Daily Reflection: 05.04

4 May

The markets tumble along with the Euro, volume jumps, the VIX spikes, and oil drops. We are looking for volatility to remain higher for “an extended period of time” and this increased volatility is making a great environment for intraday trading, but what to do from here?

The TRIN “Trader’s Index” aka. ARMS index, named after Richard Arms is an inverse relationship of market breadth, see this post for the calculation. When the TRIN closes ABOVE 2.0 the market has an 80% chance of rallying the next day. So how can we turn this into actionable information? If the market fails to rally in some way tomorrow we can expect an extended selloff. We have yet to make a 10% correction since the March 2009 lows, so we could be setting up here for a fantastic longer term buying/investing opportunity in the markets.

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