Incredibly boring day on the Emini – tiny range of only 5.75 points. Everyone must be thinking of Easter and winding down early. Still, we got a signal on the TRIN systems so that raised my heart beat a fraction at the end of the day.

TRIN, Put Call Ratio & Smart Money Oscillators (Emini daily)

My swing trading oscillators have moved into over-bought. The TRIN Oscillator turned down and as I've said before, it's usually the first.

The last down swing we had in the oscillators didn't results in any market weakness. Let's see if it's different this time – we've formed a bearish divergence pattern.

TRIN Indicator System (Emini daily)

Turn down in the TRIN oscillator gave us a take profits and reverse signal. The last trade ended up being a small winner of 6.50 points.

TRIN Indicator System Equity Curve

And the equity curve continues to make new highs. Very satisfying, but remember these are just "example" systems to show the usefulness of the Better TRIN Oscillator. No stops or money management is included.

TRIN Indicator System Performance

Let's hope for a little more action tomorrow. Hope your Emini trading is going well.

If you're a regular reader of Emini-Watch you'll know I have a Short bias – I'm always trying to call tops. We made a new high this week and the market rally from the 666 ("Number of the Beast") low is now a year old. And frankly – I'm amazed, no staggered.

I hate this rally. I think it's based on lies. And this week's revelations of what Lehman Brothers was up to shows the depths to which (some) CEOs, Company Executives and Board members are willing to go to get their salaries and bonuses.

This is not just "shenanigans" – as Brad Hintz, former Lehman CFO, described it – this is fraud and we, the investing public, are being lied to.

What is most distressing is that this is not just one public company and it's auditor, as with Enron and Arthur Andersen. This has become systemic:

• FASB (Financial Accounting Standards Board): Spineless. Allowed banks to "mark to fantasy" instead of "mark to market". A nudge of political pressure and these guys buckled. I hope to God they're not in my platoon when we have to take the hill.
   
• Accounting Firms: They know who pays the bill. They don't work for you and me, the investing public. They work for the people they're supposed to audit – leaving the lunatics to run the asylum. Genius.
   
• Ratings Agencies: Talk about public humiliation of a "profession". Why would I believe a word these guys say any more? My advice – get a gun, slink away to a quiet office somewhere at the back and do us all a favor. Oh and don't forget the plastic sheeting, let's save the carpet at least.
   
• Federal Reserve Bank of New York: As Tim Geithner, former FRBNY President, famously said "I am not a regulator". Images of the Elephant Man and John Hurt slobbering "I am not an animal – I am a human being" play in my head. Yes, silly us. We thought the FRBNY worked for us – of course they work for the Banks, our mistake.
   
• Ayn Rand: Or is that Alan Greenspan? Wearing my Avatar 3-D glasses they look strikingly similar. Loved the books but who in their right mind would use "Atlas Shrugged" to determine economic policy? "Rational self-interest", please, let's call a spade a spade and greed, greed.

And again I have to ask – where is the outrage? Is the general public so consumed with keeping their jobs, paying their mortgage and the latest "cool" iPhone app that they don't have time to understand the issues and demand action?

To me, it feels like we're at a magic show. The crafty magician brings out his scantily clad assistant with long legs and womanly curves to distract you while he tricks you in front of your very eyes.

Why are we talking about Healthcare reform? Why are we focussed on Greece (a country with a population of 11 million people, half the size of Australia)? and Iceland? Why are there no movies or Oscar speeches about the GFC? Tiger Woods, Lady Gaga, etc. Take a look at this shiny trinket while I steal your wallet.

OK, on to the charts.

TRIN Indicator Turns Down (Emini daily)

TRIN indicator turned down on Friday. Smart Money oscillator turned down a couple of days again. Put Call Ratio oscillator at +196.

TRIN Indicator Systems (Emini daily)

Turn down in the TRIN indicator signaled to take profits on our TRIN systems Long trade. 32 points profits – surprise for me. Actual exit will be in the after-market.

TRIN Indicator System Equity Curve

These systems are "example" systems – that is, designed to show what is possible with the TRIN oscillator. There are no stops or money management built-in. But we're making new equity highs and it shows the robustness and lack of optimization.

TRIN Indicator System Performance

Again, just example systems but I like the balanced results from Long and Short trades. Similar profit factor, similar number of trades, similar average trade profit.

Commitment of Traders

Lastly, the Commitment of Traders chart. Professionals net Long with 2.1% of total open interest. And Oscillator has reached +112, over-bought but yet to turn down.

Good luck with your Emini trading this week and thank you for indulging my personal rant.

And Some Reader Comments …

“You are dead on … we're in a 'Bullshit' rally.” Bob H.

“Can't help but agree … now what we need is to get you a spot on NBC or CNN … Love your site!” Vaden H.

“It breaks my heart to know that every last word is absolutely the truth.” Robert G.

“That was great! I agree 200% … Corruption will continue because of the investing public's insatiable demand for quick profits … This recent run certainly lacks reason.” Alvin K.

“As rants go I'd give that one an A+ … It was precise without leaving any of the principles unscathed yet there was no repetition or embellishment … Good job.” John R.

“I loved your rant and agree with you 100%.” Bill W.

“I think many of us who look forward to your guidance and writings are all on the same page. But unfortunately with many happy to turn a blind eye to the truth and the majority ignorant of it we can only trade what we see and try to be emotionally removed. But what you say is true and greed is a strong motivator.” Paul M.

“I agree with your comments. It's nice to know that I'm not the only one.” Ken O.

“Your comments are very timely. But just to add gasoline to the fire … you forgot the SEC. Thanks, as always for your insightful stuff.” Tom W.

“I think Ayn Rand would have said pretty much what you have said. But don't make the mistake of letting Greenspan speak for her; she clearly would have repudiated him decades ago. And he has been busy repudiating his former philosophy and evading his own responsibility for the destruction.” Bill S.

“I loved the rant and couldn't agree more … I'm of the belief that the whole market is a scam. It's not intended for the public to make a profit, it's intended for the insiders to take our money … Behind closed doors they probably laugh their asses off about how stupid we are.” David

“Well said Barry. Glad to see someone has the 'kahunas'[sic] to actually say it in a public forum … I once believed in a Government that for the most part could be trusted. Obviously that is no longer the case.” Mike S.

Last Friday (5 February) the Emini bottomed around 1,040. We've spent the whole week rallying and almost reached 1,080 at the Close this Friday. Indeed on Friday we made an intra-day Low of 1,060 and rallied to Close on the high.

But something's not right. The adjusted TRIN reading was -24 showing net selling during Friday. The chart below plots these TRIN divergence patterns. Bearish divergence is signaled when the Close is greater than the Open but the adjusted TRIN reading is negative. This signal is by no means perfect, but …

TRIN Indicator Divergence (Emini daily)

Then there's Friday's intra-day activity. I didn't like it.

On Thursday the Professionals were taking profits into the 1,074 to 1,076 level. The Amateurs we're buying the highs and got wrong-footed. An "End of Trend" warning signal caught the high and the Emini sold off overnight.

Exhaustion Buying Volume & Professional Activity (Emini 4,500 tick)

On Friday, the Professionals were again taking profits every time we got into the 1,074 to 1,076 level. We had Exhaustion buying volume and then a final push to Close out the week on the high.

Smells like a "pump and dump" to me. But I have to say my other indicators are not so Bearish. All I can say is: my antenna is up. We'll have to wait for Tuesday to see how this plays out.

Enjoy the Presidents Day holiday on Monday if you're in the US. I'm not sure why the office of the Presidency is being honored – personally I think it should be changed back to Washington's Birthday or how about Goldman Sachs Day.

Good luck with your Emini trading.

TRIN Indicator System exited at nice Short trade at the close today. The signal to take profits is a turn in the Better TRIN Oscillator. Of all the breadth or market internal (non-price) data I've tested, the TRIN is consistently the most useful – and I've tested them all: VIX, A/D, etc.

TRIN Indicator System Takes Profits (Emini daily)

The equity curve, shown below, is doing nicely just sitting under new equity highs. The Profit Factor is also holding up since release over 2 years ago at about 2.6.

TRIN Indicator System Performance

OK, enough blowing my own trumpet. Where are we headed?

The TRIN Oscillator has turned up but it is usually the first of my swing trading Oscillators to turn and is usually early. The Put Call Ratio and Smart Money oscillators are deeply over-sold but have not turned yet.

TRIN Indicator and Other Oscillators (Emini daily)

I'm watching the Better Sine Wave for the next cyclical low. Today's chart is shown below and it looks like we're a day or two away from a cross-over. Once we've got the cross we then have to see price strength. So still some work to do. In after-hours we're also down heavily to 1,082 – I'm guessing on the AAPL result.

Waiting for Cyclical Low (Emini daily)

Good luck with your Emini trading.

Making new equity highs on a system feels great – but it's also very important. It shows that the system has not been over-optimized. With today's system designing platforms it's all too easy to run the optimization routines and develop the "perfect" system. I learned that the hard way. Now my system signals are very simple – no optimized values, one line for an entry, one line for an exit, etc.

Plus, I was lucky stumbling upon the TRIN – I do believe it has some leading indicator properties. Look at today's action – the adjusted TRIN Indicator reading was zero. Yes it was up day but according to the TRIN there was as much selling going on as buying. So profit taking as the market was going up. And I believe that was what was going on.

TRIN Indicator System Signals (Emini daily)

We finally took profits on a cluster of Long positions, exiting at the close. I trade a sub-set of these TRIN Indicator systems to reduce the number of trades, so I didn't have all these contracts on.

TRIN Indicator System New Equity High (Emini)

And a new high on the equity chart. It's been a few months since we made new highs and there's been some pain along the way – but that's system trading.

TRIN Indicator System Performance (Emini)

Lastly, the system performance stats. Remember, these are just "sample" systems that are possible using the Better TRIN Oscillator. You need to test and add your own money management rules.

Profit Taking Volume at End of Day (Emini 27 min)

Volume action at the end of the day showed profit taking on large volume. This is more like the pattern we should be seeing near a market turning point. I'm watching the next couple of days closely for weak closes on high volume bars then testing of the highs on low volume.

Good luck with your Emini trading.

Lot of email requests for an update after Wednesday's Emini action. I sense an anxiousness to get Short or decide whether to stay with Short positions already taken.

Remember, market tops always take longer to form than market bottoms – and we just made a new high. So we need to see weakness and then a re-test first – and that's if we just saw the high.

This rally is littered with commentators calling the top too early – including me with the weekly Hilbert Sine Wave turn at 920. I've learned my lesson.

TRIN Indicator (Emini daily)

The Better TRIN Oscillator has now reached +174. Overbought (obviously). If we see profit taking tomorrow this Oscillator will probably turn down. The Better TRIN Systems will signal profit taking and an initial Short position. That's if we see profit taking.

Hilbert Sine Wave Indicator (Emini daily)

Hilbert Sine Wave is yet to cross. We then also need to see price weakness for a cyclical turn ("End of Trend" warning signal) to be confirmed.

Volume Indicator (Emini daily)

This is the chart that has me most concerned. We have not seen large volume profit taking at the highs. The largest volume has been Professionals buying on panic selling by Amateurs. And I don't think the Pro's have had enough time to distribute their Long positions yet. However, they were selling into the close on Wednesday – and so that might be the first step.

Good luck with your Emini trading.

Emini powered ahead today and is a hair's-breadth away from Resistance at 1,075. The stops resting above 1,075 just have to be too tempting – the Professionals are sure to make a run at them.

This would generate some more hysteria about new equity market highs and suck in some more Amateurs, no doubt. Friday is always a good day to make new highs – then the media has maximum time to broadcast the news over the weekend and Amateurs are re-thinking their portfolios.

Had some email requests overnight to update the Emini Oscillator chart and comment on the new tick bar settings. So here goes:

TRIN, Put Call Ratio & Smart Money Oscillators (Emini daily)

The Emini Oscillators have all turned up and are approaching over-bought. Better TRIN has reached +80, Better Put Call Ratio has reached +53 and Better Smart Money is at -12. I'm waiting for Better TRIN to go above +100 and turn down.

The TRIN Oscillator as usual has been the first to turn. In this last up-leg, the TRIN Oscillator was actually signalling Bullish Divergence. That's why I like the TRIN Indicator so much – of all the market internals I've tested (including VIX) it seems to turn the earliest.

End of Trend Signals (Emini 1,500 & 500 tick)

Lastly, the new tick bar settings (500, 1,500 and 4,500) are working out well. The high today was caught nicely with "End of Trend" warning signals on both the 500 and 1,500 tick bar charts.

The first peak was caught by a signal on the lower time frame (500 tick chart). This was then re-tested and the second peak was caught by a signal on the higher time frame (1,500 tick chart).

Good luck with your Emini trading.

Quick update before Friday's market open. We're getting tantalizingly close to the 950 level. The Bulls would love to break this level and confirm their "green shoots" hypothesis. Here's what I see.

Cycle Turn Yet To Be Confirmed (Emini 135 min)

On Tuesday I said the next test for the Emini would be the cycle turn on the 135 minute chart. I thought we would get the cycle turn on Wednesday or Thursday. But for the cycle turn to be confirmed we need the Low of the bar to be broken – and as you can see on the chart above we've yet to get the cycle turn.

However, if we break 930 early on Friday then the cycle turn is in and the swing trading momentum turns to the Short side – at least as far as I'm concerned.

TRIN Indicator Shows Weak Buying Thursday (Emini daily)

Quick look at the TRIN Indicator chart. First up, the Long signal has worked out really well. Entered at 879 we're sitting on 57 points of open profit. Never expected that – but that's system trading, you never know which trades will work out best.

Thursday was an up day but the adjusted TRIN reading of just +16 shows it was weak buying – mixed in with a lot of profit taking. The TRIN Oscillator is also very over-bought at +163.

Good luck with your Emini trading.

Bingo. We got the pop out of Congestion that was expected from Friday's Volume Indicator post.

Break Out of Trend Line Congestion Zone (Emini 45 min)

The Trend Line chart above updates Friday's chart and shows how large range moves develop out of trend line Congestion Zones. Getting the direction right is the trick – and in this case the decline in selling volume was the key.

TRIN Indicator and TRIN Systems (Emini daily)

Last chart is just a "hats off" to the TRIN Indicator. Once again the TRIN Indicator leads at a key market turning point – beating the Put Call Ratio, Smart Money, VIX and any other measure of market internal strength.

The first warning that the down move was losing momentum was a Bullish Divergence signal last Tuesday (red dot on the Better TRIN). We got the TRIN Oscillator turn on Thursday. Then another Bullish Divergence signal on Friday.

A true leading indicator – thank you Richard Arms (developer of the TRIN Indicator).

Good luck with your Emini trading.