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 TRIN Indicator 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 Indicator here or for TradeStation users you can watch the TRIN indicator video here.

The Emini closed up 12.75 points at 1,493.00 on Friday. Finally, an exhaustion signal today. The TRIN Indicator Oscillator peaked at +250 on Thursday, the highest reading since 2001. Then on Friday the Oscillator turned down and gave a TRIN Indicator Exhaustion short signal ('TrinX S' label on the chart).

TRIN Indicator Exhaustion

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.

TRIN Indicator Exhaustion Performance

The TRIN Indicator is one of my favorite market breadth measures – it usually leads the market and highlights weakness or strength before turning points. Plus it’s not price-based and so you can compliment price analysis with a non-correlated indicator.

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.

TRIN Indicator

The chart above shows my Adjusted Trading Index (TRIN) indicator. You can read about the TRIN Indicator here. Today's adjusted TRIN indicator reading was just +7, showing a lack of conviction by buyers. We might be seeing the Emini starting to roll over.

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 TRIN indicator data stood out as quite unusual and might provide insightful.

TRIN Indicator Divergence

The chart above shows the adjusted TRIN Indicator 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 Indicator reading is only -20! The decline we had two weeks ago registered an adjusted TRIN Indicator 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 indicator 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 indicator 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 indicator 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 TRIN indicator.

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.

John Ehlers Hilbert Sine Wave

The chart above shows how John Ehlers 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.

TRIN Indicator

The second chart above shows the adjusted 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 indicator has lost steam and put in a lower high. Click the following link to find out more about how to trade using the TRIN Indicator.

Good luck Emini trading next week and look out for the Commitment of Traders update later today (interesting data released).

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 TRIN indicator divergence pattern shown on the chart below.

The adjusted Trading Index (TRIN) indicator reading today was 58 and a new high was made. However, last Thursday the adjusted TRIN indicator reading was 162, giving us a bearish divergence pattern. This pattern is highlighted on the chart above with rising prices and falling TRIN indicator readings (red trend lines). A similar pattern occurred at the beginning of January 2007.

My use of the Trading Index (TRIN) indicator 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 TRIN Indicator data 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.

The Emini closed up 7.75 points at 1,451.00 on Thursday. My mate, Rob, laughed at me today and said "You're always too early. When will you learn?" He's right of course. So rather than me make excuses I'll just show you 4 charts. Check them out below and make your own conclusions.

Trading Index (TRIN) divergence on the chart below with the Emini up but adjusted Trading Index (TRIN) negative. Divergence shown by white dot on daily bar.

Trading Index (TRIN) oscillator turns down from highs on the chart below. Turning points shown by white dot on daily bar.

Cyclic turning point in 135 minute bars on the chart below. John Ehlers Hilbert Sine Wave shown below intra-day bars.

NASDAQ weaker than Dow in last 3 days on chart below. Bar chart below daily bars shows percentage difference between NASDAQ and Dow when the Dow has a larger move than the Dow.

The Emini closed down 0.25 points at 1,438.50 on Wednesday. Another exhaustion signal with Trading Index (TRIN) divergence – negative adjusted TRIN but close greater than open. See the chart below. Was today a trap up move?

White dot = Bearish TRIN Divergence; Red dot = Bullish TRIN Divergence

Trend and exhaustion summary

Summary of current trend oscillators – bearish:

• Trading Index (TRIN) oscillator turned down
• Open Close oscillator (Secret #2) oscillator turned down
• Hilbert Sine Wave oscillator overbought at +97 and about to cross
• Smart Money oscillator overbought at +54 but not turned yet

Summary of current exhaustion indicators – bearish:

• Trading Index (TRIN) divergence today (see chart above)
• No Demand (low volume) pattern yesterday
• High Volume Churn pattern yesterday
• NASDAQ vs Dow divergence yesterday and today

The only fly in the ointment was the buying at the end of today. Could see some follow through tomorrow morning but I'm waiting for a high volume break below support at 1,435.

The Emini closed up 4.00 points at 1,424.50 on Wednesday. Trading Index (TRIN) pop today – but is that all the Emini could manage? We didn't even break yesterday's high. Maybe that's being harsh – the Emini rallied almost non-stop from open to close on above average range and volume. Check out the adjusted Trading Index chart below.

Spike on TRIN Indicator

The adjusted Trading Index (TRIN) reading was +137 and confirmed today's buying. However, the Emini had to work hard all day from an open that was 5.25 points below yesterday's close to close at the day's highs. We're now stuck in a range between 1,412 on the low side and 1,425 on the high side.

I expect we'll grind higher tomorrow but we did end the day with a lot of churning volume. If we slide from tomorrow's open this was profit taking at the close; if we continue to advance this was professionals steadily absorbing the selling volume.

Expecting holiday strength

Apple did continue it's advance today and the NASDAQ and Semiconductors are performing more strongly. However, it did seem like hard work. The Emini typically rallies into holidays and we have the Martin Luther King long weekend coming up and no day session trading on Monday.

If we continue slowly higher over the next couple of days, at some point we may spark a short covering rally. Short stops could be sitting around 1,432 and this would give the professionals an opportunity to cascade prices higher, take profits and reverse positions. We'll have to wait and see.

The Emini closed down 11.00 points at 1,416.50 on Friday. Once in a while my views on the direction of the market differ widely from most of the commentaries I try not to read. That was the case again after the close on Friday and over the weekend. First post of the New Year and 3 charts to review.

Friday's market action first

The Emini opened down 3.50 points at 1424.00 on Friday. The market immediately started to sink but by lunchtime had put in a high volume bar with a low of 1414.25 and then traded sideways for the rest of the day. The Emini eventually closed at 1416.50. Range for the day was average at 10.00 points and volume just above average at 1.1 million contracts traded.

TRIN indicator divergence

The first chart shows Trading Index (TRIN) market divergence. I adjust Trading Index data so it's easier to interpret and the indicator is shown below the daily bar charts of the Emini. When the adjusted Trading Index is positive but the market closes down, this is positive divergence and shown by red dots on the daily bars. Vice versa for negative divergence and white dots on daily bars. This shows that although Friday was a down close day the volume traded was buying volume.

Stopping volume pattern

The second chart shows my stopping volume pattern. If the market makes a new low on higher volume than the previous day but the daily range was LESS than the previous day, this shows buying volume is coming into the market and preventing it falling further. Conversely if the market makes new highs on higher volume but smaller range this shows selling volume coming in. The pattern is shown on the chart automatically and plotted below the daily bars when bullish and above the daily bars when bearish (I love what you can do with TradeStation Easy Language).

Trend Line support

The third chart shows trend lines automatically plotted on the daily Emini bars. As you can see we recently broke a trend line connecting the last 2 pivot points (strength 4). However, Friday's low was almost exactly on the previous rising trend line that is formed from the low points on 11 October, 3 November and 28 November.

Summary

The charts above illustrate 3 reasons to be bullish about the Emini market, but they're not the only ones. In addition we have:

• Lower oil prices
• NASDAQ performing stronger than the Dow
• Large volume spike on Dow with little follow through to downside (buying volume)
• My trend indicators in the buy zone, but not strongly over-sold
• Cycle support on daily and 135 minute time frames
• Bearish media commentaries

On the bullish side we have weak bond market, seasonality and Commitment of Traders data. (Note: Release of latest Commitment of Traders data delayed from Friday to Monday.)