One Way to Use the TRIN

I haven’t written a long, long, loooong article about the TRIN yet, but here is a preview of the type of thing it would say. There are sites and books that say a TRIN < 1 is bullish, and a TRIN > 1 is bearish. Do yourself a favor and ignore that idea. Instead, the simplest way to look at the TRIN is to say a downtrend is bullish, and an uptrend is bearish. A sudden jump in the TRIN, if it sticks, can sometimes be a leading indicator of market mood swings.

Today, the NYSE TRIN forecasted the steepest drop in the dow about 5 minutes ahead of time. It did so by making an outsized spike upward, and then spiking up further as the index slipped. Here is the 5–minute TRIN lined up with the 5-minute DIA chart, so you can see what I mean. You could have gotten in short when it made new lows (because you ALWAYS wait for a good entry no matter what the market indicators say), and used the down trendline as your “trailing” stop. You would have held till the end of day without ever having to worry about being stopped out.

… so, it really doesn’t matter that the TRIN read “bullish” 0.8ish.

As an aside: if you ever design an indicator… do yourself a favor, and make the bullish side of the indicator point UP! What on earth were they thinking?? If you know the TRIN, you know it’s just a fraction… All they’d need to do is invert it, to make bullish moves point up.