21 Months of Elevated Program Trading Activity
By
Rennie on Wednesday, September 29th, 2010 at 2:16 am
TICKscore closed at -14 Tuesday. Remarkably, cumulative TICKscore is trading well below levels from the end of August, meaning we’ve seen consistently more negative TICK extremes than positive TICK extremes despite the S&P’s 10% rally over the past month. How much longer can this go on? Perhaps another month or so, as a number of recently triggered signals are calling for further strength in October. If TICKscore remains in a generally sideways-to-down trend heading into November, it would be hard not to consider the market at an extremely high-risk point at that time. The market’s rallying on fumes, large traders in E-mini S&P futures are heavily short, the 200-day average of NYSE up volume – down volume has yet to turn bullish and the Last Hour indicator continues to warn of a major long-term selloff (at some point in the next year or so).
One positive the market has going for it is the elevated levels of principal program trading. Notice from this chart that the percentage of program volume executed for member firms’ own accounts has remained mostly above 40% since early 2009. I’ve superimposed the cumulative TICKscore (in red) on the chart to illustrate that this type of elevated program volume typically corresponds with institutional buying. This suggests either TICKscore moves back into a pattern of higher highs or we’ll see a drop-off in program activity.
Short-term indications are mixed. NYSE TICK dropped to an intraday low of -1329, its lowest low in two weeks. When the S&P closes higher on a day when the TICK records a 5-day low, there’s a tendency for the market to trade lower the following session. The last 30 occurrences are below…
NYSE TICK Hits 5-day Low, S&P Closes Higher
09/28/10… S&P500 ??? next session
09/13/10… S&P500 -0.1% next session
07/15/10… S&P500 -2.9% next session
07/06/10… S&P500 +3.1% next session
06/03/10… S&P500 -3.4% next session
05/17/10… S&P500 -1.4% next session
04/19/10… S&P500 +0.8% next session
03/17/10… S&P500 -0.0% next session
03/03/10… S&P500 +0.4% next session
12/30/09… S&P500 -1.0% next session
12/16/09… S&P500 -1.2% next session
12/04/09… S&P500 -0.3% next session
11/11/09… S&P500 -1.0% next session
07/21/09… S&P500 -0.1% next session
04/08/09… S&P500 +3.8% next session
03/25/09… S&P500 +2.3% next session
02/12/09… S&P500 -1.0% next session
01/26/09… S&P500 +1.1% next session
11/13/08… S&P500 -4.2% next session
11/07/08… S&P500 -1.3% next session
10/23/08… S&P500 -3.5% next session
10/16/08… S&P500 -0.6% next session
08/20/08… S&P500 +0.3% next session
07/23/08… S&P500 -2.3% next session
06/25/08… S&P500 -2.9% next session
05/19/08… S&P500 -0.9% next session
05/14/08… S&P500 +1.1% next session
03/03/08… S&P500 -0.3% next session
02/12/08… S&P500 +1.4% next session
12/18/07… S&P500 -0.1% next session
12/12/07… S&P500 +0.1% next session
In 20 out of 30 occurrences, or 67% of the time the S&P500 closed lower the following session, significantly above the 46% random odds for a lower S&P one day later in the same time frame.
At the same time, the S&P posted a second higher high after last Friday’s 90% up volume day (technically not quite 90%, but true on a rounded basis), a pattern that usually leads to a close above the first day’s high either the same day or the next. This argues in favor of a close over 1150 on Wednesday – see this post from last Tuesday for details. Overall, the market appears to be consolidating before the next leg up, which could kick off with the end of Q3 on Thursday.
21 Months of Elevated Program Trading Activity
By Rennie on Wednesday, September 29th, 2010 at 2:16 amTICKscore closed at -14 Tuesday. Remarkably, cumulative TICKscore is trading well below levels from the end of August, meaning we’ve seen consistently more negative TICK extremes than positive TICK extremes despite the S&P’s 10% rally over the past month. How much longer can this go on? Perhaps another month or so, as a number of recently triggered signals are calling for further strength in October. If TICKscore remains in a generally sideways-to-down trend heading into November, it would be hard not to consider the market at an extremely high-risk point at that time. The market’s rallying on fumes, large traders in E-mini S&P futures are heavily short, the 200-day average of NYSE up volume – down volume has yet to turn bullish and the Last Hour indicator continues to warn of a major long-term selloff (at some point in the next year or so).
One positive the market has going for it is the elevated levels of principal program trading. Notice from this chart that the percentage of program volume executed for member firms’ own accounts has remained mostly above 40% since early 2009. I’ve superimposed the cumulative TICKscore (in red) on the chart to illustrate that this type of elevated program volume typically corresponds with institutional buying. This suggests either TICKscore moves back into a pattern of higher highs or we’ll see a drop-off in program activity.
Short-term indications are mixed. NYSE TICK dropped to an intraday low of -1329, its lowest low in two weeks. When the S&P closes higher on a day when the TICK records a 5-day low, there’s a tendency for the market to trade lower the following session. The last 30 occurrences are below…
NYSE TICK Hits 5-day Low, S&P Closes Higher
09/28/10… S&P500 ??? next session
09/13/10… S&P500 -0.1% next session
07/15/10… S&P500 -2.9% next session
07/06/10… S&P500 +3.1% next session
06/03/10… S&P500 -3.4% next session
05/17/10… S&P500 -1.4% next session
04/19/10… S&P500 +0.8% next session
03/17/10… S&P500 -0.0% next session
03/03/10… S&P500 +0.4% next session
12/30/09… S&P500 -1.0% next session
12/16/09… S&P500 -1.2% next session
12/04/09… S&P500 -0.3% next session
11/11/09… S&P500 -1.0% next session
07/21/09… S&P500 -0.1% next session
04/08/09… S&P500 +3.8% next session
03/25/09… S&P500 +2.3% next session
02/12/09… S&P500 -1.0% next session
01/26/09… S&P500 +1.1% next session
11/13/08… S&P500 -4.2% next session
11/07/08… S&P500 -1.3% next session
10/23/08… S&P500 -3.5% next session
10/16/08… S&P500 -0.6% next session
08/20/08… S&P500 +0.3% next session
07/23/08… S&P500 -2.3% next session
06/25/08… S&P500 -2.9% next session
05/19/08… S&P500 -0.9% next session
05/14/08… S&P500 +1.1% next session
03/03/08… S&P500 -0.3% next session
02/12/08… S&P500 +1.4% next session
12/18/07… S&P500 -0.1% next session
12/12/07… S&P500 +0.1% next session
In 20 out of 30 occurrences, or 67% of the time the S&P500 closed lower the following session, significantly above the 46% random odds for a lower S&P one day later in the same time frame.
At the same time, the S&P posted a second higher high after last Friday’s 90% up volume day (technically not quite 90%, but true on a rounded basis), a pattern that usually leads to a close above the first day’s high either the same day or the next. This argues in favor of a close over 1150 on Wednesday – see this post from last Tuesday for details. Overall, the market appears to be consolidating before the next leg up, which could kick off with the end of Q3 on Thursday.