Thursday, May 30, 2013

TRIN Arms Index Versus SPX Daily Charts

The TRIN and TICK are vital tools for day trading. Overdone buying is shown by a +1000 TICK and higher while overdone selling is shown by a -1000 TICK and lower. To receive more bang for the buck on any given trade, if it is a long trade, try to enter on the low -1000 TICK and conversely, if entering a short trade, try to enter on the +1000 TICK. For the TRIN, the 1.00 level is neutral. A TRIN above one shows that the markets are favoring the sellers that day while a move under one favors the buy side. A very high TRIN at 2, 3, 4, and higher show that the selling is overdone and a market bounce will be needed. An uber low TRIN under 0.60 signals that the buying is way overdone and a market pull back is needed to relieve all this bullish energy. The markets appear to live in the sub one camp for the month of May giving the bulls the nod day after day.

The red rectangles show three previous fractals now in play. Note how for each prior sell off, in December, February and April, all were identified ahead of time with the uber low TRIN showing that the wine was flowing like water and the bulls had no cares or worries, like now.  These uber bullish reading gave way to wild spikes higher in the TRIN to relieve the bullish pressure and, of course, each spike in the TRIN corresponds to the broad indexes selling off.  For the three prior fractals, each resulted in a 50 to 75-handle drop in the SPX, however, these sell offs were small and only provided a limited window for the dip-buyers to come running in waving the Fed and BOJ flag of quantitative easing. Therefore, a greater sell off is long overdue. The last substantive sell off was May 2012 one year ago. From the 1675 top this week, using the three prior fractals, a lower target of 1600-1625 is projected for the anticipated sell off. The 1625-1627 is a key support area ditto the 1597-1600 area. The month of May began at 1598-ish so would not that be interesting to see if the bears can drive the SPX 50 handles lower to print a negative month come Friday at 4 PM EST? The possibility is definitely on the table and even if the month ends positively, the low targets may be achieved early to mid next week.

Based on the prior fractals for the behavior in the TRIN, the market selling and beating should continue until moral improves. If the strong market selling occurs, watch for a TRIN above 3 that will tell you a near-term bottom is in and create the potential for a long trade. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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