One of my favorite indicators for many years has been the 200-Day EMA of the Arms Index, also known as TRIN. This indicator is a ratio of the Advancing Issues/Declining Issues ratio to the Advancing Volume/Declining Volume ratio. So it’s a ratio of two breadth ratios, the numerator describing issues breadth and the denominator describing volume breadth. While this is normally regarded as a very short-term indicator, viewed on a tick or daily basis, I have found it very useful to smooth the data with a 200- or 50-day Exponential Moving Average to generate longer, intermediate-term readings.

Here’s a long-term view of the 200-Day EMA of TRIN for NYSE Composite:

As you can see, in the past, rising bottoms in the indicator signaled a coming top, as bullish breadth waned and bearish volume increased. Likewise, as bear markets ended, the indicator would start to reverse sharply as the market began to rally. Since the January 2018 top, the indicator has produced a pattern of rising lows, which in the past led into major tops. During the crash into the late December 2018 low, the indicator acted inversely to the norm, falling with the market rather than rising sharply. During the rally off the 2018 low into the 2020 top, the indicator also acted contrary to historical normality, generally rising along with the market. And recently, the indicator did not move higher as the market crashed. During the large post-crash rally 200-Day TRIN has not responded at all, remaining virtually stationary.

So since the bear market began with the early 2018 top, this formally reliable indicator has been giving unusual readings, and since the 2020 crash, it has become non-responsive.

One possible interpretation is that it has been producing the pattern of rising lows associated with the onset of a major bear market, and that the bear in question is of a major, secular degree, following in the wake of the completion of a 70-year cycle. In that case the pattern could be expected to be longer developing and larger in scale than anything seen before, and we would expect to see a large spike in the indicator associated with a large drop in the underlying index. In other words, the meat of the bear market has yet to begin and the indicator is warning that it is approaching.

Another possible interpretation is that we are in a post-capitalist, not-markets era and that the indicator is basically reflecting the broken state of former market mechanisms. With the introduction of an actor possessing literally unlimited funds capable of inserting itself into any economic and financial sphere at any time for any reason in any way and for as long as it wants, the basic mechanisms of markets no longer work and this is being reflected by the indicator.

So since the bear market began with the early 2018 top, this formally reliable indicator has been giving unusual readings, and since the 2020 crash, it has become non-responsive.

One possible interpretation is that it has been producing the pattern of rising lows associated with the onset of a major bear market, and that the bear in question is of a major, secular degree, following in the wake of the completion of a 70-year cycle. In that case the pattern could be expected to be longer developing and larger in scale than anything seen before, and we would expect to see a large spike in the indicator associated with a large drop in the underlying index. In other words, the meat of the bear market has yet to begin and the indicator is warning that it is approaching.

Another possible interpretation is that we are in a post-capitalist, not-markets era and that the indicator is basically reflecting the broken state of former market mechanisms. With the introduction of an actor possessing literally unlimited funds capable of inserting itself into any economic and financial sphere at any time for any reason in any way and for as long as it wants, the basic mechanisms of markets no longer work and this is being reflected by the indicator.

There is no TRIN for SPX, but there is for Nasdaq:cc