveraged underlying.
More (and official results) to follow as time allows.
With respect to the above charts, even though we're clearly due for a pullback, today (Thursday) will be the first indicator of such a pullback according to the cume tick displays. Right now they are all indicating bullishness, so the depth of the pullback, e.g., does the real-time cume tick cross certain MAs, will determine whether we should remain bullish or start transitioning to a bearish stance. In the present displays, there really is no overwhelming bearishness...
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Regards,
pgd
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Update for Wednesday, October 26th
I was away Tuesday morning from the PC so I was not able to pay attention to the $TICK patterns as I usually do during the normal day. Of course, life got interesting almost out of the starting blocks:
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As with all my images, right click on the figure to open in a new window or tab.
This is the cumulative $TICK, and the middle plot is a filtered 500 stock/min accumulator that only moves if there is strong buying/selling during that interval. We started moving down right away, which is unusual -- as we often wait until about 9:50 to see movement one way or another. This is a generalization and is not to be taken as gospel.
TZA, the levered -3x ETF on the Russell 2000, is shown in the top. Note that my automated buying algo did not kick in today despite the downward pressure at the end of the day. What the lower pane shows you is that while we did sell off with news at the end of the day, in general, the damage was not nearly as bad as it could have been throughout the day. We need a few more of those MAs to cross from above before I'll move to the bearish side with a long position in TZA.
This next set of views shows that the damage was more severe to the stocks on the individual indexes:
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On the left we have the S&P500, in the middle the Russell 2K, and on the right the NASDAQ.
The sell-off due to the lack of an European agreement in front of tomorrow was deep on the S&P500 as well as the Russell 2K. The NDX held up better, but all three are obviously damaged. AMZN's miss after hours didn't help at all either.
My stance is guarded but more bullish than bearish. The fact that my automated TNA system got me out of the trades as the day got worse, but that the TZA system did not fire, tells me that we're at a crossroads. Futures are up marginally as I write this, so we'll see.
With respect to the Automated TICK system, details are just starting to materialize as I'm starting to get enough trades to see if this is going to work. While backtesting is important (yes, I owe a paper on this, I remember Bob), I think real money is important too. Here are the results of using TNA and TZA from October 1st, which is my official start date with this strategy:
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I'll continue to post weekly performance data as we march through time.
Note that this is work in progress, so please don't ask me to provide timely signals. I post only to show that there's something cooking which has promise. The issue here is that there is a SERIOUS disconnect between backtesting results and actual results (backtesting is far worse), so we've simply hit the system and conditions at a good time.
The results will get worse, not better -- THAT should be something you'd be willing to bet on !
Regards,
pgd
