TRIN 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.
TRIN - Emini Trading System Signals
The TRIN Emini Trading System has signaled short at the close. Today the Emini made a complete U-turn. We gapped down and dropped in the morning and then rallied all afternoon. By the end of the day the Emini was only down 3.50 points, closing at 1,555.25.
After yesterday's "High Churn" chart pattern we were expecting the Emini to drop today. However, the strength of the afternoon rally was impressive with a total of 2.1 million contracts traded by the day's end. This is eerily similar to last week's "drop and pop" on Tuesday and Wednesday.
But the TRIN Emini Trading System signals short …
The chart above shows the TRIN Oscillator turning, setting up a divergence signal shown by the white lines. This TRIN pattern forms the basis of one of my best Emini swing trading systems. The system does not trade often but is very profitable when it does. Using some simple money management the TRIN trading system generates a profit factor of 6.27 in back-testing. The TradeStation performance report is shown below and you can read more about the Trading Index (TRIN) here.
So, although it feels like the wrong thing to do, I'm going to follow my TRIN Emini trading system's short signal. Good luck with your trading.
Trading Index (TRIN) makes bearish divergence chart pattern
The Emini closed up 3.00 points at 1,549.00 on Tuesday. We got a classic Larry Williams Oops pattern today. The Emini opened below yesterday's low, closed the Thursday-to-Friday gap and then rallied to close near the high.
The market appears to be consolidating around the 1,550 level and getting ready to break higher. However, take a look at the chart above with the Adjusted Trading Index indicator added. Today's reading was -40, showing that the professionals were selling down their positions. A negative Adjusted TRIN reading with the close above the open is a bearish divergence pattern and shows internal market weakness.
Bearish divergence patterns are shown on the chart above with white dots, bullish divergence patterns are shown with red dots. This pattern isn't fool proof - 8 of the 12 signals on the chart were good. But the pattern is useful when combined with other indicators - in this case the Composite Trend Oscillator that peaked yesterday has now turned down. Let's see what the Emini does tomorrow.
Just as an aside, I have been working on an update of the TRIN Indicator Package for use on intra-day charts and day trading. The update is almost ready and will be released shortly.
TRIN Divergence Pattern
The Emini closed up 6.50 points at 1,539.25 on Friday. It's time to take profits and wait for the next down swing trade. We were in long at 1,523 (or 1,514 if you managed to time the pullback) and took some heat before hitting our 10 point profit target. The Emini has continued up as expected on Wednesday and open profit on the remaining half of the position is now 16 points.
The chart above shows the adjusted Trading Index (TRIN) indicator. Friday's reading was +29 and we now have a bearish divergence pattern with the Emini making a higher high while the TRIN is making a lower high. The last divergence pattern was at the end of March and this bullish signal worked out pretty well. Usually these divergence patterns are good for the next 2 to 3 days, so a good time to take profits. Read more about the Trading Index indicators here or watch the TRIN video here.
We have a convergence of non-correlated indicators signaling a down swing:
- Cycle downturn of the John Ehler's Hilbert Sine Wave (135 minute chart)
- High churn day on Thursday
- Doji and profit taking volume pattern on Friday
- Composite trend indicator showing bearish divergence
- Bond market continues down and 20 day lagged turning point approaching, and
- Crude oil is moving up
Next week should be interesting for the Emini market. I'm always early with my entries, so bear that in mind if you're following my trades.
Emini Daily Update: TRIN Oscillator Turns
The Emini closed up 0.25 points at 1,525.50 on Wednesday. Volume was high at 1.3 million contracts and a new high of 1,535.75 was reached before the market reversed and fell sharply in the afternoon.
We're short from 1,529.00 and so have taken a little heat on this trade - but nowhere near stops. We'll exit half the position at 1,519.00 - our 10 point profit target. The market always strengthens coming into a holiday long weekend and so there might be an opportunity to take profits and re-enter next week.
The chart above shows the ever-reliable Trading Index (TRIN) Oscillator, which turned down on Tuesday. Turning points in the oscillator are shown with white and red dots on the daily Emini bars (white for down, red for up). You can read more about the TRIN Oscillator here or for TradeStation users you can watch the TRIN indicator video here.
Emini Daily Update: Exhaustion Day
The Emini closed up 12.75 points at 1,493.00 on Friday. Finally, an exhaustion signal today. The Trading Index Oscillator peaked at +250 on Thursday, the highest reading since 2001. Then on Friday the Oscillator turned down and gave a TRIN Exhaustion short signal ('TrinX S' label on the chart).
These exhaustion signals don't happen all that often, from 9 to 12 times each year. But when they do they can be quite profitable. The average trade makes around 16 points; winning trades average 27 points. The chart below shows the TradeStation performance report.
You can read more about the Trading Index TRIN indicator here.
Tuesday 10 April 2007Emini Daily Update: Weak Trading Index TRIN
The Emini closed up 1.25 points at 1,455.75 on Tuesday. Another small range (5.75 points) and low volume (0.7 million contracts) day, signaling a lack of demand. The Emini couldn't get past 1,458 - a level it has hit three times in the last two days.
The chart above shows my Adjusted Trading Index (TRIN). You can read about the Trading Index indicator here. Today's adjusted TRIN reading was just +7, showing a lack of conviction by buyers. We might be seeing the Emini starting to roll over.
Tuesday 13 March 2007Emini Daily Update: Trading Index TRIN Divergence
The Emini closed down 27.50 points at 1,392.00 on Tuesday. We got the downward break - I hope everybody who reads my commentary was prepared and made good money.
The big question now is will the decline continue or will the 1,380 level hold? I don't know the answer but when I looked through my charts after the close today the Trading Index (TRIN) data stood out as quite unusual and might provide insightful.
The chart above shows the adjusted Trading Index on daily bars. Remember the adjustments I make include:
- Using both NYSE and NASDAQ data to get a broader market view
- Making the data linear instead of ratio based
- Flipping the data so that declines are negative and advances positive
What you can see from the chart is that today's adjusted TRIN reading is only -20! The decline we had two weeks ago registered an adjusted TRIN reading of over -300.
I've marked on the chart three divergence patterns over this period. The first is a bullish divergence pattern (price makes lower lows, TRIN makes higher lows) after the market correction on 27 February 2007 which led to a 45 point rally. Then we had a bearish divergence pattern (price makes higher highs, TRIN makes lower highs) which led to today's decline of 35 points from the high.
We now have another bullish divergence pattern with today's adjusted TRIN reading of -20. This could mean a significant break below 1,380 is unlikely. Let's wait and see.
Click the following link to find out more about using the Trading Index (TRIN).
Friday 9 March 2007Emini Daily Update: Trading Index TRIN Divergence
The Emini closed up 0.25 points at 1,417.75 on Friday. We had a Larry William's Oops open (today's open above yesterday's high) and the professionals took the opportunity to take profits. The Emini quickly sold off but strong buying came in at 1,410 later in the day.
The chart above shows how John Ehler's Hilbert Sine Wave worked out after yesterday's article. The Sine Wave nailed the high of the day and is labeled "FirstPB" for First Pull Back. We'll see how far the Emini will fall towards the cyclical low and completion of the trend move - especially given the strength of the rally late on Friday that carried the Emini back up from 1,410 to 1,418.
The second chart above shows the adjusted Trading Index (TRIN) indicator on daily Emini bars. This appears to be setting up a bearish divergence pattern over the past 4 days (red trend lines). The Emini is up and making higher highs, while the TRIN has lost steam and put in a lower high. Click the following link to find out more about how to trade using the Trading Index (TRIN).
Good luck Emini trading next week and look out for the Commitment of Traders update later today (interesting data released).
Tuesday 20 February 2007Trading Index (TRIN) Divergence
The Emini closed up 3.00 points at 1,462.00 on Tuesday. Although the Emini started the day down and falling, it eventually found support at 1,452.25 and bounced on higher volume and ended the day up - a typical "bear trap" day. However, beware the low Emini volume of the last 3 days and a Trading Index (TRIN) divergence pattern shown on the chart below.
The adjusted Trading Index (TRIN) reading today was 58 and a new high was made. However, last Thursday the adjusted TRIN reading was 162, giving us a bearish divergence pattern. This pattern is highlighted on the chart above with rising prices and falling TRIN readings (red trend lines). A similar pattern occurred at the beginning of January 2007.
My use of the Trading Index (TRIN) data is somewhat unconventional. You can read about the simple mathematical adjustments I make to the raw data that make it much easier to interpret Trading Index here.
We've now had a nice bounce in the market over the last week from the low of 1,435 made last Tuesday up to yesterday. I have to admit that I was surprised how quickly the market turned last week. It would not be surprising to see some professional profit taking coming in, as non-professionals get sucked back in on new highs.
Note: Starting today, I will be sending out full text articles, rather than summaries, as an experiment. I hope you like this change. Also apologies for not posting more frequently over the last two weeks - I was having too much fun snowboarding in Japan.
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