Monday, December 6, 2010

A Sobering Chart.

Several blogs are pointing out the low 5 day Arm's Index (TRIN) on Friday. Low TRINs are supposed to indicate over-bought markets--markets that are ready to pivot downwards--well that is the conventional wisdom.
The chart below indicates that low TRINs over the last 3 years seem to occur during the acceleration stage of several rallies since the March '09 low. Judging by the evidence I would be inclined to be cautious when using TRIN.

This is interesting since a comparison to the "TRINs" of the 1990s and early 2Ks to the behavior of market breadth today suggests that the market--for whatever reason--is a different beast. Is it because of the power being exerted by hedge funds??--the omnipresence of ETFs???, black pools, the nauseam. The finger of immediate blame may be pointed in many directions--but one thing is certain--the general public are becoming farther and farther removed from the 'market place'. At one point--when America was 'humming' individuals owned shares of Ford, GE X KO EK....the middle class participated in the economy--reaped the benefits and invested in the country on a personal basis. Today the middle class--the remaining few that can afford to invest in equities-- have their wealth managed by institutions that package product which consequently does not necessitate an individuals direct attention to the industrial economy.
As the middle class struggle in a world where money is being polarized at the fastest rate in America's history, their jobs are disappearing while at the same time their wealth is being invested in a world that becomes increasingly obscure and removed from the devastation of the foundations of our way of life.

The markets have changed--for the benefit of the common good??? That would be a tough argument to make.

Extremely low TRIN values are indicated by the green columns.

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