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This week's Barron's has an extensive interview with Martin Zweig.
Below is a portion where he discusses what the TRIN indicator has been
up to and how he sees it historically. Since my data doesn't go back
that far, I found it very interesting.
The entire article can be found at
http://interactive.wsj.com/edition/current/articles/SB87834117132170500.htm
Chip
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<snip>
MZ: And there was another bullish technical indicator this week I want
to mention.
Q: Which is?
A: I wrote an article about this one in Barron's, back in May 1982.
It's called TRIN, the trading index Richard Arms invented, so
sometimes it's called the Arms Index. We had an enormous TRIN on
Monday; my unofficial number was 8.97, which is the third-highest one
I've ever gotten.
Q: And TRIN, for the technically challenged, is --
A: TRIN is the advance/decline ratio, divided by the up/down volume
ratio on the New York Stock Exchange. I only have data back through
1965, because up/down volume data weren't collected until sometime in
1964. I follow TRIN on a 10-day moving average basis, and if the
10-day average hits 1.5, it's pretty bullish.
Q: That doesn't happen very often.
A: No. If you take out what were essentially duplicate signals, like
September '74 and November '74, there have been only six previous
signals. I'll give you the months: September '66, May '70, September
'74, March '80, August '82, October '87. Every one of those signals
came within moments of the bottom of a bear market. In '87, in all
fairness, you actually got the signal on the Friday before the Crash.
And obviously, the first day after that was horrible. But I'm not
trying to say the signal occurred simultaneously with the bottom. In
'66, it came when you were within a week or two of the bottom. In May
of '70, it was about two weeks before the bottom. The September '74
signal was about a week before the bottom. In March of '80, you were
right about at the bottom and the same with August '82. But even
measuring from the day of the signal, so including Oct. 16, 1987, when
you got killed the next trading day, the average gain one year later
was 28.9% on the S&P. If you waited one day to buy, that average gain
would have been 33%. I'm not trying to make a federal case here, it's
only one indicator. But this indicator is designed to show an oversold
market where there is a lot of fear. Where there is a tremendous
concentration of dumping of stocks. The up/down volume ratio was
169-to-1 on the downside on Monday. The only day higher than that,
ever, in my numbers, was Oct. 19, 1987, when it was in the ballpark of
500-to-1. So if you want to talk about heavy concentrated selling,
fear and panic, you had it on Monday. Now, that doesn't prove you're
at a bottom.
<snip>
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