Saturday, September 19, 2015

TRIN Arms Index and SPX S&P 500 Daily Charts Signal Near Term Bottom At Hand

The TRIN Arms Index prints uber bearish on Friday indicating that a near-term bottom is at hand. Keystone bot index calls and long ETF's on Friday afternoon anticipating a bounce early next week for the broad stock market.  This is VST (very short term) trading only and the trade is expected to only last a day or few. The broad markets remain in a cyclical bear market pattern (weeks and months ahead) and Keybot the Quant trading algorithm is currently bearish (although markets are choppy and it would not be surprising to see the algo flip back to the bull side early next week).

The green circles show the peak times of fear and panic on the TRIN. On Friday, as the stock market collapsed lower, several traders jumped from windows distraught with fear and worry. Fortunately, the windows were on the ground floor. Peaks in sentiment identify turning points. So peak fear identifies a bottom (green circle) and peak complacency and joy signals a market top (red circles). What do you think will happen?

The 1.00 line on the TRIN is a neutral level. Between 0.8 and 1.0 is bullish markets. Buyers are boosting stock prices higher at a steady-eddy pace that may continue for several days. Under 0.80 and the bullishness is getting out of hand. Under 0.50 and the bullishness is off the charts. Traders are staggering around drinking Fed wine and buying any stock with a heartbeat with no fear or worry. That is when the markets top out and are spanked lower.

Between 1.0 and 1.4-ish, or 1.6-ish, is steady-eddy selling in the stock market that may continue for several days. Above 1.6 and the selling and bearishness is starting to get out of hand. Above 2.0 and the bearishness is off the charts. Traders are crying into the palms of their hands; others are proclaiming that the end is near and all hope is lost. Of course, this peak in negative sentiment is when a market bottom occurs and recovery. 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.

Note Added 9:11 AM EST Tuesday morning, 9/22/15: A bounce occurs for equities with the SPX up 9 points, up about 20 or so intraday, and the Dow finishing up 125 points, however, the Nasdaq and Russell 2000 were flat in Monday trading. S&P futures point to a drop of 30 handles at the opening bell. Keep an eye on the TRIN to see what level it spikes up to. The CPC put/call ratio plummeted to 0.55 a sharp and surprising move that shows traders uber bullish buying boat loads of calls yesterday becoming complacent at the stock market so this morning they are slapped in the face.

Note Added 10:45 AM EST Tuesday morning, 9/22/15, with trading underway:  The TRIN Arms Index spikes to 3.74 displaying uber negativity and bearishness so this will only set up a market bounce probably tomorrow. This hints that choppy sideways markets will continue a couple days. With the high TRIN reading, buying some index longs this afternoon may be prudent to ride a pending rally say tomorrow due to the high TRIN reading that is printing today.

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