So the NYSE reversal signal was legit, as we have seen from the past week. The problem is trusting it, when it gives that signal, because so many times, the market is trending heavily in our favor, and the last thing any of us want to do is cash in our chips when it seems like more can be made. The indicator is about half way to opposite end of the spectrum, where we begin receiving the “buy” signal. So going forward, it wouldn’t be surprising to see some consolidation around the 20-day moving average, and that all important 200-week moving average, that held as well on a retest during the Friday session. 

[Note: Apparently the Market Analysis for 11/12 did not upload correctly to YouTube last night, and as a result you were left with only 1:46 out of 9 minutes of market analysis. My apologies – the analysis is a must for Monday, and I will do everything I can to get this taken care of by tomorrow night. Thanks to those who brought this matter to my attention.]

For those of you who are not familiar with this chart, here’s 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, the extremes are where you are wanting to pay the closest attention to, particularly 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 at one of the extremes that goes against the positions in my portfolio, I, often times, look to take profits in those positions or at least hedge against them

Here is the NYSE Reversal Indicator.