Key Reversal Indicator – Flashing Oversold Potential

November 15, 2012 11:29 am

Just an early warning and a much needed discussion of the situation that we have right now. So many have been talking about the markets being oversold for weeks now. However, we have been tweeting and writing that we were in disagreement with these comments as a simple RSI or MACD cannot fully quantify a signal for when the exhaustion level exists.

We have rarely seen a condition when the Key Reversal Indicator (KRI) exceeds +4 or -4 and then does not see a reversal within a relatively short period of time. Note that the condition could continue for some time, but the potential for a counter-trend move exists over the next few days.

From there,the counter-trend has been seen to last for 2-5 days. In other words, this is a short-term signal that can be used as a hedge or trading opportunity.

(Later today we will be posting some additional information on the KRI)

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