Strong Market Today, Let's Take a Look At It

It's not too surprising that stocks are strong today as there were quite a few buy programs that hit the market in the last hour of trading yesterday. As of this writing, the SPY is up approximately 1.25% and IWM (small caps) is up 1.5%...which is significant because there has been a divergence between large cap and small caps lately. One notable divergence that is still in place today is with the financials (XLF) as it is down a little and not participating in the rally, making todays rally a little suspect. Here's a screen shot of my intra-day stock monitoring screen with the SPY and some annotations:As you can see, the SPY gapped up and is currnelty holding onto gains. It's currently in an uptrend on the 15 minute time frame, but there's some overhead resistance at the $111.75 level. We'll need to see that level taken out and for it to hold in order for the SPY to see higher highs...otherwise it will just continue to chop around in that 111.75-109 range that it's currently stuck in.

At the beginning of this post I mentioned buy programs...some might wonder what this means. I (along with most other traders) monitor the NYSE tick index or the TICK for short. Various people state that certain levels are important, such as 800, 1000 or 1250 and the corresponding negatives of these values. Others monitor an average of the values and watch that to see if there's more buying or selling. Personally, I just keep track of the number of readings above 1000 and below -1000 and I note if there are several readings that are close but not quite at these levels. I also keep an eye on the 20 and 50 period moving averages on the 5 min chart to look for consistent buying or sellling.

For example, lets look at today's 5 minute tick chart:There have been 6 readings of 1000 or more on the tick and there has not been a single reading at or below -1000, although there were a few close readings around -900. In fact, the majority of this morning's tick reading were positive as indicated by positive 20 and 50 period moving average readings. What does this mean? It means that buy programs have been hitting the market and the significance of this is that the big boys are trading to the upside, at least for now. This tells me to only trade to the upside and to let profits run because the trend is likely to continue...as opposed to a choppier day evidenced by extreme tick readings in both the positive and the negative that would warrant taking profits quickly.

This is how I follow and look at the TICK chart. Note that there are several interpretations on how to use and read the tick chart. Furthermore, this post has not gone into very much depth about the tick and it assumes that you are at least familiar with it. The tick index is merely the number of stocks on the NYSE that are trading on an up tick vs. the stocks trading on a downtick. If you're not familiar with the tick index and want to learn more, a good place to start for learning about the TICK index is Investopedia with this and then read some of the links as well.

Have a profitable trading day!

TLT