Investments, tenth edition

  Sentiment Indicators 

 

Behavioral finance devotes considerable 

attention to market  sentiment,  which may 

be interpreted as the general level of opti-

mism among investors. Technical analysts 

have devised several measures of senti-

ment; we review a few of them. 

  Trin Statistic   

Market volume is sometimes used to measure the strength of a market 

rise or fall. Increased investor participation in a market advance or retreat is viewed as 

a measure of the significance of the movement. Technicians consider market advances 

to be a more favorable omen of continued price increases when they are associated with 

increased trading volume. Similarly, market reversals are considered more bearish when 

associated with higher volume. The    trin  statistic    is defined as

   Trin

5

Volume declining/Number declining

Volume advancing/Number advancing

 

Therefore, trin is the ratio of average volume in declining issues to average volume in 

advancing issues. Ratios above 1.0 are considered bearish because the falling stocks would 

then have higher average volume than the advancing stocks, indicating net selling pressure.  

The Wall Street Journal Online  provides the data necessary to compute trin in its Markets 

Diary section. Using the data in  Figure 12.5 , trin for the NYSE on this day was:

   Trin

5

$1,058,313/1,553

$852,581/1,455

5 1.16