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A Look At Cumulative TICK & Market Breadth at Trader’s Narrative





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A recent mention of cumulative TICK on Trader Feed blog caught my attention and I looked at this indicator today. Now I know, Dr. Steenbarger’s chart of cumulative TICK is using the NYSE TICK data and it is very short term in contrast to my analysis.

But he does briefly mention that “…the Cumulative NYSE TICK has stayed well above May levels.” And then goes on to extrapolate:

Continued strength in Cumulative TICK would suggest to me that we’re experiencing a correction in a bull market, not the start of a renewed bear.

I’m not so sure we can draw that conclusion. For reasons that I’ve outlined many times before, I prefer to use the internal breadth data from the Nasdaq. So here is a look at a few years worth of cumulative TICK for the Nasdaq:

Nasdaq Cumulative TICK chart

If a higher high is a sign of a correction within a bull market, then by that account according to cumulative Nasdaq TICK we’ve never even entered a bear market!

Now I know this is the Nasdaq data but the NYSE chart doesn’t look all that different. Which reminds me of the uselessness of cumulative breadth numbers (advance decline) as any type of indicator - NYSE Breadth Is Strong: Why It Doesn’t Matter.

Instead of looking at TICK data cumulatively, I prefer to smooth it using a simple short term moving average:

Nasdaq TICK 25 moving avg

Although it has come down from the extreme in April 2009, it isn’t anywhere close to the range that has historically coincided with market lows (or lasting market bottoms).

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8 Responses to “A Look At Cumulative TICK & Market Breadth”  

  1. 1 jkw

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    Dr Brett calculates the cumulative tick by subtracting the average value of the tick from the current value and adding up the 1-minute (or however frequent) readings. In theory, that should remove any long-term trends and create an oscillator. Did you do that with your NASDAQ cumulative tick chart?

  2. 2 moneyfriend

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    Great post, I was going to call Brett out on that but figured I’d just let him live his dream : ) . Extrapolation is something I see a lot of on trading blogs and I’m glad to see you go the extra mile. IMO tick data is not consistently reliable enough for trading these days, but to each their own!

  3. 3 david

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    The first chart you show adds the tick values of every single day to each other. As far as i understand Dr. Steenbarger uses intra day tick data and he compares the 1 minute cumulative tick in one day with the average 1 minute tick of the last 20 days.

  4. 4 Babak

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    david, Dr. Brett uses something called ‘adjusted TICK’ which is what you mention but he also said that with the removal of the uptick rule, the adj. isn’t necessary anymore (since it no longer has an uptrending bias).

  5. 5 Rennie Yang

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    Your construction of the cumulative TICK chart is not accurate. You cannot replicate it utilizing daily data. I maintain a cumulative TICK chart for the NASDAQ w/ 1-minute data and it looks nothing like your chart.

    Rennie

  6. 6 Babak

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    Thanks for the feedback Rennie, so if not using daily data, how do you construct yours?

  7. 7 Rennie Yang

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    For the basic Cumulative TICK, I keep a running summation of 1-minute NYSE TICK (or NASDAQ TICK) readings from open to close. You can simply chart that running summation against price, as Brett did in this recent post - or you can use each day’s summation of all 390 1-minute readings to create that day’s Cumulative TICK reading (this is what I do). You can see the current chart of the NASDAQ Cumulative TICK via this link and the NYSE Cumulative TICK via this link - the green line on the chart is the final number for that day (the sum of all 1-minute readings), while the red line is a 20-day moving average (which I like to compare against price). Note how there’s virtually no lag between the moving average and price, suggesting the raw number functions as a lead indicator. While I maintain both versions, I tend to focus on the NYSE Cumulative TICK.

    Best,
    Rennie

  8. 8 Babak

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    Thanks Rennie, appreciate being ’schooled’ :)

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