Those of us who use the trin on an intraday basis know about its glitches as large volume stocks move from the advancing column to the declining volume or versa-vice. On Thursday this happened when Citigroup hovered around the previous day's close. It caused the trin to shoot across the magical 1.00 level from .86 to over 1.20. Since a stock can be in only one of two states, either advancing or declining, a "state change" causes the entire volume to shift. For most stocks this has little effect on the trin value, but with a high volume stock like Citi it can have a profound effect causing a quantum jump in the indicator.
We have identified the first problem with the trin but there is another issue with this indicator, volume. Since volume is not dollar weighted in the trin a share of Citi at $4.00 has the same impact as a share of Goldman Sachs at $140 per share. This can swamp the indicator with low dollar high volume stocks thus not accurately present the internal machinations of the markets.
The low price of the financial's and the high volume from their daily churning have led to record lows on the trin as we have moved through this bull market and I been reluctant to use any level information only intraday trend information for trading.
As a project I will add to my list producing a better trin indicator. Currently, for the record, I do apply an inverse function, (ie. I multiply the trin by -1), this allows me to see the trin as a having a direct relationship to prices.
-rlt
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