Tick Status / Interpretations

[Harry]

I too use Matlab for all my GGT work (2 production machines running 24/7, 1 devel machine), so let me know if I can be of assistance.

Regards,

pgd

Hi Paul,

Last week I sent you a PM regarding Matlab - didn't want to bore others with my entry level questions. Not sure if you are swamped or if the PM never came through? Anyway, figured I better check before I begin my backtesting.

Thanks,
Harry

[grems8544]

"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.



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 GGT system status today, 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

[EB]

Paul, without getting into anything proprietary, could you share some of your methodology for in/out of sample testing? I know you've touched on this before with respect to testing EMAs. I'm more interested in your general approach to robust system testing.

[grems8544]

Paul, without getting into anything proprietary, could you share some of your methodology for in/out of sample testing? I know you've touched on this before with respect to testing EMAs. I'm more interested in your general approach to robust system testing.

Yes. I'll write something up -- and I'll try to get it done next week since I'm home and have a bit more freedom. Backtesting correctly is a big issue and I think it's important to do it correctly (or at least, my *view* of correctness <grin>).

As an aside, I had dinner last night with several GGT/EV/HGSI followers and this topic came up there too, so it will be good to document some of that discussion with examples.

Regards,

pgd

[grems8544]

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:



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:



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

[Riskslayer]

Paul,

Thanks for the explanation on your $TICK, etc. methods, and how I can blow up the charts so I can see them (eyes are going on me).

I look forward to your further updates!

Thanks,

Shawn

[brrim]

Paul; I am very interested in setting up these charts. Can you point me to a post that indicates what explains looks like MA on the charts?
Thank you in advance.
Robert

[grems8544]

Can you point me to a post that indicates what explains looks like MA on the charts?

Much of the setup is derived from Billy's published work in this forum as well as the VIT forum.

Basically, do the following:

1) establish a cumulative tick trace that is essentially an always-running accumulator. I use $TICK, which represents all the securities trading on the NYSE, $TIKSP, which is unique to TradeStation and represents the ticks of the S&P500, $TIKRL, which is also unique to TradeStation, and represents the ticks of the Russell 2000 small caps, and $TIKQ, which represents the ticks of the NDX-100.

2) Apply a simple moving average (SMA) that corresponds to 1/2 day in length. Hence, if you are on 1-min bars, this would be 195m.

3) Apply a SMA that corresponds to 1 day in length. This would be 390m

4) Apply a SMA that corresponds to 10h in length. This is 600m.

5) I take this further, and I also use 780 (2d), 1170 (3d), 1560 (4d), and 1950 (5d).

I also have another display that I am working on and will share that when it is finished. Basically, it is the slope of the MAs above, and it is FAR easier to see signals using slope than looking at the moving averages. In addition, I also am plotting the slope of the slope, so we can see the ebb/flow of momentum in the tick indicators, and initial backtesting has shown this to be interesting (but unfinished) and somewhat profitable work.

Regards,

pgd

[EB]

Great...look forward to it.

[grems8544]

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:



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!).

=====

The aforementioned divergence is present in the $TIKSP (S&P500) and $TIKRL (Russell 2K small caps):




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.

===============

Regards,

pgd