The TRIN index (often called the Arms index) is a market indicator developed by Richard Arms that measures market breadth and volume. A more detailed description of the indicator can be found at Investopedia, but to describe it quickly, the TRIN measures the ratio of up stocks to down stocks and then divides that number by the ratio of volume in up stocks to volume in down stocks. When the ratio is above one it indicates that volume in declining stocks is greater than the volume in rising stocks, while readings below one indicate that more volume is going into up stocks than down stocks.
In order to eliminate the noise in the daily readings of the TRIN, we often look at the ten-day average. This helps to give us a clearer picture of short-term sentiment. In the chart below, we highlight the 10-day average TRIN over the last several years. As shown, at a current level of 2.53 there has only been one other period since 2002 where the indicator was higher than it currently is. Surprisingly, that one occurrence was not during the heart of the bear market from October 2007 through March 2009. It actually came right before, in March 2007 when the S&P 500 saw a 5% correction as the first cracks of the sub-prime crisis began to emerge. Following that correction, the S&P 500 quickly recovered and hit new highs within a matter of weeks. It wasn't until seven months later, in October 2007 that the S&P 500 finally peaked at 1,565.15.
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