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SharePlanner (< 20)

SharePlanner Reversal Indicator

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March 04, 2012 – Comments (0) | RELATED TICKERS: SPY , IWM , QQQ

Another week of gains for the indices (unless you are the Russell of course) while there is a huge disconnect between the SharePlanner Reversal Indicator and the Market itself. At some point the divergence between the SPRI (including every name worthy indicator) and the broader markets is going to cause a break in one or the other. With the Russell starting to break down this week (and let me remind you, they led all the other indices on the way up), I expect it to be equities that ultimately break. 

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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