The Arms index (often referred to as the TRIN index) is a technical indicator that compares advancing and declining stock issues and trading volume as an indicator of market sentiment.
Richard Arms created his now famous Arms Index while still a young stock broker in the 1960s at E.F. Hutton. The indicator is widely available in most commercial charting packages.
HOW TO USE IT
There are as many ways to use the indicator as there are users but my personal favorite use of the Arms index I learned from Michael Riesner, chief market technician at U.B.S. Michael uses a 50-day moving average to smooth the volatile indicator.
CURRENT SIGNALS
The chart below illustrates the idea that a low value in the moving average is often correlated with highs in the equity markets. While this approach certainly doesn’t work at all market tops, when it does flash a signal, it is worth paying attention to.
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