OEX And The Thrust Oscillator
by Stuart Meibuhr
STOCKS & COMMODITIES contributor Stuart Meibuhr suggests using advance-decline data for trading the
OEX contract. Is it feasible? Meibuhr explains.
The four items of data that describe the advances and declines in the New York Stock Exchange
(NYSE) market continue to receive attention and research. Technician Richard Arms, in his 1968 article in
Barron's, described the TRIN index (trading index), now known as the Arms index. The index shows the
ratio relationship between advancing and declining issues to their up and down volumes. The index is
calculated daily using the formula:
AI = the number of advancing issues
AV = volume of the advancing issues
DI = the number of declining issues
DV = volume of the declining issues.
This formula can be rearranged to read:
Values below 1.0 are bullish, showing that more volume went into the advancing issues than into the
declining issues; the theoretical lower limit is zero. There is no theoretical upper limit. In his 1989 book,
The Arms Index, Arms detailed how to use this index for four types of traders/investors ranging from very
long term to short term. Anyone involved in the market is a trader regardless of the timeframe of that
trade, which could vary from shorter than one day to longer than one year. Moving averages of the daily
index were the most common tool used for analysis.