The equity markets are getting just a whiff of bad breadth again - TRIN and McClellan charts

Bad breadth is a cute way of saying that the volume data isn't very strong for the markets. It shows up as weakness in buying volumes, and less participation by many sectors and stocks in an advance. Remember the last time we really looked at TRIN here, and I pointed out that it was actually showing oversold levels? It was hard to believe at the time because the market was "supposed" to be ready to go down. Sure enough the market didn't go down as widely hoped. Now, TRIN went and closed under .80 and its 3-day moving average is also under .80. Richard Arms, the originator of this indicator, uses it to detect extreme conditions and considers the market overbought when TRIN's 10-day moving average goes below .8 (and oversold above 1.20). The 10-day MA isn't under .80, so using Arms' view the market wouldn't be overbought. That's why I'm calling this a "whiff" of bad breadth!

There are some other ways of seeing this too. The McClellan charts for NYSE and Nasdaq (courtesy of DecisionPoint.com via Stockcharts.com) are also below. The picture they paint look to me rather similar to what Terry Laundry is showing with his T Theory charts (see his update, about which I posted last night) (although Terry also overlays his "T" analysis). Namely, the Oscillator flagging down as price has advanced, a warning signal although it remains above the zero line. The ratio index on both has pushed into levels that have signaled turns in the past. So when these roll over, they will help confirm some level of a decline in equities. Notice that the Nasdaq's McClellan Oscillator is actually a bit weaker than that for NYSE. That prompted me to also pull and post (at the bottom, below) the NDX:SPX ratio chart. It's often used as a sentiment indicator as well, on the theory that when Nasdaq leads upward that's bullish (with the reverse being true as well). It's been flagging for a while, and has turned down again. Its faster-moving StochRSI shows bearish divergence, and its slower-moving indicators at the bottom of that chart look like they may be in process of rolling over too. So, we are slowly starting to see signs of this rally tiring out.