The NYSE Reversal Indicator still managed to continue its upward move, despite this week’s pretty destructive market action. Another such week of this could stop short the indicator from bouncing off of the top range of the chart as it has done historically. If that happens (and rarely does it ever), the doom and gloom it will spell for all the bulls out there will be that of major proportion.
The NYSE Reversal 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, in order to post then 1) I wouldn’t be posting it – I’d save it all for myself, or 2) I would sell it to a major brokerage firm for an ungodly sum of money. But it isn’t perfect (I wish it was) 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 respect to the direction that the indicator itself is pointing to.
Here is the NYSE Reversal Indicator.