One indicator now providing some extreme readings that are typically followed by bounce is the TICK Tomoscillator. The TICK Tomoscillator is the brain child of my friend and fellow market analyst, Tom McClellan of McClellan Financial Publications (click for Tom’s article on the indicator). It uses the NYSE closing TICK readings to measure recent end-of-day sentiment. I first introduced the TICK Tomoscillator in the 4/19/11 subscriber letter. For those that are not familiar with the TICK Tomoscillator, you may find a detailed description in the May 13, 2011 blog. The TICK Tomoscillator posted an extremely low reading of -236.82 on Wednesday. This pushed the Tomoscillator % Rank down below 1%, meaning Wednesday’s reading is among the lowest 1% in the last year. Subscribers may find Tomoscillator readings on the charts page every night. Below you can see the Oscillator reading from Wednesday’s chart page:
The TICK Tomoscillator is also included in the QE Indicators/Functions for Tradestation package which can be downloaded by all subscribers for free.
The study below uses the Tomoscillator % Rank reading rather than just the raw reading. It was last seen in the 6/13/11 Letter. I updated the results.
While instances are a little low we see what appears to be a strong inclination for the market to bounce immediately, and then eventually follow through with more upside.
For more TICK related research from Quantifiable Edges, you may use the link below: