NYSE TICK Divergences Predict End-of-Day Selloff

Technician's Corner

NYSE TICK Divergences Predict End-of-Day Selloff

One of the screens that we at Fibozachi continually monitor throughout the Cash session (09:30 - 16:00) is the NYSE TICK. 

The hackneyed cliche of "volume precedes price" is certainly true more often than not, however, it is far from foolproof.  We prefer to modify this tired cliche by saying that: "buying and selling pressure precedes price."

The snapshots below (from today's session) clearly illustrate how this critical relationship (between the TICK and price action itself) plays out on a daily basis. 

- Please click on any of the snapshots below to open a large, crystal-clear picture -

ESH10 (S&P 500 E-Mini) with TICK Highs & Lows Overlaid onto Price

NYSE TICK 1-Minute

For more examples of how to effectively 'trade the TICK' and other practical nuances within advanced technical analysis ... please see our R-tickle from 12.3.09, It’s 3:27 pm … SELL !!!

Watching the market internals on a 1-minute basis can be extremely valuable to intra-day traders (especially those who scalp futures) as warning signs within these internals almost always lead actual price action on the ES (S&P 500 futures, current basis December, ESZ09) by just a full second or two. 

Please always remember that everything is contextual; a new TICK lod reading that registers with only a half-hour remaining in the session does not always imply that an end-of-day (eod) sell-off will occur …. many times it will indicate that an exhaustion of selling pressure has taken place and effectively mark the low - in actual price action - before a swift upwards push takes hold into the close.  

The new TICK lod reading of -889 that occurred today at 15:27 (3:27 EST) was much more likely to be a bearish kick-off signal because the ES had spent the majority of the cash session (09:30 - 16:00) in a narrow trading range, otherwise known as ‘sideways chop.’  When trend is purely neutral and the TICK has not registered any noteworthy reading for hours …. the first extreme reading that it registers usually signifies to technicians that an outsized price swing will soon follow.  Today’s bearish instance is a perfect exemplar of this practical nuance within technical analysis and just one of many which successful traders effectively employ on a daily basis.

p.s.  beware the Bearish Engulfing candlestick pattern on the daily S&P cash (INX)

Disclosure: during any given session, we may trade any of these instruments bi-directionally.  We are currently flat and merry at the time of publishing.

For similar technical takes, market calls and insights; please visit our new website, www.fibozachi.com.  There, you can view both our complete body of analytic work as well as detailed explanations of the unique design development and technical methodologies within the proprietary technical indicator packages that we use daily to perform a comprehensive technical analysis of stocks, options, ETFs, bonds, futures and FOREX across interval periods of time, tick and volume.

Comments

[babbs]

Hey, Genii -- thanks for the peek at your MINT Scalper and Line indicators (not active on your site).  Query: are these useful to a non-day trader?  Also, whither Gold? 

[Chopshop]

urgh. sorry fur the double 'Save' click on the blatant commercial above.

[Chopshop]

lol, thx for the uber kind comment(s) babbs.

certainly do appreciate you taking the time to share your sentiments & am always happy to hear when folks "get" our work; we do try.

and as i often quip, only half-jokingly: 'my brother z is the real brains behind the operation n i'm just the good looks'

mint: Crisp Market Internals™ is only available at present to our qualified institutional clients.  we are in the long, slow process of finalizing legal agreements between various partners and do expect to be able to offer mint....™ to both retail traders / investors and boutique firms alike by Q2 of 2010.

most likely, we will offer mint.... and a few other neat lil charting toys that we've designed / coded over the past few years and use within our own automated trading systems ... to the public at large through the TradeStation Strategy Network Program.

TS (TradeStation) is not only one of our primary charting platform provider partners (alongside NinjaTrader, which is 100% free) but it is also the only charting platform that can provide proprietary design developers such as ourselves (1) nearly unlimited & nearly unrivaled design development capabilities as well as (2) true protection of our proprietary source code.

[gatopeich]

Thanks for the warning!

[Cursive]

Most people seem bullish with the FOMC announcement this afternoon and the expected reconfirmation of ZB tommorrow.

[SteveNYC]

Good post. What concerns me, is that it seems fair to say that most market participants right now, and there are not that many of them given the volume and all the traders that have been simply wiped out this year, have a "minute by minute" view of things?

No view of fundamentals of course, when the timeframe is so short. Does this not set us up for a MASSIVE plunge when these signals stop working?