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Just a quicky


One of the things I track is the ARMS Index (originated by my friend Dick Arms), otherwise know as the TRIN indicator. This indicator measures price and volume of the NYSE. It is calculated using the following formula;

((advancing issues/declining issues) / (advancing volume/declining volume)). The calculation could be done for any exchange where price and volume are published, but I track it each day for the NYSE and NASDAQ markets - looking for extremes.

While I frankly don't know how much weight to put in it because of the holiday, the TRIN on the NYSE was 3.49 on Friday. That happened because declining stocks beat advancing stocks by a wide margin, but also because advancing volume was crushed by declining volume ((1048 / 2150) / (91845 / 657008)). I looked back over the year to see how many times it was above 3, which is indicative of a market getting killed and found there were only two prior readings above 3. Both instances were followed by a brief near-term respite and then further intermediate-term downside.

That would fit with the scenario of oversold bounce, but one that is not sustainable. Again, I don't know how much it means because of the holiday volume skew, but thought you would all want to know.
No positions in stocks mentioned.
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