Institutional Sentiment can and should be monitored on a daily basis, so it should be no surprise that CNBC viewers know that the S&P500 has seen a shift from growth to value stocks.
- That said, how can we tell if institutions are selling into strength?
- How can we protect ourselves from the next market drawdown?
- How can we tell what institutions are actually doing?
TICK Cumulative Measures Institutional Sentiment
In its most basic form, TICK represents the direction of the price of a stock. An uptick represents a trade occurring at a price higher than the previous transaction, and a downtick referring to a transaction that has occurred at a lower price.
If we add a cumulative measurement, we can tell when institutions are buying and when they are selling. Moreover, when a change of institutional “sentiment” emerges, we will see it immediately. This cumulative measure is “real-time”, so a change is something to monitor closely.
S&P500 – TICK Cumulative Crossed for the First Time
It’s early, but the S&P500 has crossed for the first time since November. We need to monitor the lower panel for further developments. Note RSI and Stochastic are turning up, so this observation can change. Remember this is real-time, so shorter time frames should also be monitored.
For the time being, we consider this change in “institutional sentiment” a caution signal. It could turn back up as it did frequently in late 2016, after the presidential election process.
NASDAQ-100 TICK Cumulative
Considering the Nasdaq 100 represents a predominate weighting to growth and technology stocks, it should be no surprise that TICK cumulative has been oscillating at highs. If this turns down, we would consider this current plateau to be distribution; Phase III in my eBook. Phase IV, markdown follows this transitory phase, so if TICK cumulative is more than sector rotation, we will know it soon enough.
Monitor these changes. We will do the same and let you know if more evasive action is prudent. With earnings approaching, banks could provide the fuel for more upside. Therefore, use caution over the summer months. Previous thoughts on the markets.
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