Friday 17 August 2007

Trading 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.

Trading Index Divergence Pattern Image

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.