Richard (Dick) Arms - yes,
that Arms who invented the Arms Indices (one of which is often called the TRIN indicator) said this morning at TheStreet.com's RealMoney site that despite the stock market "breakout" on Monday, the validity of the breakout is in doubt and the stock indices are in overbought territory. The article can be located at
http://secure2.thestreet.com/cap/login/rm_mbp_yho_nflow.jsp?flowid=cf0d52dc29&url=http%3A%2F%2Fwww.thestreet.com%2Fp%2F_search%2Frmoney%2Ftechnology%2F10628098.html. Technical analysts take note! because the Arms indices are among some of the most useful technical indicators. Given my prior post this evening about the Dow Theory confirmation of Monday's move, this is worth knowing. It's another example of my point about the warning signs in the technical indicators. Here's a quote from the article:
Buyers, encouraged by the strength, are trying to push prices higher, but they are being supplied with all the stock they want, stopping them from moving prices up. The implication is that the markets, in spite of going above the old highs, are encountering resistance. But again, the volume is low. One would expect, on breaking into new high ground, that volume would become heavier, but so far that has not been the case. In fact, in recent weeks the heavier volume has tended to come in on declines rather than advances. That puts the validity of the breakout in doubt.
Makes sense to me, especially as the lighter buying volume has been growing more obvious. Below is my own version (customized on Stockcharts.com) of the TRIN - showing it very close to an overbought sell signal, with the 10-day moving average at 0.87 and the 3-day MA plus daily closing value under 0.80:
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