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SharePlanner (< 20)

SharePlanner Reversal Indicator

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July 15, 2012 – Comments (0) | RELATED TICKERS: SPY

When the market had to bounce last week (that being Friday), it did and it kept the uptrend from the June lows in place. However, when you look at the weekly  chart, you have some definite concerns - a) the fact that we remain overbought on the weekly, b) coupled with price pattern on the SPX that shows a bearish wedge forming, and finally c) the SPRI is hitting extremes and ripe for a reversal. 

But even with the conditions lining up for a nice reversal here soon, its not a given, and I wouldn't try to jump ahead of this market, and instead wait for the SPRI to give that needed confirmation. 

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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