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SharePlanner (< 20)

SharePlanner Reversal Indicator

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January 16, 2012 – Comments (0) | RELATED TICKERS: SPY

There hasn't been much of a change in this week's SPRI. However, there have been some fundamental changes in the price action on the weekly S&P, where we are now seeing a breakout from the bearish wedge that was highlighted before. It's hard to really gauge the strength of this market though. On one hand, the SPRI is starting to look exhausted (but not over) to the upside, while on the other hand, we are seeing the index climb above previous resistance and now looking to make a run into the 1300's. At the very least, remain cautiously optimistic, with an eye on the developments taking place in Europe, and trying to ride the momentum as long as you can, being ready to bail on it, at the first sign of problems.

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 to pay the closest attention to 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 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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