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SharePlanner (< 20)

SharePlanner Reversal Indicator

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August 20, 2011 – Comments (0) | RELATED TICKERS: SPY

After Friday's close the market found itself back at the same place it was the previous week, when it kept bouncing off of the S&P 1120 level. So that means Monday becomes even more important, in that the slightest bit of weakness will send us down lower to test the intraday lows at 1101 established back on 8/9/11. Break that and all bets are off. 

In the midst of all this incredible selling, the SharePlanner Reversal Indicator is finally hitting extremes, which could mean this market finally finds some stability in all of this chaos. You also have the Jackson Hole speech next Friday with Ben Bernanke, which will undoubtedly be a major market mover, whether it be on Friday, or in the hype leading up to the event. Also be on the lookout for possible intervention by Germany who has a lot to lose from all of this, if the Euro collapses. You also have the possibility of intervention from the European Central Bank, too. And of course you have President Obama...on vacation...and golfing. 

So to say the least, if any of the aformentioned entities come together to do something, you should then see the confirmation that we are getting in the SharePlanner Reversal Indicator.

For those of you who are not familiar with the SharePlanner Reversal Indicator, here's quick tutorial...

The Indicator uses the advance/decline ratio with a stochastics overlay. The bottom half of the chart is the weekly candles of the S&P. The chart itself goes back two years. Some folks have criticized me for posting this chart in the past saying that it isn't 100% accurate - but if it was, as some think it must be, then I wouldn't be posting it - I'd save it all for myself and make an ungodly sum of money off of it. But it isn't perfect and there is always a level of error that you can expect from it. But overall, it is fairly accurate, and when the indicator hits certain extremes on the stochastics, it is often a good time to start hedging positions that are going against the direction of the indicators, or start loading up on short or long positions in-line with the direction that the indicator itself is pointing to.

Remember, the extremes are where you are wanting to pay the closest attention to, particularly where the %K & %D lines cross (i.e the red and green lines). This is typically where we begin to see changes in the behavior of the market - not always but quite often enough, to warrant our attention. What this tool is best for, in terms of what I use it for, is market timing and position building. When there is a crossover at one of the extremes that goes against the positions in my portfolio, I, often times, look to take profits in those positions or at least hedge against them

Here is the SharePlanner Reversal Indicator.

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