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10 day ARMS

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#1 Guru Dudette

Guru Dudette

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Posted 31 January 2007 - 11:11 AM

10 day ARMS

Named after its inventor, Richard Arms, the TRIN ia also called the ARMS Index. This is a solid IT/ST overbought/oversold indicator based upon breadth and Volume. The key is to demonstrate the relationship of volume in advancing issues versus declining issues. Normally, we should see more volume going into advancing issues than declining when the market is rising, unless negative divergences occur. The same applies in reverse for declining markets. A good chart of the index will display points where the market is oversold and overbought, as well as where we occasionally see the divergences between the market and the ARMS.

Usually, when the 10-day ARMS is under .89 the market is overbought, when over 1.1 the market is oversold. Additionally, this indicator can point out patterns of distribution or accumulation. We use a 10 day ARMS, which is calculated by using the moving averages of the components rather than the moving average of the daily ratio of the components.

[(Last 10 day's Advances) / (Last 10 day's Declines)]
[(Last 10 day's Advancing Volume) / (Last 10 day's Declining Volume)]

"I'd rather be vaguely right than precisely wrong." J.M.Keynes