In my video, I touched on the TRIN closing above 2. When this occurs, it is a sign that the market is ultra-short term oversold, and I watch for a bounce on the open, or after an early push down the next day.
How much of a bounce? How long will the bounce last? Based on my experience, I don't look for much of a bounce before I trail stops. I trail stops rather than taking an exit because a small bounce may indeed lead to a bigger bounce, and I want to try and milk as much as possible out of the trade. However, I don't want to let profits disappear by not protecting gains as quickly as possible.
Don't take my “ultra short term Bullish” opinion as anything more than what it says. Ultra-short term means just that, and could only be an hour or two, or even less.
So why even bother? Because there is an edge, in my opinion. Go look for yourself. Back test (even manually) when the TRIN closes over 2 and how the SPY (or ES Futures) acts at some point the next day. Remember, I'm not talking about closing green, or rallying huge. I'm just looking for a bounce either at the open, or after an initial push down.
A personal problem I have with the signal, is technically, the trade should be placed at the close, this way a gap up can be taken advantage of. However, this leaves exposure on overnight, and with the world events going on now, I'm not comfortable with too much overnight risk. A good way to limit risk that would be to take small size with a wider risk, or to use option strategies that define your risk to the penny.
Trade well,
Michael tiny Saul
tinymjs at gmail dot com
Follow me at www.twitter.com/tinyreal and www.stocktwits.com/tiny
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