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SharePlanner (< 20)

SharePlanner Reversal Indicator

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September 10, 2011 – Comments (2) | RELATED TICKERS: SPY

Pretty horrid way to the end the week considering what we got out of it on Tuesday with the huge intraday reversal, and the rip-roaring tear on Wednesday. But the jeepers started creeping back in ahead of the Obama speech on Thursday, and the creepers came about with Greek default jitters (say that a few times in a row). In any case, the SPRI looks, when you initially view it, alright. However I can promise you, that if we get another negative week, and break below 1140, and more so 1120, this indicator, will be heading due south, with further turbulence on the horizon. So button down the hatches, because next week promises to be a wild one.  

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.

2 Comments – Post Your Own

#1) On September 11, 2011 at 9:20 AM, davejh23 (< 20) wrote:

Many technical indicators work very well in low volatility trending markets, but aren't real reliable in turbulent markets.  Wide swings are made in a day or two, and indicators can be triggered close to turning points in the opposite direction.  It's hard to trust stochastics on a weekly chart in a market when entire moves are made in less than a week.  In any case, run the same indicator on daily and monthly charts.  Daily indicators are looking short term negative.  Monthly, we're close to triggering some crash indicators that preceded the dot com bust and the recent crash...with no false signals in between.

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#2) On September 11, 2011 at 1:22 PM, SharePlanner (< 20) wrote:

great points - very true in this type of crazy market. 

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