In past posts I’ve mentioned that I runway a handbasket of institutional favorite stocks together with monitor upticking together with downticking across the grouping every infinitesimal of the trading day. The logic is that when large marketplace participants desire to purchase or sell with urgency, they volition elevator offers or hitting bids across a hit of liquid stocks. This simultaneous upticking or downticking across a hit of shares–the execution of purchase programs together with sell programs–leaves a footprint that provides a real useful take in of instantaneous marketplace sentiment.
The top nautical chart tracks sell programs on a rolling one-day footing from October, 2014 to the present. Note the expansion of sell programs at relative marketplace lows together with the diminished grade of sell programs at relative marketplace highs. That is pretty much what nosotros would hold back to see.
When nosotros teach to the 2nd chart, tracking purchase programs, nosotros run into the same pattern, however. At relative marketplace lows, nosotros run into to a greater extent than buying activity. At relative highs, buying dries up. This is real important. What makes marketplace lows is that lower prices attract longer timeframe buyers–the ones who execute inward baskets. Volume ramps upward at relative marketplace lows because ane grouping of participants is actively selling together with about other grouping is actively scooping upward the shares straight off offered on sale. At relative marketplace highs, cypher is on sale together with longer fourth dimension frame participants are non incentivized to buy. Total mass dries up.
It is the 3rd chart, tracking the relative residual betwixt buying together with selling programs, that tells us who is winning the tug-of-war. At marketplace lows, sell programs diminish piece purchase programs croak along to fire. That creates a province of affairs inward which buying pressure level spikes early on inward a marketplace cycle. (Note that this is what has happened latterly inward the wake of the ECB action). As a marketplace rising matures, sell programs commence to overstep purchase programs together with nosotros run into the residual betwixt the 2 top out ahead of price. The recent pregnant expansion of programme buying suggests that nosotros should run into upside momentum from recent fundamental banking venture actions.
I included the fourth, bottom nautical chart to brand a split point. Notice inward the 3rd nautical chart how nosotros had intensive selling pressure level alongside the institutional favorite shares prior to the recent marketplace rise. Despite that, the cumulative NYSE TICK (the total of upticks vs. downticks across all NYSE shares) stayed potent together with straight off has made novel highs. What that way is that nosotros were seeing intense selling (downticking) alongside the liquid large cap issues, only non across the wide market. It was that discrepancy that educate the recent strength.
I deeply appreciate the involvement readers convey shown inward the locomote I convey shared. These are proprietary measures (all information from e-Signal together with all calculation together with charting done inward Excel), only I volition update periodically to remain on top of where nosotros stand upward inward marketplace cycles. I volition too last sharing information well-nigh the breadth together with thought measures I runway inward my upcoming book.
Further Reading: A Look Back on a Previous Instance of Program Buying Surge