Friday 1 June 2007

TRIN Divergence Pattern

Emini Trading Index 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.

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