📡 MARKET INTERNALS
Is Today a Trend Day, or a Chop Day? • 3-Number Morning Checklist • Garrett Drinon (SMB Capital)
Why this matters: trend days happen only 10-20% of trading days (roughly 25-50 a year), but they can produce a disproportionate share of your annual P&L — IF you recognize them early and trade with the trend instead of fighting it. This page is the fast, objective version of that check: 3 numbers, in order, every morning around 9:45-10:00am.
The core idea: big trend days are driven by institutions buying/selling near VWAP over hours or days — not by day-trader chart patterns. These 3 internals reveal what institutions are doing in real time, before the price chart makes it obvious.
"Trending days are one of the most liquid, scalable and asymmetric risk-reward opportunities in the market. You have to reserve your bullets for when everything is aligning." — Garrett Drinon, SMB Capital
THE 3-STEP CHECK — DO IN THIS ORDER
1VOLD Ratio (Volume — the slowest, most foundational signal)
What it is: the ratio of trading volume flowing into stocks that are UP on the day vs. stocks that are DOWN on the day. Check on your platform under "VOLD" (or UVOL/DVOL if VOLD isn't available).
| Reading | What It Means | Verdict |
|---|
| Below 3:1 (either direction) | Not enough one-sided volume to support a real trend day | Low confidence — likely chop |
| 3:1 or higher | Real one-sided volume pressure building | Trend day becomes possible |
| 5:1 or higher | Overwhelming one-sided pressure | "Undeniable" — high confidence |
2Advance/Decline (ADD) Line (the "most dynamic" signal — ties it together)
What it is: the running count of stocks going up minus stocks going down. Look for whether it's pinned near an extreme and staying there.
| Reading | What It Means | Verdict |
|---|
| Pinned near +2,000 or -2,000 early and stays there | Broad, consistent participation across the whole market, not just a few names | Strongest pattern — trust the trend |
| Starts extreme but drifts back toward zero soon after the open | Early move losing broad support | Expect mean reversion instead |
3TICK / Cumulative TICK (the fastest, most immediate signal)
What it is: number of stocks ticking up minus ticking down at this exact moment (search "TICK" or "USI:TICK" — use NASDAQ TICK for QQQ, NYSE TICK for SPY).
| Reading | What It Means | Verdict |
|---|
| Normal day range: roughly ±600 to ±800 | Typical noise, nothing unusual | No signal either way |
| Persistent, repeated +1,000 / -1,000 readings, staying one-sided | Sustained, real buying or selling pressure, not a one-off spike | Trend confirmation |
| A single isolated ±1,000 spike on an otherwise normal day | One-off algo/news blip | Don't over-interpret it |
STEP 4 — CONFIRM WITH VWAP AND SECTOR ETFs
- VWAP test: on a genuine trend day, price stays on ONE side of VWAP essentially all day (above it for an uptrend, below for a downtrend), with only shallow, brief dips. If price keeps crossing back and forth through VWAP, that's a chop-day signal, not a trend day.
- Offensive sectors leading = risk-on: Tech (XLK), Consumer Discretionary (XLY), Semiconductors (SMH), speculative growth (ARKK) leading the tape confirms a genuine risk-on trend day.
- Defensive sectors leading = risk-off warning: if Consumer Staples (XLP), Healthcare (XLV), or volatility (VXX/UVXY) are leading INSTEAD of the offensive names — even during an apparent breakout — that's a red flag the rally may fail. Don't chase it.
- Thematic context: TLT (bonds/rates), UUP (dollar), HYG/JNK (high-yield credit), BTC-USD (crypto risk appetite) add colour on the macro narrative behind the move.
QUICK VERDICT TABLE — WHAT TO DO WITH YOUR READING
| All 3 Internals Say | Verdict | What To Do Today |
|---|
| VOLD 5:1+, ADD pinned extreme, TICK persistent 1,000s, all one direction | Trend Day — High Confidence | Trade WITH the trend. Buy pullbacks to VWAP (uptrend) or sell failed bounces to VWAP (downtrend). Size up one grade. Willing to re-enter if stopped once ("give it two tries") since context still supports the thesis. |
| VOLD 3-5:1, ADD moderately extended, TICK mixed but leaning one way | Possible Trend Day — Medium Confidence | Trade smaller size, same direction bias. Wait for VWAP or key-level confirmation before committing. Don't fight the lean, but don't oversize it either. |
| VOLD under 3:1, ADD reverting to zero, TICK inside normal ±600-800 range | Chop Day — Low Confidence | Reduce size or stand aside on trend/momentum setups. This is a mean-reversion environment — fading extremes back to VWAP/value works better than chasing breakouts. |
RED FLAGS AGAINST A TREND DAY CONTINUING
- Price cannot clear and hold outside the PREVIOUS day's range early in the session
- Price cannot take out the initial reaction high/low from a morning catalyst (news, data release) either pre-market or early in the regular session
- Offensive sectors fail to participate in an apparent upside breakout
- The move into a key level looks slow and grinding rather than fast and decisive
KEY NUMBERS TO REMEMBER
| Metric | Threshold |
|---|
| VOLD Ratio | Below 3:1 = low confidence • 3:1 = trend day possible • 5:1+ = "undeniable" |
| ADD Line | Pinned near +/-2,000 early and holding = strongest trend-day pattern |
| TICK (normal day) | Roughly +/-600 to +/-800 |
| TICK (trend day) | Persistent, repeated +/-1,000 readings |
| Trend day frequency | ~10-20% of trading days (roughly 25-50 out of ~252 days a year) |
| In-play stock RVOL threshold | Minimum ~3x for individual names (index ETFs rarely show 5-10x RVOL) |