One of the market timing indicators which has proven successful over the years is the TRIN. The TRIN, formally known as the ARMs Index (it was created by Richard Arms), measures advancing and declining issues along with their volume. Readings above 1.0 tell you the market is oversold. Readings below 1.0 tell you the market is potentially overbought.
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One of the very few quantified ways to use the TRIN was published by us a number of years ago and it still holds today. The rules state that if the S&P 500 is trading above its 200-day moving average, and the TRIN closes above 1.0 multiple days in a row (the higher the TRIN the better and the more days above 1.0 the better), there have historically been healthy edges to the upside on the market over the next few days.
Follow the TRIN, especially now that the market is above the 200-day. It’s historically done a good job of telling you when prices are going to move higher.
This is from Larry Connors’ Daily Battle Plan which he publishes each morning. If you’d like to take a free trial click here, or call 1-888-484-8220 ext 1 to start your free trial today.
Larry Connors is CEO and Founder of TradingMarkets.com and Connors Research.