Earlier today I saw that TRIN, the Trading Index, has
been over 1.0 for 10 of the last 11 trading days. I have
not done extensive work on the TRIN, since mostly I use
it to see if there is fear in the market: A high TRIN
usually means we had exhaustive-type selling. For
example, at the mid-December low, we saw the TRIN stretch
up to 3.37 one day.
In late January, again as the market was making a low, we
saw it push up to 3.14. So you can see that a high TRIN
shows some sort of selling capitulation. The TRIN is
derived by measuring the advance-decline line against the
up volume and down volume, so a high TRIN means there has
been a lot of selling.
When the TRIN is over 1.0 for an extended period, it also
means there has been selling, but not of the exhaustive
or capitulatory kind. It’s more persistent selling. So if
the TRIN has been over 1.0 for 10 of the last 11 trading
days, that tells us there has been quite a bit of
persistent selling in the last two weeks. Yet the S&P
sits right near the top of the range.
I cannot explain to you how it is that there is seemingly
so little selling in the indexes, and yet the McClellan
Summation Index sits at lows. On the chart below, I have
boxed off three declines in the indicator over the last
year. I have omitted the October plunge, since it stands
out on the chart like a sore thumb.
Notice that the first two times, the S&P followed suit,
heading down. But this time the indicator -- which tells
us what the majority of stocks are doing -- peaked in
late April and yet the S&P continues to creep upward,
albeit in what I view as choppy or tiring fashion. But
either way, this is a big divergence from previous times;
the only other time we saw anything even close was the
fall of 2013 (not circled on the chart).
Then there is the number of stocks making new highs.
Don’t you think it is a bit ridiculous that a few months
ago when the S&P was at 2120, we had 300 new highs, and
today we have fewer than 100 new highs? That tells us the
market is rallying on narrower and narrower
participation. But it’s over on Nasdaq where I am more
surprised. Here we have the Hi-Lo Indicator, so it’s a
calculation using both new highs and new lows; here we
find this is the second lower high since March. Again,
this is not the way stocks should act at new market
These charts exemplify to me why a good cleanout to the
downside would be bullish. Individual stocks are already
being sold; stocks are already on their way to clean out
weak holders. A sharp move down would likely finish it
off, since it would get the VIX jumpy. It would also
likely send the put/call ratio’s 10-day moving average
(shown below) back up to the top of the range (indicating
an oversold condition). The indicators are already well
on their way to getting extremely oversold, so one more
push would get them there and it would remove the
complacency that exists.
So when I say that they keep saving them, that’s what I
mean. You can see saving them has given us one- or two-
day rallies and then nothing more. And while the indexes
have seen very little selling, those indicators tell us
individual stocks have seen plenty of it.
Longtime readers know that I have been a fan of
eBay (EBAY) for what feels like years. In an
otherwise dreary day, this stock moved up on volume. A
breakout over $61 would measure to the $66 area. I’d love
to see some follow-through on today’s rally.
The 10-day moving average of the put/call ratio is
discussed above. Currently it says be cautious, but then
so do many other indicators!
Helene welcomes your questions about Top Stocks and
her charting strategy and techniques. Please send an
email directly to Helene with your questions. However,
please remember that TheStreet.com Top Stocks is not
intended to provide personalized investment advice. Email
I look at the chart of Valspar (VAL) and think in
a different market we’d call this a top, especially with
that strong reversal/outside day it had on Tuesday. In
this market, we’ll just call it a trading range between
$82 and $88, so if it comes down a bit more, closer to
the lower end of the range, it’s a buy for a rally.
Conversely, a rally to the $88 level is a sale.
As we all know, these small-cap stocks tend to have a
mind of their own and do not trade the same way as large-
cap stocks do, thus I am always leery of them. Yet I
stare at this chart of Kratos Defense & Security
Solutions (KTOS) and then a move up and through $6
would be a breakout of an extended base that would
measure to about $7, and longer term near $8. In
percentage terms, that is quite a move. If it captured
some volume on the move up, it would be even better.
Idera Pharmaceuticals (IDRA) is trying to bottom,
but it looks to me to be quite early. So a move up over
$3.75 would find resistance. If that was then followed by
a pullback to $3.25-$3.50, the chart would then have a
head-and-shoulders bottom drawn out and it would also
give the chart more time to develop a small bottom. I
have drawn in gray how it might play out.
After rally, we may be in for more downside soon.
Everyone finally sees them as a problem.
Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.
David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
Every recommendation goes through 3 layers of intense scrutinyquantitative, fundamental and technical analysisto maximize profit potential and minimize risk.
Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
Want more than one service? Sign up to one of our packaged services and take advantage of amazing savings!
After the Bell
Before the Bell
Jim Cramer's Daily Booyah
Winners & Losers