By similar a shot readers are aware that measures I rail closely are buying pressure level (demand) inwards the marketplace position versus selling pressure level (supply). My measures are derived from a decomposition of the NYSE TICK, which is issued past times the New York Stock exchange. The TICK is a running total, updated many times per minute, of the number of stocks trading on upticks versus the number trading on downticks. My buying pressure level together with selling pressure level measures divide upticking from downticking inwards the fourth dimension series, treating pull together with weakness every bit distinct variables. While take away together with provide are reasonably good correlated inwards the short-run, that is non the example over a menses of days. Any given menses tin demo high amounts of buying together with high amounts of selling; high amounts of buying together with depression amounts of selling; depression amounts of buying together with depression amounts of selling; together with depression amounts of buying together with high amounts of selling. Indeed, the interplay amidst buying together with selling pressure level is a useful means of tracking phases of intermediate-term marketplace position cycles.
As you lot tin run into from the charts above, we’ve of late made fresh highs inwards SPY. During that period, we’ve seen below average buying pressure level (the zip grade is average) together with to a greater extent than than average selling pressure level (values below zip demo heavier selling). That suggests that to a greater extent than stocks accept been trading on downticks than upticks, fifty-fifty every bit the wide marketplace position average has risen to novel highs. This is the kickoff departure we’ve seen inwards the cumulative NYSE TICK inwards many months.
This excess of provide pressures over take away helps describe concern human relationship for the weak breadth of the recent rally. Interestingly, yesterday nosotros hovered at novel highs inwards the index, merely solely 500 stocks across all exchanges traded at fresh one-month highs, piece 389 touched fresh one-month lows. Volume inwards SPY has likewise been unusually depression during the past times several sessions. Since 2013, when SPY book has been inwards its lowest quartile, the side past times side x days inwards SPY accept averaged a loss of -.08%. When book has been inwards its highest quartile, the side past times side x days inwards SPY accept averaged a make of 1.41%.
A interruption to novel highs on expanded book together with breadth would clearly violate the designing of weakness noted above. Until that point, I don’t run into an border inwards chasing the upside. More on this topic at this evening’s gathering.
Further Reading: Tracking Market Dynamics