The NYSE TICK index measures the number of stocks trading on an uptick minus the number of stocks trading on a downtick at any given time.
Yesterday afternoon, during her inaugural FOMC press conference, Janet Yellen sent the TICK index to its lowest level since the height of the European debt crisis in November 2011. At 3:09 PM ET, the index registered a -1706 reading as a wide range of issues moved lower.
“Historically, extreme low readings in the TICK have been bullish looking forward, as it indicates capitulatory action,” says Jonathan Krinsky, chief market technician at MKM Partners.
In a note to clients, Krinsky examines stock market performance subsequent to other extreme low readings seen in recent years.
“Consider that as of yesterday over 80% of S&P 500 components were above their 200-day moving average,” he writes.
“Of the 25 lowest TICK readings over the last 10 years, only TWO have occurred with more than 80% of S&P 500 components above their 200-day moving average. One was yesterday, and the other was June 19th, 2013. Interestingly, while returns 20 and 30 days out were bullish following that reading last June, returns during the initial ten days did see further selling. We think given the current structure of the market, that is a more likely scenario. (i.e. short-term weakness, followed by a potential rally).”