Last week when reviewing this indicator, I mentioned that I was a bit concerned about the early reversal signal (against historical norms) that the NYSE Reversal Indicator was giving off. But last week’s action confirmed the move, and we are advancing into overbought territory once again. After breaking through the 1130 level and confirming the move on Friday, there really isn’t any reason to be bearish on this market (it takes a lot for me to say that, considering how bearish I had been of late).
For those of you who are not familiar with this chart, here’s quick tutorial…
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.