What are reversal times?  Whenever our computers project program buying and program selling within 6 minutes of each other (our standard deviation) we label the average time between them, rounded to the nearest 5 minute increment, as a reversal time. That simply means that you could get hit with both program buying and program selling; or, one, or the other.  And you never know for sure.

The most common reversal time pattern is for the spoos to drop first, dropping the premium (PREM) and the kicking in sell programs that in turn drop the Dow (usually about 20 points).  But as the Dow is falling, usually about 4 to 5 minutes later, the spoos rally sharply on local buying (all of the stops having been hit) driving the premium way up and kicking in buy programs. The Dow then rallies up about 20 points, usually about another 4 to 5 minutes later.

Although that is the most common reversal time pattern, it actually only happens that way about 10% of the time. The rest of the time reversals simply end up being non-events (60% of the time) or a continuation of the last rally or sell off (15% of the time).  But about 15% of the time reversals actually change the direction of the market, stopping a rally dead in it's tracks, or stopping a hard decline by rallying the spoos and the cash markets.

What we have learned over the years is that reversal times are totally unpredictable and should be avoided by most conservative traders whenever possible.  Occasionally we get a tip off as to the most probable market direction right after a reversal time, but usually the odds of betting on it are no better than about 55/45, even with the tip off.  That results in a trade that really is only suitable for true gamblers.  And that is especially true when using options on the SPX, OEX, or QQQQ.

Please remember that reversal times are projected on the prem and not on the spoos or the cash markets or any securities that you may be trading.