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SharePlanner (< 20)

SharePlanner Reversal Indicator



December 11, 2011 – Comments (0) | RELATED TICKERS: SPY

The market is at an interesting juncture here. The daily SPRI is indicating a bounce should be in the cards here, and the weekly SPRI could very easily see such a reading in the next 1-2 weeks. On the weekly chart we have a nice bearish wedge, and the macro economics globally, when considering the potential for implosion in Europe, suggests nothing bullish should be coming out of the market in the coming weeks/months. 

So what do I listen to? What do I follow? Well, I Often times believe that when I trade on what I "think" rather than what I "see", I get myself in trouble with my trades. But there are some developments on the different charts/indicators, as mentioned above, that are clashing. So then what? On the whole these charts and indicators are showing more potential than actual merits. You have the bearish wedge that could easily confirm this week on the S&P, and the chart below shows us at least 1-2 weeks, maybe even 3 weeks away from a bullish reversal pattern. So for now, unless we break through the descending trend-line off of the 7/7/11 highs, I'm going to remain entrenched with a bearish perspective on this market. 

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