V.10:2 (77-78): Closing Tick by Arthur A. Merrill, C.M.T.

Closing Tick by Arthur A. Merrill, C.M.T.

Buyers' market or sellers' market? Counting the upticks and downticks can give you a clue, Merrill says. Are buyers reaching for stock? Do they have to bid a price higher than the last price given (an uptick)? Or do sellers have to accept a lower price to get rid of their stock (a downtick)? A count of the upticks and downticks should indicate whether it's a buyers' or sellers' market.

The closing tick is reported each day in the financial press. It shows, for various markets, the number of stocks whose last change in price was an increase less the number the last change of which was a decrease. How well does this statistic forecast the price movement on the following day? I asked my computer to check it out, using a database of the last 417 trading days on the New York Stock Exchange (NYSE).

If the upticks exceeded the downticks (a positive closing tick), how much of a difference is required to favor rising prices the following day? Take a look at Figure 1. For an example of the use of this chart, if upticks exceeded downticks by more than 750, the Standard & Poor's 500 index rose an average of 1.1% the following day.

My conclusion from Figure 1: The chances of a rising day seem mildly probable if the closing tick is positive but less than 700. If the closing tick is more than 700, I'd rate it highly probable.

Look at Figure 2 for negative closing ticks. Here, zero is at the top of the chart, since the average price change is negative. My conclusion: Negative closing ticks are mildy bearish until they get lower than -450. If they are below that, I'd rate it a strong bearish sign.