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14 June 2022 – Working with Market Internals

During the cash hours when the US market opens at 9:30 am ET, it takes about 5 minutes before meaningful data appears on the ThinkorSwim chart. Here, we are using the $TICK and $ADD market internals to give us advance warning as to where the market is heading in the 1-minute charts.

To be sure, we still defer to the moving averages price actions as our P/L are based on actual price actions rather than any other indicators such as $TICK and $ADD.

In this strategy and on the chart to the left, there are dots which are capturing the actions of the $TICK and $ADD charts on the right. This is just a simplified way of tracking the market internals when the charts are not easily accessible. We can see when the $ADD dots are White, the /RTY did eventually sold off and likewise, when it is Cyan, the /RTY goes up. It is a leading indicator. Like in all indicators, it is not 100% true as the market will do what it wants to do. There will always be instances that the price action deviate from the market internals for a short while before they come back into synchronisation eventually.

Comparing the $ADD and the price action chart, we can see that they synchronise rathar well. With the $ADD, when the line is White (below zero), we know that the market has a bearish bias and when it is green (above zero), the market has a bullish bias.

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