For those who are curious, the reversal indicator perfectly time last week’s market bounce and since then it has been on one incredible tear, with it already halfway back to the other side of the reversal reading. I certainly don’t think we’ll see the same kind of price move that we saw last week, but ultimatley I think we’ll continue to move higher, and possibly even challenge new recovery highs. The only thing that does look problematic to me is the head and shoulders pattern forming recently on the S&P daily chart, which I plan on keeping a close eye on.
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 SharePlanner Reversal Indicator.
