A sequence of 3 charts today, showing how the TRIN Indicator (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 indicator data

If you're interested in how this is done, it's all explained in the Better TRIN indicator article here.

Emini: TRIN Indicator 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 indicator is making higher lows.

Emini: More TRIN Indicator 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 Indicator 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 Indicator Long Entry Signal

Also on Tuesday, the Better TRIN Indicator turns up and the TRIN Indicator 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 Emini trading.

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.

The TRIN Indicator 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 Indicator Oscillator Turns Down

The chart above shows my trusty Better TRIN Indicator 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 Indicator 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.

The TRIN Indicator 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 Indicator Emini system has signaled short.

TRIN Indicator Emini System Signal

I seem to be posting a lot of articles about the TRIN indicator 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 Indicator 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 Indicator Oscillator.

TRIN Indicator 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 Indicator 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.

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 indicator here and how to spot TRIN bearish divergence patterns.

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 TRIN Indicator article explains the TRIN Oscillator in more detail.

TRIN Indicator 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 Indicator 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 indicator 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 indicator and Emini divergence patterns here.

TRIN Indicator 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 Indicator Emini Trading System signals short …

The chart above shows the TRIN Indicator 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 Indicator 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 TRIN indicator here.

TRIN Indicator System Performance

So, although it feels like the wrong thing to do, I'm going to follow my TRIN Indicator Emini trading system's short signal. Good luck with your trading.

Trin Indicator Divergence 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 TRIN 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 Indicator 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 TRIN Indicator 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.