If you would like an email sent to you when I update the blog please send an email with "subscribe" in the subject line to traderbob58@gmail.com. To be removed use "unsubscribe".

Search This Blog or Web

Wednesday, December 19, 2012


The TRIN has been very low lately.  Check out this chart of the 10 and 20 DMAs of the TRIN vs. SPX.  The blue line is the 20 DMA.  You can click on the charts to make them larger and easier to see.

The 20 DMA is down to .87 today.  This is only the fourth time it has dropped down to .9 since the 2009 bottom.   In late Aug. 2009, the market pulled back some and chopped its way higher until Jan. of 2010.  In April of 2010, the market was about to crash.  In Dec. of 2010, the market was in the middle of a big rally and just kept on going up for another two months.  This is the first time it has been this low when SPX was not at bull market highs since the 2009 low.  Looking back historically, it turns out to be a rather rare occurrence.

Here is look back a little further.

Going back to late 2004, there were five more occurrences.  Three of them occurred as the market was topping in 2007.  On this chart there were two occurrences that happened before the market made new highs.  April 2004 and Oct. 2007.  Both of those times the market sold off.  In Oct., SPX made a slight new high before selling off though.  That sell off was the start of the market crash in 2008.

Here is one more look back a bit further to where my TRIN data ends.

Going back to 2000, there were three more occurrences.  The first two on this chart happened before SPX made new bull market highs.  Both were followed by down moves.  In the Aug. of 2000 occurrence, it was the start of full blown bear market.  The 2003 event was early in a new bull market and SPX was at new highs for that fledgling bull.  There was some choppy action after that low reading, but no major down move.

The only time the 20 MA got this low and SPX was at new highs that was followed close in time by a major move down was the flash crash of 2010.  The flash crash itself probably made that sell off much worse then it otherwise would have been.  However, if it happens before SPX makes new highs it can lead to sizable sell offs.  The last two bear markets started with that low reading near the final highs.  I did not know that when I started this article.  Really.  I just thought it was a rare thing to happen and I wanted to look at the history of it.  I started the article with the first chart before I looked back any further.  It wasn't until I was writing text for the last chart that it dawned on me the last two bear market started with such a reading.  Now I have to ask the question.  Is this the final high before the next bear market gets going?  Since I already think we are starting one I would of course say probably yes.  What else can I say, LOL.

Whether this is really the final high before a new bear market or not, we do have to be on the lookout for a sell off since SPX is not at new bull market highs.  The McClellan oscillator still has not had the kind of strength we have seen coming out of important lows since the 2009 bottom.  That combined with the low TRIN readings and poor fundamentals leads me to believe this is more likely a blow off move then the start of a new leg up.


No comments:


The information in this blog is provided for educational purposes only and is not to be construed as investment advice.