Market Indicators to Use to Help Your Trading

I wanted to introduce two market breadth indicators I've been using recently, which I have found to be very beneficial to monitor while planning my entries & exits on all trades. The first chart is the Arms Index or TRIN (Traders Index). This trading indicator updates intraday & measures overall market sentiment. This indicator is most useful for day & swing trading, so please keep that in mind. I like to use $TRIN in conjunction with the NYSE - Advance Decline Line. This indicator takes the number of advancing stocks, subtracts the number of declining stocks & adds that to the previous periods value. This is good to use when trying to anticipate a reversal in the overall market, and is also a good tell as to the strength of the current move. On both charts above, I've determined what I like to use as extreme levels (signified by the blue lines). For TRIN I use 2.0 and above as extreme, & on the NYSE Advance Decline Line I use + or - 2,000 as my extreme levels. Extreme levels are subjective to each trader, so you may see differing opinions as to what designates an "extreme." As you can see, we closed Friday very close to what I consider an extreme level (1,856) on the NYSE A/D Line after our big rally all day. So just be mindful of this if you are planning on taking on new positions Monday. Broader fundamental market factors trump the extreme levels on these indicators, so please don't use them in the absolute sense. For example, if the EU & Greece can come to an agreement on a new bailout over the weekend as anticipated, then this will likely result in another sustainable market rally on Monday.



If you've read through any of my previous posts, I generally like to include the McClellan Oscillator or NYMO at the beginning of each. This is my favorite indicator to use to gauge the overall market. I use + or - 80 as my extreme levels on the $NYMO, but you will see a lot of traders use + or - 60. Again, extreme levels on indicators are subjective & obviously the more you come in/lessen the range the more signals will be triggered. We ended Friday in no man's land around at 13.03, which makes sense due to all the choppiness of the previous week. I lean bullish this week with earnings kicking off, but we will once again all be held hostage to the news coming out of Europe & China (at least in the near term).