Tick Status / Interpretations

[grems8544]

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:



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:



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:



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

[nickola.pazderic]

Here are some of my own:



I utilize this four part screen (hat tip to the shadow trader) to measure breadth, A/D, NYSE tick, and IWM on 15 minute scales.



this is a chart of 30 minute NYSE Tick. I keep it in the background-- a ghostly presence.



NYSE and NASDAQ Tick Charts, courtesy of Ernst

I'll definitely look to take new positions in IWM-related robotic trades today. 66.88 is only .07 away as I send this off.

Thanks Paul!

[grems8544]

From a broad perspective, the buying algos turned on around 15:22 EDT and didn't let up through settlement at 16:15:



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:



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.



This is a bullish sign that can be interpreted various ways:

• End of Month/Quarter window dressing in the relative "safety" of dividend paying stocks

• Movement to lower beta positions in advance of an anticipated (continued) down draft

• Methodology to employ capital where yields are higher than Treasuries

Supporting the end-of-day move was a reversal of sorts in terms of LEV into the SPY:



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

1. Watch for a crossing from below on the $TIKRL (Russell 2K) small caps of the 10d cumulative tick MA
2. Watch for confirmation across $TIKSP, $TIKQ, and $TICK of the same ($TIKSP is already there -- will it hold?)
3. 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.

I'll miss the first hour or so of the market this morning ....

[Harry]

Thanks Paul,

I am glad you decided to set up a separate thread for tick interpretation.

I am following with great interest as next month I plan to get back to backtesting. My plan is to try the tips both you and Billy have provided to see if I can develop a profitable strategy? I'll be using both Matlab and TOS, so I won't have the Russell or other indicators available via Tradestation. None the less, I am following your posts so thanks in advance.

Harry

[grems8544]

I'll be using both Matlab and TOS...

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

[Harry]

I suspected so looking at some of your historic plots. I appreciate the offer and will be back in touch when I get to start my testing in a few weeks.

[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

[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