For the most part, and since the June lows were put in, I would say about 90% of all my trades have been to the long side. But after reflecting, and pouring over some charts, I gotta say, that the climate for trading is looking more bearish than it has since we put in those June bottoms. 

I'm not simply stating this because we had a decent sized sell-off on Friday, but because of what I am seeing in combination with the SharePlanner Reversal indicator nearing a bearish reversal trigger as well as the bear-wedge that has been forming off of the June lows (much like in the previous rally) and the heavy resistance we seem to be running into. 

I'll continue to trade predominantly long, but my stops on existing positions will be much tighter and I won't hesitate to book gains if conditions continue to deteriorate. The reason is, that despite all that I'm saying in terms of potential market bearishness, nothing has really confirmed (yet) my suspcions. I don't want to front run, and therefore, I'm going to continue to trade in the same direction until I get some confirmation of sorts. 

Here's the SPRI

SharePlanner Reversal Indicator 7-22-12



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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small-ryan-malloryRyan (@shareplanner) specializes in swing trading strategies and is the founder of SharePlanner which he created to help and teach others on how to trade stocks better using multiple approaches and time frames. Each day you can count on Ryan to provide his trading advice as well as transparency in every trade that he makes. Ryan Mallory resides in Central Florida. More >>

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