NYSE CUMULATIVE TICK

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APPLICABLE TIME FRAME(S):  

SHORT / INTERMEDIATE

UPDATE SCHEDULE:

Each weekday night by 7:00 PM EST

EXPLANATION:

This is a running 10-day total of daily NYSE TICK closing readings.  The NYSE TICK shows the number of issues traded on the NYSE which last traded on an uptick minus those which last traded on a downtick.  For example, if MMM traded at 50.45 then traded at 50.48, then it would be on an uptick.  As of early 2003, there were approximately 3400 issues traded each day on the NYSE.

GUIDELINES:

This indicator can be effectively used to approximate overbought / oversold conditions.  When the ratio reaches one of the extremes, caution is warranted when trading with the current trend.  For example, if the trend is up and the cumulative TICK reaches +5000, then there is a high probability of at least a short-term retracement.  Overbought/oversold indicators such as this one are most effective when giving contra-trend signals. 

When we are in a clear long-term downtrend and this indicator becomes overbought, then it is an effective sell signal.  Conversely, if we are in a sustained uptrend and the indicator becomes oversold, then it suggests that an upside reversal may be forthcoming.

STATS:

*Standard Deviation.  See below...

68% of readings (1 standard deviation) should be between +1850 and +4350

95% of readings (2 standard deviations) should be between +600 and +5600

99% of readings (3 standard deviations) should be between -650 and +6850

In other words, we should expect a reading under -650 or over +6850 only between 2-3 times per year.  Since such a reading would be highly unusual, it suggests that we are seeing an unsustainable trend.  These figures assume a normal distribution curve.

ADDITIONAL RESOURCES:

New York Stock Exchange (www.nyse.com)

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