Comparing the SP500 and TICK Extreme Highs in 2010

Jan 20, 2011: 11:14 AM CST

I’m a huge fan of comparing the S&P 500 with the NYSE TICK (and Breadth, VOLD internals along with volume and momentum) for confirmations and non-confirmations (divergences) as tools to get a better sense of trend strength and possible opportunities to play within that developing structure.

Just like the S&P 500, the TICK has an individual ‘character’ to it and sometimes that character changes along with market environments/conditions – particularly in times of high or low volatility.

Let’s take a look at the entirety of 2010 – and slip into present day – in comparing TICK Highs and the S&P 500 to see how the picture has evolved and changed up until now.

Click for full-size image.

What we’re seeing above is the Daily Chart of the S&P 500 and the NYSE TICK ($TICK).

What I’ve done that’s unique is cut-off the TICK lows so as to compare only TICK highs/extremes.

Remember that the TICK – a market internal – is the difference between stocks “ticking” up at given moment minus those “ticking” down at a given moment.

Thus, a TICK reading of 1,000 reveals that 1,000 MORE stocks/issues are ticking up at a moment than those trading down.

A TICK High Extreme is the highest point in the day where the TICK registered a positive value.  It’s helpful for confirmation/non-confirmation intraday, but you can take the insights up to the daily chart like this for a broader picture.

As might not be surprising, TICK extremes are correlated with volatility – as in high volatility market periods tend to show higher and lower TICK extremes on a session, while low volatility periods likewise show lower, more moderate TICK extremes in a day.

Markets alternate between periods of high and low volatility – and markets tend to experience MORE volatility as they FALL than when they ‘creep’ higher – as 2010 was an excellent testament.

Ok so that’s the background – what’s the message now?

Given that the market has traveled almost straight up since bottoming in early September (save November’s retracement), volatility and thus TICK extremes have contracted/declined during periods of sustained upside ‘creep.’

There are three specific examples of ‘upside price creep’ that was accompanied by declining TICK high extremes in 2010:

1.  The “Creeper Rally” from February to April (ahead of the May Flash Crash)

2.  The mini-July/August 5-wave bounce from 1,010 to 1,130

3.  The Two-Step “Creeper Rally” from September to present (excepting November)

In all three cases, price traded higher and higher while TICK extremes declined – TICK extreme lows also declined/compressed during these periods as well (not surprisingly).

In the case of the April peak and August peak, the market pulled back deeply when the creeper rallies peaked and a retracement phase began.

If you look closely at the actual TICK high numbers, we see the following:

1.  April 23, 2010 Stock Peak:  TICK daily high was 866

2.  August 9, 2010 Swing High:  TICK daily high was 1,108

It would have been more interesting I suppose if the TICK peaked near a similar sub-1000 number.

The SP500 pushed to a new recovery high Tuesday at 1,296 (shy of the key 1,300 number I described previously).

On that day, the TICK extreme high of the session was 783.  Take a look at the recent compression (divergence/decline) in TICK highs going into that – so far – peak.

Not only was there the longer, multi-month decline, but there was a noticable contraction of the week(s) just ahead of the peak.

Now, if the market/buyers surge back above 1,300, all bets are off and the little ‘melt-up’ likely continues, but until then, it’s interesting to compare prior TICK behavior/character with current realities.

Keep this 2010 comparison chart in mind and closely monitor new price data – and levels to watch – as the market moves/reacts with the 1,300 level.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

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5 Comments

5 Responses to “Comparing the SP500 and TICK Extreme Highs in 2010”

  1. Stone Says:

    Good stuff Corey….it's always appreciated!

  2. Drago Says:

    Expect to retest the highs as a proper market top forms…
    http://wethetrader.blogspot.co

  3. thechartguy Says:

    Good stuff. I agree that internals and breadth are an important and maybe sometimes overlooked aspect of technical analysis. Take a look at this you might like it.

    http://Tradingwithtechnicals.c…/

    Let me know what you think.

  4. steveo77 Says:

    My contribution to charting research, funnymentals

    http://oahutrading.blogspot.co

  5. Research on Changes in TICK Extremes Over Last 10 Years | Afraid to Trade.com Blog Says:

    […] showed on this type of logic in my post:  “Comparing the S&P 500 and Extreme TICK Highs in 2010” – take a moment and read that and compare those insights to what the data show over […]