What these two instances of high tick tells me is that there are large basket purchases of stocks being made. Only the smart money has this kind of buying power and this action sets the intermediate direction. Once you start seeing an overabundance of these, it could singal reversal such as back in Nov.
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ES Journal - 2012
- Thread starter Buy1Sell2
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What these two instances of high tick tells me is that there are large basket purchases of stocks being made. Only the smart money has this kind of buying power and this action sets the intermediate direction. Once you start seeing an overabundance of these, it could singal reversal such as back in Nov.
Quote from Lespaulr0cker:
What these two instances of high tick tells me is that there are large basket purchases of stocks being made. Only the smart money has this kind of buying power and this action sets the intermediate direction. Once you start seeing an overabundance of these, it could singal reversal such as back in Nov.
You mean "big money". "Smart money' would have bought stocks at SPX 1100, and not 1370.
Quote from JoshDance:
B's point was that around 10:40 this morning there were several 1100+ readings, which was followed by a 6 tick pullback, and now 7 handles higher.
Since SPX long term resistance just hit, perhaps this is a time when a tick fade may be more logical. But all TICK says is, "this many stocks in the NYSE are ticking UP at the moment" -- it's up to us individually to do something with that information if we choose.
Exactly. One of the first real strategies that I tried to develop on my own was based off of TICK divergences after huge extreme readings like that. I personally could not find a consistently profitable angle to work using that method. I found it far more successful to look for TICK readings that confirm strength or weakness, as opposed to levels that seem so extreme that they can't be sustained.
One theory / method I have heard more than once is this:
Let's say we make a high TICK of the day (example is the 1240 TICK this morning at 7:40 PST). If after that high TICK prints we continue to make new highs on price, it is solid guess to assume that price will continue to make new highs until a new high TICK of the day is established. So in the early morning case, you could assume that we were going to keep traveling higher, once price made new highs after that 1240 print. Currently the high TICK of the day coincides with the highest price of the day, so there is a chance that the high of the day could be in.
I don't actively use the above in my trading plan, but I've heard the idea bounced around more than once, so maybe there is validity to it.
Quote from Lespaulr0cker:
What these two instances of high tick tells me is that there are large basket purchases of stocks being made. Only the smart money has this kind of buying power and this action sets the intermediate direction. Once you start seeing an overabundance of these, it could singal reversal such as back in Nov.
High tick readings is to a large extent because of index-futures arbitrage. Futures lead, stocks lag, thus cash index lags. Futures and cash index are connected by mathematical relationship F = S*EXP((r-d)*T)
T: time remaining to futures maturity
S: cash index level (here SPX level)
F: Futures level (here ES level)
d: dividend rate for cash index
r: risk free rate
So, when Futures and cash get out of whack, index-futures arbitrage traders (typically investment banks) sell futures and buy basket of 500 stocks to mirror SPX. All these simultaneous computer generated orders on stocks produce large tick readings. Typically a good time for ES to reverse.
Quote from Lespaulr0cker:
What these two instances of high tick tells me is that there are large basket purchases of stocks being made. Only the smart money has this kind of buying power and this action sets the intermediate direction. Once you start seeing an overabundance of these, it could singal reversal such as back in Nov.
Defining "overabundance" is the problem. How much is too much? How high is too high?
On another note:
the 1206-1211 range accounts for over 7,000,000 contracts traded this year. The market really broke away from that when the NFP number came out. Since then there have been about 24,000,000 contracts traded. We have been building some serious volume up here, but no one area can seen to get the same heavy concentration as the 1208 area. 1345 is trying, and so is 1360. But 1308 is still the most fair price traded this year according to the market, and we have some serious divergence from the current VWAP on the year, which is at 1317.50 as of right now.
My best guess is that when we do retrace, that the 1320 area, the market pre- "happy days" NFP, must be tested to determine the market's seriousness about going any higher. Ideally, 1308/1300 would as well, to see what's below the "fair" price. Today's buying has seemed to have the kind of "panic, get on board now before this train leaves" feel that would be ideal to come before a nice correction. We're well ahead of median volume (+20% currently), large range of 16.75, and tested last year's high. Just stating some observations, nothing more.
Quote from trickshot:
You mean "big money". "Smart money' would have bought stocks at SPX 1100, and not 1370.
Booyah, and, they did:
http://screencast.com/t/lq0HCst2u
Quote from gmst:
Futures lead, stocks lag, thus cash index lags.
Good post, but one (futures) cannot always lead the other (cash), thus risk free arbitrage would exist; it's more accurate to say that the premium fluctuates during the day, and buy and sell programs act on extremes in premium, both a relatively high or low premium (though in the current market of course, the premium is always negative).
thanks for sharing those statsQuote from JoshDance:
Defining "overabundance" is the problem. How much is too much? How high is too high?
On another note:
the 1206-1211 range accounts for over 7,000,000 contracts traded this year. The market really broke away from that when the NFP number came out. Since then there have been about 24,000,000 contracts traded. We have been building some serious volume up here, but no one area can seen to get the same heavy concentration as the 1208 area. 1345 is trying, and so is 1360. But 1308 is still the most fair price traded this year according to the market, and we have some serious divergence from the current VWAP on the year, which is at 1317.50 as of right now.
My best guess is that when we do retrace, that the 1320 area, the market pre- "happy days" NFP, must be tested to determine the market's seriousness about going any higher. Ideally, 1308/1300 would as well, to see what's below the "fair" price. Today's buying has seemed to have the kind of "panic, get on board now before this train leaves" feel that would be ideal to come before a nice correction. We're well ahead of median volume (+20% currently), large range of 16.75, and tested last year's high. Just stating some observations, nothing more.
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