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SharePlanner (< 20)

SharePlanner Reversal Indicator



August 12, 2012 – Comments (0) | RELATED TICKERS: SPY , DIA , QQQ

You gotta love this market - no matter what you think a market should do or what the economy is doing, the market itself is going to do whatever it pleases. a couple of weeks ago we got the bearish reversal to the down side, and while this signal tends to be very, very reliable, it has nonetheless produced nothing for the bears at this point. In fact, i would surmise that if, the market moves higher like it did this past week, there's no doubt we'll probably see yet another reversal in the SPRI - but this time it will be to the upside. 

If that's to happen, those unexpected reversal signals can make for some great trading opportunities, and I'd as a result drop the two short positions that I have acting as hedges against my longs right now. Another aspect that I'd keep an eye on is the RSI that I like to tie in with the SPRI, which is reversing back higher yet again. 

Interesting times.... 

Here's the SPRI Chart:

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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