Trader’s Narrative

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:

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:

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).