SharePlanner Reversal Indicator

Despite yesterday’s extreme sell-off (especially considering how much we had been up in overnight futures) the SharePlanner Reversal Indicator below is finally showing signs of bottoming out and we actually got a bullish green/red crossover, with some good signs coming from the RSI, as well as a break of the downward trend on the daily chart (bullish wedge). So while, I still hold short positions primarily in the portfolio, I’ll start closing them out as it becomes more likely we are going to bounce – and that happens when we break above 1335 on the S&P which would thereby create a higher-high on the S&P chart. 

Here is the SharePlanner Reversal Indicator.

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.