TRIN Spikes
On Monday, we had a giant TRIN spike with a reading of 9.77 (click chart to enlarge):
The top panel of the chart is the TRIN, and the bottom is the S&P 500.
In a bull market, this would be a fantastic indication of capitulation. However, in this bear market, high TRIN readings haven’t been good buy signals.
In September, we had two spikes (marked by green vertical lines) that were buy-able as long as you took profits within two days.
The ones marked with purple lines were slightly better, though you got a pretty deep draw-down the very next day.
The ones marked with red lines were actually good sell signals.
A guy on CNBC Tuesday was gushing over Monday’s TRIN super-spike, but he needs to study further.
I think that the TRIN is no longer a good buy signal because trader sentiment is not a large factor in this market. High TRIN readings probably reflect a damaged market: poor liquidity, de-leveraging, no uptick rule, popular ultra-short ETFs, redemptions, no public participation, exploding hedge funds, and of course, an insolvent banking system which pulls money out of stocks and into bonds with each and every new crack in the global financial system.
(Note: this chart shows single-day TRIN readings, and not the three-day average that I often show as I did last week.)
