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SharePlanner (< 20)

SharePlanner Reversal Indicator.



June 23, 2012 – Comments (0) | RELATED TICKERS: SPY

After a couple solid weeks in the market, it was easy to put the market weakness that proceeded it behind us and believe that greener pastures lied ahead. But it only took one day to re-instill that fear into the markets. With Thursday's sell-off, we got a healthy reminder just how far and fast this market could sell-off when it took a liking to it. On the daily chart of the SPX we have a clear uptrend that is in place, and unless we break below 1306, I'm holding that bias. On the weekly chart below, you'll see that we have a bearish-looking flag that is forming and we need to really see a healthy bounce to put to rest that developing chart pattern. 

Here's the SPRI

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.

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