Trader’s Narrative

I was really surprised to notice that the 5 day moving average of the Nasdaq TICK (TICKQ) reached a statistically significant oversold level last week. I was watching the advance decline numbers and it slipped my mind to check in on the TICK.

Wow! I never suspected that the Nasdaq TICK would be so low. When it occurs after a market decline, it usually marks an inflection point in the market. That is what happened in this most recent example as the market rallied from its lows last week.

But there is a caveat.

This indicator has a short term perspective. So this latest signal has much less meaning now. And even less going forward.

The short term average of TICK is a handy approximation of cumulative TICK, which can be challenging to compile and calculate. It does a good job of flagging market extremes. The disadvantage being that as with all moving averages, the more short term, the more noise mixed in with the signals. And the more long term, the larger the lag between signals and opportunities for action.