The top ten (10) questions I have answered in the last 8 weeks has all circled around my intraday market analysis and the setup for it. In this post we are going to look at the setup and discuss what I’m attempting to do, then we are going to discuss how to set it up on your TOS and discuss what signals I believe are the most powerful.
If you have questions about the setup or the indicator or how I use it, please reach out and ask. Since the study is a custom study and since I modified the setup and the study it is not really something you can research on Google.
One more thing about this “custom study” – I am not the creator. The study was created by someone else & they left the code “open source” for others to use / modify. The setup is mine and the way I use this study has been my own journey but at the end of the road – I did not develop this thing and I believe that is important.
Also worth a mention – I am going to discuss how I use this – and the changes we are making today are based on my own needs. This is not the only way and this is not even “the right way” for everyone; it is just the changes I’ve made and the reasons why I made them.
Cumulative TICK Comparison
For more background about $TICK and the $CTICK study you can read this post $TICK & Cumulative TICKs which goes into detail about these topics; I really believe that understanding a study gives us more understanding about the ways we can use it while also giving us a greater sense of “trust” in our ability to read it accurately.
As discussed previously – the CTICK is a custom ThinkorSwim study that I use through the trading day to evaluate the markets; but what we did not really get into is the way I have it set up on the charts. Today, I want to show you how to set it up and then show you the signals I am looking for.
As with anything else we use in the markets each day, the CTICK is not going to give you signals “all day long” and it is not always going to give you “honest” or solid signals. This is just a reality of using a lagging indicator on a market that as traded by algo’s.
This study DOES have very solid signals and there are varied levels with these signals which range from “sloppy” to perfect which we will also review and discuss after we get things set up.
Setup TOS Chart
While the picture above is my own personal setup – it may not be the setup everyone else wants. In this “setup” discussion we are going to talk about giving the $CTICK study its own chart space. To do this – we first need to understand that the $CTICK study is a “lower indicator” study on TOS – meaning it has a default configuration “below” the price candles (like the picture below shows).
While there is nothing wrong with using the $CTICK as it was designed, this is not exactly what I want and (in my opinion) is using too much precious chart space. So, the first thing we want to do is get rid of the “stock price” above and only have the $CTICK showing.
To get rid of the “stock price” above the $CTICK study we need to change the chart settings in the TOS “chart settings” user interface (or “dialogue box” as I like to call them). So, click the gear icon at the top of the chart and then “uncheck” the “show price” setting.
Now that we have turned off the stock price, the lower study is the only thing on the chart and that is exactly what we were attempting to accomplish. Now, we have a full chart that is easy to scale and apply in different ways. Keep in mind that you can apply this trick on Quick Charts, Flex Grids, and regular Charts.
Ok, so far we have removed price above the indicator and as the picture above shows we now have a massive chart with a lot of room to see the study but there are a few things worth discussing at this point. I am going to list these points below and then we can work through them.
- $CTICK only works from Cash Open to Cash Close
- The S&P Cumulative TICK is very small relative to its peers
- The additional signals along the zero line are distracting
- The additional signals within the $CTICK lines are distracting
- There are a lot of days showing
Ok – $CTICK is a “regular trading hours” indicator which means we want to plot this on a symbol that is also only a “regular trading hours” symbol (and by doing this we can eliminate the “blank space” between each day’s prints). Notice in the picture above I used $CAT which has premarket trading and after hours trading. That picture with $CAT and the gap between each day was not “too bad” but if we had used SPY or a futures chart like /ES that makes the space between each RTH day just a huge waste of space
For my own charts, I like to use one of the indexes here, which are markets that only chart during regular trading hours. Here are a few choices that I like: $SPX, $NDX, $NYFANG. These are not the only choices out there, but this can be something for you to consider & explore on your own. So, below is a picture of the $CTICK study with the /ES and the big wasted space between each of the $CTICK days.
Ok – that is a great example of what we need to fix – because space wasted here is massive and the “zoomed out” nature of the indicator is just not going to work for me. So, either we change the chart settings to show “only regular trading hours” or we put a name in that only has regular trading hours prints.
Remove S&P-500
I know this will be a controversial thing to say but – the S&P-500 CTICK’s (relative to its peers) is just a distraction – causing confusion and just “more mess” within the study. I’ve been using this $CTICK every single trading day for a few years and I can honestly say that turning off the S&P-500 $CTICK has only improved things for me; there is less clutter, the signals are easier to see, and the indicator becomes just a little more “user friendly.”
Look at the picture above again; the /ES futures chart has 7 trading days showing and the S&P-500 is plotted in dark red. See how that dark red signal does not really travel “too far” away from the zero line? See also how the S&P-500 often “turns away” from the rest of the indexes and makes it appear like there could be a reversal forming? THAT is exactly why I removed it from my setup.
Having said that – I wanted to mention a simple fact: I trade and I monitor the S&P constantly so I am already watching it (making my modification to the $CTICK ok since I am already deep into S&P-500 data from other sources).
I’ve recently considered adding it back in but converting the lines slightly – making them appear less solid than the other indexes; doing that, we would still have the S&P-500 $CTICK’s but will be able to avoid the distraction more easily.
Remove Signals
In the S&P futures chart picture above there are a lot of white dots inside the index lines. Below is a closeup of these white signals and the “zero line” signals. These white signals are there to inform us of “confluence” between the (4) four indexes. If all 4 “tick -up” or “tick – down” at the same time we get a white dot & we get a dot on the zero line.
As you can imagine, there is a useful purpose to these dots but they are not useful to my type of analysis – so I do not need them (in fact, I consider them a distraction and added “clutter”). So I want to turn those off completely. As I mentioned at the start of this post – my way is not the only way & it has nothing to do with “right or wrong” – so, if you like the signals then you should keep the signals but for me – buh bye!
Remove Days
Ok, last thing to discuss here is the removal of “all those additional days.” Why? Because during the trading day I am interested in today’s price action and todays market breadth – I am not interested in performing a “deep dive” analysis or comparison analysis of multiple days. In the market today – I only want to know about what the market is doing now and I want to know about changes happening now.
So, I like to set the chart to (2) two days. There are a few reasons for this – one reason is the simple TOS fact of using “today only” charts – the study will be very zoomed in until later in the morning and I find that distracting. By setting the chart to show two days, we have a chart “zoomed out” just enough to keep some balance without too much wasted space.
As we discussed above, I’ve decided to leave the S&P-500 signal in the discussion today, so instead of turning it off we will reduce the strength of the visual signal. Having said that – I’ve gone nearly 18 months without using it & I liked it that way. If you want to try things without the S&P-500 showing, uncheck the “show plot” on cumulativeTick3.
If you want to reduce the visual impact – we can make the signal a little less vibrant by clicking on the “change plot color” like the picture above shows and choosing “more…”
Once you click “more” – choose the HSL in the top left portion of the Dialog Box – then change the Transparency to 75% (at least). As you can likely guess – this change is going to make the line less “solid” and it will be easier to ignore when we want to ignore it – but we can still see it.
Just as a side note – I change this color setting on a LOT of things – making them less “solid” and easier to see through (or easier to ignore). This is great for things like circles, rectangles, and drawing lines.
Now, in the picture above we have two days and all (4) four index showing but the S&P-500 has been adjusted to 75% transparency to make it easier for us to ignore. These changes have radically altered the visual nature of the study and gives us a whole new way to approach it.
There is value in looking at 5-10 days of $CTICK data and in performing a “deep dive” analysis or review. That sort of analysis is something I like to do “after the market close” and consider it “weekend work.” Looking at the distance away from Zero – gives us an indication of the strength today. A strong breadth will cumulate in a very large gap between “zero” and the lines.
THIS is where the S&P has merit. There are 500 names in the S&P-500, so when we see that the S&P has cumulative $TICKs expanding beyond 2 (either as a +2 or a -2) then we know things are getting serious out there & that the breadth is very strong.
Signals
Now that we have discussed how to modify the indicator and how to modify the chart timeframe, you have learned a valuable skill which can be utilized to adjust all the other indicators you use. Just think about all the things you can modify now after learning these things!
We are not done, however. Setting up the chart was only 1/2 the goal in this post; the next thing to discuss today is the signals the indicator produces & what those signals means to us (well – what they mean to me). On some of these signals, I wont always have an answer as to “why” we see something but that is O.K.
- Above / Below Zero
- Zero Line Crossover
- Cluster
- Breakover
- Reversal
Zero Line
Starting with the most simple and obvious – above & below zero. This is a “cumulative TICK” indicator on (4) major market index. When the TICK’s are positive, then the combined cumulative $TICK is going to be above the zero line. Take this as a sign of market strength. It is implying that more companies in the index are “ticking up” rather than “ticking down.” (Or, that more companies are moving up rather than moving down).
That makes sense – right? If I tell you that 1700 companies just ticked up but only 500 companies ticked down, how would you take that? As a sign of “positive markets” today? When we can look back & say that “in the last hour more companies have ticked higher than lower” it gives us a sense about what is happening in the market today.
When I can also say that 4 indexes are above the zero line – then we know that not only have we seen more positive ticks versus negative ticks, but that the “whole market place” has been moving higher through the trading day. Keep in mind a few things; “stocks” in the indexes are varied and this study gives us insight into all these different companies – but the stock market is so much more than just companies and we still need to look at other things for clues.
a.) what direction the lines are pointing – because this is an indication that the up move is continuing or fading
b.) divergence – because each index is a representation of a select group
c.) clustering – because each index is a different size and the strength of the TICK move is a perfect visual of “how many names” are ticking up / down at once.
Zero Line Crossover
When we see the indicator cross from one side to the other side, it implies that there has been enough cumulative TICK’s to wipe out the existing ruling TICK’s and that a new ruler is in charge. We want to avoid chop and whiplash within our own trading but also within our analysis.
In the picture above we had a zero line crossover after lunch; this was not really a surprise because we did not really expand beyond the zero line through the morning session. Remember, this study is “cumulative TICK” so it is continuing to add new TICKs to the existing pool; if the study did not really expand higher through the morning and instead just stayed sideways, it was a signal that there were no leaders (positive or negative) and that we were unlikely to see a breakout (or a breakdown) within the broader market until after lunch.
Notice also in the picture that the cross down was within all four indexes? The S&P-500 started things but then the NYSE crossed, then the Russel 2000 crossed and then the NASDAQ Composite crossed. This was a signal that across the whole stock market – more companies were printing lower lows.
Through the trading day, one thing I am constantly looking for is a change in market structure. In the picture above, the “change in structure” was significant. Across the market place, all the indexes (and all the stocks within those indexes) suddenly began ticking higher.
Remember, this is the CTICK – so it is counting “how many companies just ticked higher” – it is not measuring “how far did each company move” – so when the indicator suddenly points sharply up (or down) the implication is that we suddenly had thousands of stocks move up at once (or down).
And when the study continues to point higher – and higher – and higher – it implies that more companies are continuing to tick up versus the number of companies that are ticking down. I find that sort of signal to be very aggressive.
Here we have a green line crossover – this is a signal that I never ignore and that I look for constantly. In the picture here, the green line broke away from the purple line and crossed the blue line – to lead the indexes in a market reversal off the lows
In the picture above, we have two signals but really only one is the star: the green line crossover. While I do not understand “why” that green line crossover is so significant – I do understand that it is significant and I look for this signal constantly when I am looking for a “V” in the market or a reversal in the market.
This is not about a pullback – this is about a complete stock market reversal from a “we are going down!” sentiment to a “we are going up” sentiment. Radical and complete change in behavior and sentiment and price action.
Green Line
When this indicator was created – no one would have ever guessed that the Green Line would be such a powerful component to the whole system but after using this study every single day, I have come to respect that green line and to pay close attention to it.
“Within the Channel” is a signal that we get (and I post) – and I wanted to explain what that means. First, just consider that this study is really a green line study and the other two lines are the “boundaries” or the “channel.” (Use your imagination – but remember that I’m making an example).
When things within the market are kind of just “steady” we very often have the green line riding in the middle and the other two lines fairly spaced above & below the green line. We very often see this as “steady buying” or “steady selling” across the market. So, a good bullish day that made a move but has stopped advancing – will often give us this signal. (or a bearish day that made a move but has stopped declining).
Here is an example of a “Green Line Cross Down” – where we had a good bullish morning (market was gapped up and moved bullish in the first part of the day), before stalling out and failing to print new highs.
After stalling out for more than an hour, the market suddenly reversed and began falling hard. The Cumulative $TICK shows there was a green line cross-over and all 4 indexes went below the zero line quickly.
This is not a predictive study – it was not a “early warning” but instead was a “confirming signal” of the power or the breadth and scope of the move.
The stock in the picture crossed over and began to fall (yes) but the $CTICK shows us that “a lot of stocks suddenly started to fall – all at once.”
Green Line Cross-Down
In the picture below we have the start of a cross-down which is great – but not enough information. This is what gets our attention – but we still need to look at other things to “validate” or confirm before we get into trades (or get out of trades).
“Other Things” can be the Advancing vs Declining issues of the S&P-500 or the Advancing vs Declining issues of the NASDAQ-100. We can also look at $TICK, and the $DXY, the $VIX, crude /CL and bonds /ZB and Bitcoin /BTC and gold /GC and the 10-year Yields $TNX and the financial sector $KRE and the Monsters of Technology (MOT) using the $NYFANG.
Here was a cluster signal – where the $CTICK’s were moving well as a group – all the indexes were slowly moving higher – not a lot of aggressive activity and not a significant change in the number of new companies printing an uptick.
Final Thoughts
We have covered a LOT today, from making adjustments to reading the signals within the Cumulative TICK. While we did not get everything covered – I believe we went far enough to convince you of the value this FREE indicator provides.
There are other signals – and the more you use the indicator the more you’ll come to see those signals – and the more you will trust in your own ability to see them. Remember, I have been using this study for years, and it is something I am really comfortable using.
One thing I did not mention – is “time” on the chart. Personally, I have used this with a 2-min chart and a 5-min chart; but are fine but you need to stay on a single timeframe when you first start using it. I recommend the 5-min chart first, simply because a lot of traders are already using the 5-min for ORB and charting and trading – so it fits their “normal” structure.
You will need time with this indicator to become really good at reading it but (hopefully) I’ve convinced you that the time is well spent. ALWAY remember that this is a “broad market signal” – it is designed to see what the majority of the market place is doing.
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