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SharePlanner (< 20)

SharePlanner Reversal Indicator



October 01, 2011 – Comments (0) | RELATED TICKERS: SPY

For the bulls, the sell-off since the July highs is a  lot worse than the way it looks on paper. Every bounce that we've seen to date (and there have been plenty of them) has given the bulls reason for hope that the market would emerge out of the chaos, to buy back in, and only get trampeled on by a  new wave of selling. So despite the market being down 10% on the year, the whip-lash over the last two months have created far greater pain for the bulls

With that said, I believe that the S&P is very close to emerging out of this whip-saw action that we have seen of late, and likely break to the downside in a very descisive manner. Ultimately I believe the S&P heads down to at least 1040, before finding any real significant bottom for traders. The SharePlanner Reversal Indicator, also confirms my belief on additional selling coming our way, and is worth checking out below. 

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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