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...

Well, today is Friday and the market is playing around with it's weeekly R2 level. It seems as if this will be the week ( fed week for reference) that we don't trade back to the weekly pivot unless we sell off 40 - 50 points in the next few hours. It will be interesting to see if we can close today ( Friday) above the weekly R2. Perhaps this is an area of future research..

Bruce

No close above R2 and no trade to the weekly pivot last week

Market traded to its weekly pivot today, Wednesday....

Bruce

Hey Bruce,

This is interesting, let me throw my 2 cents in if OK.........since I own the DVA tool available on this site this is easy to do in Esignal. BTW this tool is excellent. The VA tool is wonderful in that it leaves the VA's up for the previous days, clusters are usually real strong numbers that you may or may not see on a chart otherwise. The IB (initial balnce) tool is really useful as well and I have developed a number of setups based solely on this as well. Having the lines plotted lets you scroll back and see what actually happened as opposed to by hand where you sometimes wonder if you are only remembering the trades with positive outcomes. Anyway, enough plugs for Guy's software.

The weekly pivot makes sense in that it is longer term and may show a balnce area for the week which may be useful to know if that area comes into play again. I personally do not think the extensions are that useful, the r1, r2, s1, etc, but I know some people like them.

The problem I do have with the weekly pivot is that it really depends on if you are using day session data or 24 hour data, the difference seems large enough to make the difference of the number being tested at all or many times in some cases.So you have to decide which is the "real" weekly pivot or if both numbers could be valid.

I THINK you are using this number as more of a reversion to the mean type of trade, where you are expecting the market to test this level lower if the market is trading above it? Maybe I misunderstand what you are doing.........

I THINK it may be of value in that when it is penetrated a retest of the number may be an effective area to fade as we are essentially stating that this is a "balance area" from the previous week and could be and area of some indecision.

I am not really on board completely here with pivot numbers, they seem to be of dubious value, but the weekly one may hold some promise as it is derived from more data.

My other question is that wouldn't one get a more refined number from the previous week from Market Profile which I know you are familiar with?

Hi Pat,

For this particular analysis I am only looking at the weekly pivot as posted from this site. I'm only tracking this as we proceed forward and haven't developed any particular trade strategy yet. Although from this brief observation it seems that the weekly pivot is tested quite often so if we open above it and the risk/reward is good then it may make sense to get short and the reverse for a lower open. I'd like to see a really persistent up or downtrend to see how well the market retests the weekly pivot under those conditions.

I think what you implied about the weekly Value area and Point of Control is an excellent idea. It would be interesting to see how often we trade back to the previous weekly POC for example. We could then develop a matrix around where we open on a weekly basis providing the statistics show some consistent ideas. Thanks for the input.

For what it's worth: today is monday and we traded through the weekly pivot provided from the ES daily notes page. This includes the overnight data.

Bruce

quote:

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Originally posted by pem06081971

So you have to decide which is the "real" weekly pivot or if both numbers could be valid.

I THINK you are using this number as more of a reversion to the mean type of trade, where you are expecting the market to test this level lower if the market is trading above it? Maybe I misunderstand what you are doing.........

I THINK it may be of value in that when it is penetrated a retest of the number may be an effective area to fade as we are essentially stating that this is a "balance area" from the previous week and could be and area of some indecision.

I am not really on board completely here with pivot numbers, they seem to be of dubious value, but the weekly one may hold some promise as it is derived from more data.

My other question is that wouldn't one get a more refined number from the previous week from Market Profile which I know you are familiar with?

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We traded down to the weekly pivot on Wednesday this week. I beleive the weekly pivot was calculated based on the high from last Fridays session also. The market was "officially" closed due to the Good Friday holiday so this is an important distiction. Please correct me if I am wrong.

Bruce

Correct - it used Friday's session as well. The ES volume was surprisingly high on Friday compared to Monday which was much lower. Difficult to work out which days are significant enough to include and which not.

The market didnot trade back to it's previous close the week ending Friday April 20th. It did close beyond it's weekly R2 level

The ES Market traded back to it's weekly pivot on Tuesday this week

My post date 4/22 should mention that we didn't trade back to the weekly pivot...

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