Weekly TICK Volatility Hits 11 Year Low with Update for May

May 6, 2013: 11:49 AM CST

A member asked me about the relatively low intraday TICK readings on Friday’s big breakout above 1,600 in the SP500 and 15,000 in the Dow Jones and wondered why the TICK did not spike well above 1,000 on the opening gap and intraday breakout higher.

For example, the NYSE Intraday TICK high on an ohtherwise bullish-dominant session was “only” 777.

Let’s address that reality with our current TICK Volatility Update chart for May.  This time let’s start with the Weekly Chart:

We’ll start with a description of each indicator on the chart above.

We see the Dow Jones Industrial Average (the chart is similar to the SP500 for comparison) along with the blue NYSE TICK indicator.

I’ve added a 20 week simple moving average (black) to the intraday TICK high and intraday TICK low as a way to smooth the data.

The “TICK Average” custom indicator is simply the addition of the 20 day average TICK high with the absolute value (because it is a negative number) with the average 20 day intraday TICK low.

The indicator mathematically summarizes what we can see for ourselves on the TICK and 20 day average indicator.

Perhaps what surprises me the most is that the TICK average indicator has consistently been registering new decade lows since the breakdown and compression in mid-2012.  Last week saw yet another new average TICK value not seen since early 2002.

In other words, as I continually stress to members and in open blog posts, “We MUST Consider Volatility When Trading with the TICK.”

Additional research can be found on the post “Research in Behavioral Changes in the TICK Over the Last 10 Years.”

Let’s now view a chart of the TICK itself for emphasis on the changes over the last decade (updated):

The chart above is simply the enlarged version of the TICK and 20 week simple average (intraday highs and lows) seen on the Dow Jones chart.

It makes it easier to compare periodic changes in terms of increases and decreases in intraday TICK highs and lows (“TICK Volatility”).

Our recent period of sustained decline in the NYSE TICK (highs and lows) began in mid-2011 (arguably early 2010) and we can see the visual compression that has taken place (note the blue lines with the actual TICK high/low data along with the black average).

For intraday traders, it’s important to note that a fixed TICK value like the popular 1,000 means different things during periods of high or low average volatility.

A 1,000 TICK reading is far less meaningful for signals/trade triggers in a period where the average intraday TICK high or low is above 1,200 when compared to the same 1,000 reading when the daily average value is near 800 in a low volatility environment.

Let’s finally update the current Daily TICK Average values so we can adapt our strategies:

In simple terms, the current 20 day average intraday NYSE TICK high is 874 while the average intraday TICK low is -817.

This means for intraday or swing traders who take the NYSE TICK into account when making trading decisions (such as short-selling/taking long profits at a +1,000 TICK reading or buying/covering short profits on a -1,000 TICK low reading), the updated values for importance should be near 875 (TICK high value) and -815 (TICK low value).

By the way, it should be inferred that periods of heightened intraday price volatility – and increased intraday TICK highs/lows – correspond with sell-offs or down movements in the equity markets while periods of low price volatility – and low intraday TICK high/lows – correspond with stable, rising up-swing periods.

Volatility itself is cyclical and spans between sustained periods of increasing and decreasing intraday range or price movement.

For prior updates and additional information on the “TICK Volatility” Concept, view any of the prior updates:

Though I don’t discuss TICK Volatility in every member report, you could also follow along along each evening by joining our membership services for daily or weekly commentary, education, and timely analysis beyond the daily blog updates on these concepts.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Corey’s book The Complete Trading Course (Wiley Finance) is now available!

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  1. Updating TICK Volatility Charting for October | manufacturer blog Says:

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