Spearman Indicator Update: Nosebleed Territory

December 8, 2011 8:45 am

We have dusted off and brought out the Spearman Indicator a few times in the past. In particular, we are most interested in the time that the readings are getting extreme in either direction. Our last update, was on 11/25/2011 and it was just before the turning point. At that time, the Spearman did a good job of calling the condition and producing a buy signal.

Now the indicator is getting toward the top of the range that is considered to be extreme. It is important to note that it can stay at these levels for some time. When the Spearman crosses the moving average, that is the actual signal. Notice that the turn back in November occurred from an extreme position, signaling a potential buy.

 

Today’s reading is close, but not quite there. If there is a down day within the next 1 or 2, that should create a “sell” signal. While you could try to get ahead of it, there is no reason to unless there is confirmation.

In short, keep an eye on the action over the next couple of days for the S&P 500 in order to adjust your positioning.

 

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