In addition to the guidelines mentioned above, there are a few other market variables that we want to take into account before the start of the trading day. These considerations aid in determining the likely nature of trading activity in the early hours, and helps us to decide whether the opening gap (if one exists) is likely to be tradable. First off is a review of Trin (sometimes called the Arms Index in honor of its developer, Richard Arms). This is a breadth oscillator designed to measure internal market strength, and is most often provided as part of a real-time datafeed. Although a modified version of Trin is preferred in that it delivers more detailed information and is far easier to read (which is especially important during fast-paced, hectic trading conditions), the levels noted here reflect the standard Trin, which will be more easily accessible for most readers. A closing prior day Trin reading near or above 2.0 tells us that the day ended on an excessively bearish tone. If overnight pricing has not already swung to the upside, we can usually expect it to do so in the very early part of the trading day. Once this excessive bearish pressure is released, further downside typically follows. On the other hand, if prior day Trin finished near or lower than .5, we know that the day ended with excessive bullishness. A push lower should occur either in overnight trading or early the next day. Once market tone is effectively neutralized further upside normally ensues.

Just before market open it is also a good idea to mark on our intraday chart the price high and low points that occurred in overnight trading (all trading activity that occurred since the prior day close). If market activity is thought of as an auction process, where bidders and sellers are constantly vying for the most advantageous price, overnight highs and lows represent the outer extremes of accepted value for that particular period of time. The highest price achieved represents the maximum that buyers were willing to offer, and the lowest price represents the minimum that sellers were willing to accept. For this reason, subsequent price action has a tendency to remain within the boundaries of apparent value as defined during this period. If these limits are exceeded to the upside, we know that current market activity has a bullish tone to it. On the other hand, any downside push that surpasses the overnight low has bearish implications.