A Quick Look at the Current Intraday TICK Compression

Mar 22, 2011: 12:37 PM CST

As of this moment, the NYSE intraday TICK is deeply compressing relative to the prior sessions, and to historical norms.

Why is this important?  Compression highlights “no activity” and “little opportunity” in the intraday market on the one hand, and on the other, it suggests that an expansionary move – a sharp rise in volatility – is likely to follow tight compression periods (similar to the “NR-7” concept).

Let’s take a look at the current multi-day TICK Index to see what I mean:

Click for full-size image via Flickr.

Before we get too deep in this chart, take a look at my two prior updates on TICK Behavior Research:

“Why You MUST Consider Volatility When Trading with the TICK”

“Research in Behavioral Changes in the TICK Over the Last 10 Years”

Using those a foundation, we see even over the last five trading sessions, the extreme values (highs and lows intraday) of the TICK have changed along with market volatility – as expected.

The volatile trading session of Wednesday March 16th gave us an intraday TICK high of 1,070 and a TICK low of -1,461.  Yes, you read that correctly – almost a negative 1,500 value.

The prior session – the 15th – gave us a TICK high value of 1,313.

Notice the TICK lows under -1,000 was common on the 16th but since then, we’ve only had three 5-min TICK values lower than -1,000 … and those were ALL on March 17th.

This underscores my point – you can’t just pick a random TICK value (like plus or minus 1,000) and expect it to work perfectly all the time, particularly if you use the TICK values for entries (for fade trades) or exits (exiting a profitable position on an ‘extreme’ TICK reading).

What’s the point of this post?

Today, with over half the trading session behind us, the TICK high has been 624 and the TICK low was -736.

If you were waiting for a plus or minus 1,000 TICK to guide your decisions, you might wait all day.

So rule 1 is to ADJUST your strategies to the relative volatility of the stock market, which has a big impact on the intrday highs and lows of the TICK.

Rule 2 is that – in general (and as viewed by the TICK and stock prices) – periods of low volatility cycle into a period of high volatility… and vice versa.

So as price seems to be unable to overcome the 1,300 key resistance level and price has compressed for two trading sessions near that level – along with a compression in TICK and volume – expect the NEXT move to be a high volatility departure from this trading range.

It’s best to let the market tip its hand – either breaking firmly on higher volume and TICK highs above 1,300 (get long to play for “Popped Stops”) – and expect continuation … or the alternate play would be look for a breakdown under 1,295 or 1,290 on high volume and new lows in TICK (hopefully beyond -1,000) with the expectation that the downside break will continue and spark a volatile down-phase.

Anyway, just a quick thought I wanted to share – that the TICK is tightly compressed today and the market is gearing up for a volatile pop one way or the other as a result of the tight price and internals compression.

Corey Rosenbloom, CMT
Afraid to Trade.com

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6 Responses to “A Quick Look at the Current Intraday TICK Compression”

  1. Tprovan Says:

    what would be the best interday volatility indicator ?

  2. Corey Rosenbloom, CMT Says:

    Good question!

    I'm partial to Bollinger Bands – and you can have an indicator %B which shows the distance between the Bollinger Bands which is nice – compare the oscillations in it to high and low volatility.

    The ATR – 14-period – is a popular one as it allows you to discern volatility on different intraday time periods.

    By that thought, Keltner Channels are somewhat helpful but I still prefer Bollingers over ATR functions.

    Standard Deviation is your basic statistical calculation which most charting programs have.

    Just remember certain tactics/indicators work best in high volatility times and worst in low volatility times.

  3. Tarhini_Trade Says:

    good stuff, really like how continuously you examine and adjust, the only way to do it

    good trading

  4. Tprovan Says:

    Thankyou for the previous information, I have traded for many years and this info with the tick has been very helpful. I watched your vidio at smb capital, great.
    bought your book and john bollingers there on the way. %b looks usefull with try with spy, tick, and vix see what i cant see. thanks again

  5. Tprovan Says:

    If the momentum low was put in on the 16th we still have to get a new price low and a test to put in a bottom? So stocks with high short interest would go up under these circustances because when the market goes up on low volume ticks will compress and shorts panic out as price goes higher – looking for price low and tick divergence on price test after that to go long. Just some thoughts.

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