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Nasdaq TICK At Decade Lows, While Index Powers Ahead at Trader’s Narrative





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This is rather strange. Actually that may be putting it too mildly. The Nasdaq Composite has been incredibly strong, rising +95% from the March 2009 lows and leaving other indexes like the S&P 500 in its dust. So you would imagine that the Nasdaq TICK would be showing underlying strength, just like the advance decline numbers.

But the Nasdaq daily TICK, which measures the aggregate tick movement in Nasdaq stocks, has been scraping the bottom of the chart. Click to see a larger version of the charts:

Nasdaq TICK 50 moving avg Apr 2010
Nasdaq composite long term chart Apr 2010

As you can see from the long term chart above, usually when the moving average of the Nasdaq TICK falls to zero, the index finds its footing. But for some strange reason, during the recent bear market things went haywire. While the Nasdaq fell, the TICK actually rose. And since the summer of 2009 it has been falling. Today it finds itself the lowest it has been for a decade.

We saw something similar in the 2002 bear market where the TICK rose while the market index fell. But very quickly things got back to “normal”. This time around they haven’t (at least yet). I’m not sure exactly why this is because every other market internal metric is painting a very clear picture of strength.

For comparison purposes, here is the same chart for the NYSE TICK:
NYSE TICK 50 day moving avg Apr 2010

It paints a very different picture. The moving average of the NYSE daily TICK is close to a peak. But the reason why I choose to use the Nasdaq TICK is that the NYSE has a lot of non-operating company securities which invariably pollute the TICK data. When I get to the bottom of this I’ll let you know. In the meantime, if anyone has any ideas, drop me a comment below.

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3 Responses to “Nasdaq TICK At Decade Lows, While Index Powers Ahead”  

  1. 1 Nick

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    When the Tick indicator and the stock prices go in opposite directions, then this probably means that the majority of small market players are selling their shares while a few big market players are buying.

    The downward ticks are more numerous, but they are small in size. While the up ticks are few, but they are huge in size.

    This could also be evidence of market manipulation by High Frequency Trading Programs or large hedge funds. They would wait until the trading volume is low and then place very large buy orders in order to cause sudden price spikes and creates price momentum that lures other market participants into buying stocks.

    Over the last year or so, there were a lot of sudden price spikes at the end of the trading day on many days. Which made the charts look like market interventions by a central bank in currency markets. Perhaps the Fed had loaned a lot of money to big investment banks so that they would manipulate stock prices higher.

    There is a reason why the Fed is so secretive in its dealings. Market manipulation works best when its done in secret.

  2. 2 Rennie

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    Wouldn’t read too much into this - nasdaq breadth is a poor indicator in general especially when charted on a longer-term time frame. Have you looked at a chart of the cumulative adv/dec line for NASDAQ stocks only? Straight down since 1990.

  3. 3 Wes

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    Rennie, nice observation and one I had planned to bring up.

    But, I think for the dilution reasons Babac cites above, the nasdaq overbought/oversold metric seems to be the best.

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