Have you read the following article: http://top5indicators.blogspot.com/2013/09/how-to-interpret-predictive-power-of.html?
If so, you have good understanding about the predictive power of the TRIN.
Moreover,
when the TRIN is combined with a High-Low Index, it can work more
effectively. The High-Low Index (HL
Index) is computed as the number of stocks with new 52-week highs, divided by
the total number of stocks reaching either a new 52-week high or a new 52-week
low.
TRIN
|
HL Index
|
Market Movement
|
Oversold
|
New Low
|
More likely to continue the downtrend
|
Oversold
|
HL stabilizes or trends up
|
Bottom is likely in sight
|
Overbought
|
New High
|
More likely to continue the uptrend
|
Overbought
|
HL drifts to lower level
|
Possible topping is in process
|
Combined TRIN and HL Index Power to Foretell the Near Term Market Movement
Source from Stock Market Indicators, by Dr. M. Metghalchi. (Edited by authors)
The above table discloses relationship between the TRIN
reading and the HL index, can be used to foresee the future market
movement. When the TRIN enters the
oversold territory, and the HL index reaches the new low, this would confirm
the likelihood of a continuous downtrend for the stock market. Otherwise, if
the HL index provides stabilization evidence, the market would stop bleeding
and establish a bottom.
On the
other hand, if the TRIN claims the overbought condition, in the meanwhile, the
HL index provides a confirmation by reaching the new high, the market is more
likely to continue the uptrend, and traders can attain more profit. However, if the HL does not cooperate well,
the market might be in the topping process. Traders should be alert regarding a
possible market reversal.
Please let
me know if you have any questions or comments about this subject.
If you want to read more about Traders Index (TRIN), you can visit:
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your visiting and reading.
Have a
great day!
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