2 Lessons from TICK and the 30min SPY

Jul 28, 2009: 5:57 PM CST

I presented subscribers this evening with a discussion of the following chart presented below.  Let’s take a look at it and learn two lessons from integrating the TICK with the SPY 30min price chart from where this recent strong rally began.

The full details are in tonight’s report but here are the two lessons:

1.  At the beginning (or birth) of a new uptrend (or swing), the TICK (and momentum oscillators) will often register new highs ahead of, or concurrent with new price highs.

This is a “Sign of Strength” and continued higher “Market Internal” readings (from TICK, Breadth, etc) place the odds squarely in favor of higher actual prices yet to come as price rallies.

In this way, we are using market internals as CONFIRMATION of higher prices with the expectation of continuation.

2.  At the end of a mature uptrend, the TICK (and momentum oscillators) will often mark divergences, which serve as a non-confirmation and hint that the swing is coming to an end (leading either to a standard retracement leg or full reversal).

As this current rally has persisted for almost three weeks now, it is undoubtedly “long in the tooth.”  This does NOT mean that price HAS to reverse – just that odds favor a retracement/reversal swing as opposed to continuation of higher prices once we start putting in lengthy divergences relative to price.  Remember we trade in probabilities, not certainties.

Notice how the TICK Highs of the day (session) are registering at lower highs as we form new price highs on the 30min chart.  This pattern is evident also on the 60-min chart.

For a full description of this chart, and to receive ‘teaching moments’ and discussions on expected plays and developing structure each day, please subscribe to our new daily “Idealized Trades” service at $27.00 per month (sample reports are available via the link).

Corey Rosenbloom, CMT

3 Comments

3 Responses to “2 Lessons from TICK and the 30min SPY”

  1. pipercolt Says:

    agreed , wouldn't want to be long here

  2. Bob Says:

    Corey,

  3. Bob Says:

    Corey,
    What specifically is TICK a measure of? Are their other indicators that mirror TICK?

    Thanks!