Market Breadth is an “old school” quantitative analysis function designed to provide scope and perspective to today’s money flow; before we get into Cumulative TICK and how I believe it is useful to intraday traders we first have to understand what $TICK is. Per Investopedia, the $TICK index

“compares the number of stocks that are rising to the number of stocks that are falling on the New York Stock Exchange (NYSE). The index measures stocks making an uptick and subtracts stocks making a downtick. For example, there are roughly 2,800 stocks listed on the NYSE. If 1,800 stocks have made an uptick and 1,000 stocks have made a downtick, the tick index would equal +800 (1,800 – 1,000).”

Provided by Investopedia – this is a picture of the $TICK graph.

As with anything else – there are periods of time where $TICK is not useful but even within these times – the fact that $TICK is not providing us with insight – provides us with insight! For example, the intraday $TICK may be crossing the zero line frequently; this is an indication of a choppy market and provides a perspective suggesting the overall market is uncommitted. There are a number of patterns provided by the $TICK index we can utilize.

Extreme Readings

For the $TICK we can focus on extreme readings above 500 or below -500; when price is pressing above 500 and moving towards 1000 there is an expectation that the indexes are also pushing higher (with strong flow) into a big candle. As the TICK hits 1000 we can expect that the stock indexes are about to pause or pull back. The same thing works the other direction as well; if we see TICK breaking lower and pressing into -1000 there is an expectation that the stock indexes are also pressing lower (with strong flow) into a big candle. As the TICK hits -1000 we can expect that the stock indexes are about to pause or pull back.

This picture shows $SPY intraday breaking support and starting to fall – when the $TICK spiked lower & hit -1000 the fall in $SPY halted and price began to rebound. $TICK does not make the stock markets move and these extreme readings do not always have a follow through but generally this signal is a solid warning.

This picture shows where $SPY began a breakout but stalled as the $TICK readings spiked into -1000 and into 1000.

These pictures above have been using TOS custom indicator called “Simple Tick.” This study was designed to eliminate the noise from looking at the $TICK and give clear readings. The indicator is not looking at the market in your chart – it is looking at the NYSE. So it will not matter if you use it to look at $SPY or $AAPL or any other market; the study is going to be looking at the NYSE. The share link for this “Simple TICK” is http://tos.mx/drJJB1C

LH or HL

Another pattern or signal from reading $TICK comes in the form of Lower Highs (LH) or Higher Lows (HL); once we print a pivot and begin to move off of that turning point we want to “stick the trade” as long as the $TICK readings continue to show an increasingly higher low (or lower high). Generally speaking – I like to utilize this in intraday swing trades where we run price from one “swing low” to the next “swing high.”

It should be obvious – but I wanted to point out that this study is “capped” and thus will not provide HH and LL signals; for example the picture above shows where price set a low and began moving off of that “swing low” pivot while the Simple TICK indicator printed higher lows until noon. At that point we see the Simple TICK study print a lower low and SPY presented a “blow off top” and rolled over.

$TICK – Review & Summary

We can utilize $TICK as a warning indicator and watch for extreme readings above 1000 or below -1000 to signal a market pause; we can use the $TICK for a continuation signal and stay with the micro-trend as long as the TICK is printing HL (or LH). It takes time to get comfortable with utilizing TICK readings and there are days where TICK is not useful; careful review and analysis of previous signals can provide confidence and understanding.

Cumulative TICK Indicator

What is Cumulative TICK?

Now that we have covered TICK – let’s go a little deeper and think about various ways we can utilize TICK; in the Investopedia quote above we discussed how TICK is calculated and a number is given; suppose we plotted added that TICK value to the last TICK value and we continued to count these TICK’s through the day? Imagine if the first 1-min candle provided us with 325t and the next minute provided us with 375t (325+375 = 700t) and the next minute provided us with 275t (700+275=925t) and … you get the picture I hope. This is cumulative TICK. When there are negative TICK readings we subtract that value from the current total TICK’s.

This picture above shows $SPY and below that is the Cumulative TICK indicator. This indicator does not respond to the market you have on your chart – it is reading the NYSE. What we can see in the picture is that the NYSE cumulative TICK “rolled over” from a positive reading to a negative reading.

Cumulative TICK Signals

Now that we know how the Cumulative TICK works we want to focus on signals provided by it; the first signal is the “zero line.” The day always starts at zero and then we move away from zero as we accumulate more TICK through the day. During the trading day – “where” we are in cumulative TICK tells us quite a lot; above zero indicates we have seen more aggregate positive TICK’s and have not had enough negative TICK’s to take us below zero.

When looking at the cumulative TICK we want to focus on the slope of the readings; the steeper the slope the higher the TICK readings must have been comin through. Think back to our discussion on $TICK; readings above 500 (or below -500) is considered edging into the extreme and if we have repeated extreme readings then the cumulative TICK will have a steep plot.

We also want to look at where the readings are at – in relation to previous days and in relation to earlier in the day. have we hovered at a range? Have we reversed from a consistent reading in one direction? Has there been a significant change in TICK’s? Are we printing an extreme reading?

By looking at the Cumulative TICK through the trading day we can get a feel for the market sentiment and witness when the overall market collectively changes its attitude or behavior. This can also confirm continuation or strength within the stock indexes.

Cumulative TICK Indicator

The cumulative TICK indicator shown in the picture above is a custom indicator developed for the TOS platform; the share code is http://tos.mx/uG1eE87

Comparing Cumulative TICK’s

So far we have been discussing the NYSE and it’s TICK but there are other indexes besides the NYSE; the S&P, the NASDAQ, and the Russel index also have TICK and we can perform the same functions for these indexes as we do with the NYSE. First, we need to record and tally the TICK for each index and then we can plot these cumulative TICK readings side by side for comparison.

In the picture above we have the single cumulative TICK (orange and purple) that we have shown previously and below that we have the (4) indexes printed side-by-side for comparison.

By printing these cumulative TICK’s in this way we can monitor the entire market and look for signals; we can also look for market index sync. We can see if all of the indexes are moving together or if there is an outlying index that is bifurcated. When all of the market is moving in a single direction that is something we want to know – it increases the likely continuation of holding the same direction and gives us a better perspective of which things we may want to trade.

Cumulative TICK Signals

Notice that the zero-line has red and green dots? This is showing when all four indexes TICK’s went in the same direction at the same time. We can use this to confirm a significant movement within the market place. Suppose we see SPY breakout intraday during the lunch time (when it should not be breaking out) and we bring up this cumulative TICK indicator to see if this breakout in SPY is specific to just the S&P or if it is part of the basket of stocks that make up the various indexes; if we think about it, the Russel represents small cap companies, the NASDAQ represents tech companies, the S&P represents large cap companies, and the NYSE represents the broad market place.

After the zero-line we have the four markets; within each of these we have a white dot which represents negative TICK’s within that indicator. Then we have these colored lines – each of these lines is one of the major indexes. When the market is open – there are labels on the right side of the study to show you which line is which index.

Russel cross-overs are the last signal worth discussing; when we have a general indicator direction and then see the Russel crossover and begin running strong in the opposite direction (or just outrunning the other markets) this is a signal of significant market bias changes within the trading day. The TOS share link is http://tos.mx/hry82rK

Adjusted Cumulative TICK

Be sure to check out the blog post on Cumulative Tick.