Weekly pivot influence on first trading day

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Originally posted by BruceM

...I have a friend who will only trade in the direction of the weekly pivot on the first trading day of the week....he uses it like a magnet...so for today he is only taking longs......his is by observation

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I'm curious about testing the general theory of this. I'm typing as I think...

If we took the week's first trading day's opening price and measured the number of points that it traded in the direction of the weekly pivot point and also the number of points it traded away... We might be able to measure a statistical deviance in the direction that it trades. Problems with this theory are (1) the market has an upward bias in the long term (i.e. not symmetrical (2) Market Profile theory can replace this because we are probably trading towards the weekly Point of Control which is likely to be near the weekly Pivot Point.

Testing is difficult because we need to compute the first trading day of the week in case it is a holiday and also count the number of trading days in the prior week in case of holidays. For example, last week we had 3 trading days in the E-mini S&P500 because of Gerald Ford's day of mourning. This was an unexpected holiday that is not on the calendars.

What I am thinking of is running a test to see if a rolling 5-trading-day pivot point has any influence on the direction of trade for any particular day-of-the-week. For example, are Monday's more likely to be days where the price is "drawn to that pivot like a magnet" rather than any other day of the week. That should be easier to test...

Weekly pivots are another piece of information to consider when trading. The pivots, whether daily, weekly, or monthly, act as support and resistance. Some traders have developed strategies about trading into the pivots or fading them. When used in conjunction with other techniques, e.g., Fibonacci, harmonics, etc., they give you an idea of where price may stop or why price did what it did at a point in space. Again, it's just another piece of information to have and evaluate. If you look around this site, you may find a pivot point calculator. To calculate you just need the previous high, low, and close and some simple arithmetic.

Thanks Steve!

wannabe - welcome to the forum !

The weekly pivot point is a reference point traders can use to establish an expectation of price behavior. Some basic questions being: if price opens away from the weekly pivot point, will the market subsequently return to and touch the pivot point during the week ? Does the weekly pivot point act as a price magnet ? Is there any statistical significance to where the week opens relative to the weekly pivot point ?

Steve listed several more kinds of price reference points traders use or consider important. Another set of reference points you might consider in your education is obtained using the Market Profile.

For my trading, although I do not use pivot points specifically, I do use other price reference points I consider significant or important. One way I use price reference points is to pay attention to how price acts when the market approaches and touches one of these reference points. Thus I develop expectations for certain market behavior relative to the reference point. It is the combination of price behavior at the reference point which provides meaningful information to me in real-time. This is a synergistic approach, combining the two pieces of market information to obtain a more accurate or meaningful understanding than is available when either is viewed in isolation.

Another example is the use of technical indicators, like the MACD or stochastics indicators. When used or tested in pure isolation these indicator signals produce less than ideal results. When used in combination with a significant price reference point, the signal reliability improves. When used in combination with reference points and price action the reliability is enhanced further.

Food for thought, best of luck in your trading and education experiences.

the market hit it's weekly pivot on Tuesday this week. This was a fed announcement day. Market was up at 1525 area and dropped through weekly pivot at 1495 and is currently at 1477 area...

Another interesting week is now in the books. This week, with the exception of the Nasdaq, each index traded to its weekly high and low marks on Tuesday and Wednesday, respectively. The Nasdaq hit both its weekly high and low on Tuesday. Barring any further selling, I would expect to see the weekly pivots hit early next week because each pivot is above the Friday closing price and the TRIN closed at 1.86.

They're banging on the door of the weekly pivot as I type up at this 1498 area...pivot is 1498.25....I will consider this a good test.....they waited until friday to hit it this week....

They took the weekly pivot during this holiday shortened week on Friday 12-28....personally it was a tough trading week for me ..the market stopped 5 points below it's R1 level up at 1516 ( IT STOPPED AT 1511 IN rth) AND TRADED DOWN TO 1481 on friday....

Hope all have a wonderful New Year

Bruce

OK. I have been tracking this for 13 weeks and, for what it's worth and under these market conditions, the following is true of the S&P 500 e-mini (ES):

The weekly pivot has been hit on the first trading day of the week 23% of the time (3/13).

The weekly pivot was not hit at all during 3 different weeks.

54% of the time, the ES traded in parallel to the YM with respect to hitting or missing the daily and weekly pivots on the same days throughout the week.

38% of the time (5/13 weeks) the weekly high was recorded on Friday.

31% of the time (4/13 weeks) the weekly low was recorded on Friday.

31% of the time (4/13 weeks) the weekly low was recorded on Monday.

Weekly highs were recorded once on a Monday and once on a Thursday.

Weekly lows were recorded only once on a Thursday.

Happy New Year, all!
Steve

Haven't been around much, but I would have to ask this question........isn't this just a overly complicated way of saying that prices revert to a mean?

the market failed to reach it's weekly pivot during New Years week!!

Absolutely! The past 4 months has enabled me to collect some good data and I will continue to do so. Very good exercise!