Emini Low Volume Test and TRIN System Update
Low volume test on the Emini today and the Better TRIN system reverses. First the low volume test chart.
Emini Low Volume Test
The 81 minute Emini chart above shows the volume climax we got towards the end of yesterday. Panic selling by the public was absorbed by the Professionals. Today we tested the 1,393 level but this time there was lower volume - a low volume test. The Emini bounced from this level and the bottom of this down swing could now be in.
Emini Signal: Better TRIN System
Meanwhile, the Better TRIN Oscillator turned up and signaled to take profits and reverse position on the Better TRIN System. We were expecting this after Monday's Emini oscillator update. Yesterday, we got a bullish divergence warning signal but waited for the actual Emini signal today.
Emini Equity Curve: Better TRIN System
We're making new equity highs on the Better TRIN System, which gives me greater confidence in trading it. Good luck with your trading.
Trading Index (TRIN) - Extreme Negative Reading
Extreme reading on the Trading Index (TRIN) today. The adjusted TRIN reading was -256, a level not seen since the end of February sell-off last year. You can read about the adjustments I make to the raw Trading Index values here.
The Emini didn't hold the 1,450 level discussed on Thursday. I entered a long trade in after-hours at 1,456. The trade immediately went in my favor, up 7 points, so I raised my stop to just under break-even. Then the jobs report came out and my stop got hit. Unbelievably I got positive slippage and ended up with a loss of only 0.75 points.
Emini and Extreme TRIN Reading
The chart above shows the extreme Trading Index (TRIN) reading of -256 and that the Better TRIN System is still holding a short trade from 1,490.
What's the best way to trade these extreme TRIN readings? I tested a simple system of going long the Emini at different TRIN levels. The entry is the next open after an extreme reading and then exiting 3 days later.
The chart below shows the Profit Factor at different TRIN levels, ranging from 0 to -300. We get a peak profitability around -220, but below that the system is unprofitable (profit factor < 1). So buying these extreme TRIN levels, expecting the market to bounce straight away, does not work consistently.
Buying Extreme TRIN Reading at Next Open
Instead of entering the market straight away, let's wait for some confirmation. The chart below shows the Profit Factor when we wait for a break above the prior day's high, after an extreme TRIN reading. Again the trade hold is 3 days.
In this case the shape is similar - a drop off in profitability below -180. But there is also a peak at -270 on the adjusted TRIN. In addition, I've excluded the results below -280 because there are only 2 trades (at -290 and -300) which are both profitable.
Buying Extreme TRIN Reading at Break Above High
Based on these back-tests, it is not a sure thing that we'll get a bounce in the Emini on Monday just because of the extreme selling and TRIN reading we saw on Friday. Best to wait for a break above the prior day's high. In the meantime, the Better TRIN system is still short. Good luck with your trading.
TRIN Emini System Update
TRIN Emini system exits long trade at the close today.
TRIN Emini System
Yesterday we got a bearish divergence signal on the Better TRIN indicator (see bottom pane of chart above). It would have been a perfect trade if we'd exited at yesterday's close, but we had to wait for the TRIN Oscillator to turn down for confirmation. The trade still managed a 23 point or $1,150 profit per Emini contract.
And thank you to Robert for the kind words in his email today:
"I am very much enjoying getting to know the Better TRIN - it's wonderful and is transforming my trading. You really should name it the Taylor Oscillator."
Apologies for the shameless promotion.
Start of Emini down leg?
The TRIN Emini system has also now signaled short at today's close. The 1,475 to 1,485 gap left from last Friday's Emini action looks like it might get filled. Other confirming indicators include:
- Cycle down turn on 135 minute Hilbert Sine Wave chart
- Over-bought readings for Smart Money and Put-Call Ratio Oscillators
- Emini over-valued versus Bonds and complex top formed in Bonds 20 days ago
- US dollar weakening versus Japanese Yen and crude oil testing $100 per barrel
Good luck with your trading.
Using the TRIN to Signal Emini Turning Points
A sequence of 3 charts today, showing how the TRIN (Trading Index or Arms Index) can be used to highlight Emini turning points.
The first chart below shows daily Emini bars with the Better TRIN indicator below. There's nothing fancy about this simple indicator - it makes TRIN data easier to understand in 2 ways:
- Positive values indicate buying and negative values indicate selling
- The values range from roughly -100 to +100 and are linear, not a ratio like the raw TRIN data
If you're interested in how this is done, it's all explained in the Better TRIN indicator article here.
Emini: TRIN Bullish Divergence Signal
Last Friday we had the first warning of a possible bullish divergence setting up. The Better TRIN indicator identifies possible divergence patterns with a red dot for bullish and white dot for bearish. The Emini continues to make lower lows on Monday and Tuesday but the TRIN is making higher lows.
Emini: More TRIN Bullish Divergence Signals
On Tuesday the Emini closes the 1,443 to 1,451 gap mentioned in the last post and rallies hard in the afternoon. The Better TRIN value is positive, indicating buying, but the Emini closes below the open. This is another bullish divergence signal and a red dot is printed on the Emini bars. The same thing happened again on Wednesday, which was also a doji candlestick pattern day indicating market indecision.
Emini: TRIN Long Entry Signal
Also on Tuesday, the Better TRIN Oscillator turns up and the TRIN system signals to go long at the end of the day with a Type D pattern. The trade was entered in after-hours at 1,466 and the Emini closed at 1,498 on Friday - an open profit of 32 points or $1,600 per contract. Let's see how this trade eventually works out. Good luck with your trading.
Monday 3 December 2007Better TRIN Oscillator Systems - New equity high
Better TRIN Oscillator update today. I will finish my article on the Better Volume indicator but thought it more relevant to show today's Better TRIN Oscillator chart.
Better TRIN Oscillator & Systems
The Better TRIN Oscillator turned down today and that was also the signal to exit long positions entered over a week ago. My other oscillators (smart money and put-call ratio) are also over-bought with readings above +100, but yet to turn down. In addition, we're approaching a cyclical turning point down on the daily chart of the Emini and all the other indices (Dow, NASDAQ and Russell).
As for the systems, there are 5 Better TRIN Oscillator systems (A to E) that I run concurrently, as shown on the chart above. They generated multiple long signals around the bottom of the last down move with an average entry price of 1,423. I also use a simple money management trick of doubling up after a losing trade and in this case a total of 10 contracts were bought (2 for each of the 5 signals). With today's exit at 1,476 the average profit per contract was 53 points - very nice.
The 5 systems all use the Better TRIN Oscillator and are very simple, each with one line of code for a long signal and the reverse for a short signal. They all share the same exit signal, again just one line of code for exit long and one line for exit short. The systems are included in the Better TRIN Indicator package as examples of what can be done with the Oscillator. I'm sure system writers better than me could improve upon them.
Better TRIN Systems - Equity Curve
Since release the combined equity curve for the Better TRIN Systems has continued to make new highs. The systems appear to be robust since the code is very simple and does not include any optimized or back-tested input values.
Better TRIN Systems - Performance Summary
And here's the performance summary of the combined systems. The long and short profit factors are evenly matched and both above 3, etc. etc.
Check out the Better TRIN Oscillator and Systems here. The price goes up next week, so if you're interested, act soon.
TRIN Oscillator and Emini Direction
The TRIN Oscillator turned down on Monday. There is a huge amount of speculation right now about what the Fed will do with rates and where the market is headed. At the end of last week the Emini showed consolidation on all time frames I follow (from 5 minutes to 135 minutes and daily charts). This means we're winding up for a big move - but in which direction?
TRIN Oscillator Turns Down
The chart above shows my trusty Better TRIN Oscillator. On Monday this indicator turned down, giving 3 lower turns in a row. Not exactly a divergence pattern, but just shows weakness in the market. You can read more about the TRIN Oscillator here.
Remember, don't rely on a single indicator to trade - especially an oscillator in a strongly trending market. But combine non-correlated indicators to anticipate market turning points.
Friday 31 August 2007TRIN Oscillator - Emini System
The TRIN Oscillator Emini system signaled short today. The Emini closed up 15.25 points at 1,476.75 on Friday. Volatile day today with a gap up, three pushes higher and then profit taking on large volume at the end of the day. Net result - a doji day.
The Emini has a tendency to rally the last couple of days of the month AND leading up to a holiday. This week we have these two events coinciding and right on cue we had a rally after Tuesday's drop. After the long weekend, where to next? My best guess is a downswing in the Emini:
- The 135 minute Hilbert Sine Wave has peaked and is about to cross;
- We've had No Demand volume patterns in the Emini on the last 2 days;
- Doji patterns usually show market uncertainty; and,
- The TRIN Oscillator Emini system has signaled short.
TRIN Oscillator Emini System Signal
I seem to be posting a lot of articles about the TRIN lately. Maybe I'll write about something else next week, but I had to show you this Emini system. It is based on the TRIN Oscillator and take trades after "hook" patterns. The chart above shows the latest "hook" pattern and the last 2 trades using this system. Trades are entered on the Close and exited on the next turn of the TRIN Oscillator.
TRIN Oscillator Emini System Performance
The screen grab above shows the performance results of this Emini system. It signals 8 to 12 times a year, generates a very healthy 4.88 profit factor, has an average winning trade of over 30 points and winning trades almost twice the size of losing trades. Using some very simple money management you can get the total profit over $54,000 and the average trades over $1,000. All with 1 line of code for each entry and each exit.
TRIN Oscillator Emini System Equity Curve
The equity curve of the system is shown in the chart above. Performance was a little flatter in 2005 and 2006, but I'll take what I can get - especially when this is part of a suite of non-correlated systems. Anyway, I plan to release the system as part of the Better TRIN indicator package, so look out for it. Good luck with your Emini trading.
Wednesday 22 August 2007TRIN - Bearish Divergence Pattern
Bearish divergence pattern on the TRIN today. Last week we had a bullish divergence pattern on the TRIN and this resulted in a nice swing to the upside for the Emini. The TRIN is losing steam a little now and the TRIN Oscillator has become over-bought.
TRIN Bearish Divergence Pattern
The chart above shows Emini daily bars with my adjusted TRIN indicator ("Better TRIN") below. Remember with the Better TRIN indicator, bullish market internals have positive values and bearish market internals have negative values. We've got a higher high on the Emini but the TRIN has weakened - setting up a bearish divergence pattern.
Divergence patterns on the indicator are shown with white dots for bearish and red dots for bullish. You can see how the last TRIN bearish divergence pattern worked out, catching the Emini high of 1,510 before reversing strongly.
TRIN Oscillator Over-Bought
This divergence pattern is also happening while the TRIN Oscillator is in over-bought territory - but yet to turn down. These TRIN signals sometimes are right on cue, sometimes they take a little time to come good.
I've exited my long position and will wait to see what happens next. Interesting to note that the Emini is up over 10 points in after hours trading. Could we get a Larry Williams Oops entry tomorrow morning? We'll have to wait and see.
You can read more about the adjusted TRIN indicators here and how to spot TRIN bearish divergence patterns.
Friday 17 August 2007Trading Index - Divergence Pattern
Trading Index (TRIN) divergence pattern today. The Emini bottomed yesterday with a volume climax and 4.8 million contracts traded. Today, the Emini shot up 25.50 points and closed at 1,450.00. The Trading Index Oscillator was in over-sold territory yesterday and has now turned up and set up a bullish divergence pattern.
Emini with Trading Index Oscillator
The chart above shows the Trading Index Oscillator on daily Emini bars. The bullish divergence pattern is shown with the white trend lines. The Emini has made a lower low, however, the Trading Index Oscillator has made a higher low. This sets up a bullish divergence pattern.
The TRIN indicator is labeled "Better TRIN Osc" - I've recently re-branded some of my indicators to match the website's tagline and objectives of Better Emini Trading. What I do best is take existing market indicators and improve upon them. My Trading Index Oscillator is a good example. It's a combination of 3 ideas - using the log of the TRIN, creating an oscillator by cumulating the data and then applying some very smart mathematics to sharpen up the turning points. So the "Better" label seems appropriate.
Trading Index and other market fundamentals
In the bigger picture, we have a very bullish Commitment of Traders report (see tomorrow's post) and we're oversold from a Bond market valuation perspective. Plus, now we have a TRIN Oscillator turn with bullish divergence. The next upswing might be more powerful than people are expecting.
This Trading Index article explains the TRIN Oscillator in more detail.
Tuesday 24 July 2007TRIN Indicators - Emini Divergence
TRIN indicator signaling divergence on the Emini today. A gap down open followed by an afternoon sell-off ended up in a 26.25 point decline on the Emini. The Emini eventually closed at 1,523.00 with very high volume of 2.1 million contracts traded.
Last Wednesday the TRIN Oscillator showed divergence and signaled short at the close. That trade felt uncomfortable at the time but has worked out well. Funny how the best trades often don't feel right - but great back-testing results help to pull the trigger.
Friday's sell-off resulted in an adjusted TRIN indicator reading of -97; today's adjusted TRIN reading was -73. With today's lower low than Friday, this sets up a TRIN indicator divergence pattern and a potential long entry on the Emini. The signal might be early - my cyclical indicators have yet to turn - but this may be an early warning sign.
The Emini chart above shows TRIN indicator divergence with red (bullish) and white (bearish) dots superimposed on the Adjusted TRIN indicator. The signals aren't foolproof (nothing is) but even the poorer signals are early warning signs of market turning points. You can read more about the TRIN indicators and Emini divergence patterns here.
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