Analysis of today’s pivot line positions relative to yesterdays pivot line positions can give us a very good idea of market sentiment.
This simple indicator helps us see market sentiment at a glance. It can be applied on any time frame and any market.
- Rising Pivots. If today’s R1 is higher than yesterdays R1 and today’s S1 is higher than yesterdays S1 then sentiment is bullish.
- Falling Pivots. If today’s R1 is lower than yesterdays R1 and today’s S1 is lower than yesterdays S1 then sentiment is bearish.
- Outside Pivots. If today’s R1 is higher than yesterdays R1 and today’s S1 is lower than yesterdays S1 then the bulls and bears had a big fight resulting in increased volatility and the market may be at a point of indecision.
- Inside Pivots. If today’s R1 is lower than yesterdays R1 and today’s S1 is higher than yesterdays S1 then the bulls and bears had a very evenly matched fight and the market may be at a point of indecision.
A green bar indicates that yesterday was a bullish day.
A red bar indicates that yesterday was a bearish day.
A long blue bar indicates that yesterday was a more volatile day that neither side won.
A short blue bar indicates that yesterday was a day of indecision.
The latter two are of the most interest and can be used to predict possible changes of market direction.
I have written a simple strategy based on this theory which is currently under forward testing. Hopefully to be shared later!
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a1=OpenDayOfWeek b1=DHigh(1) b2=DHigh(2) c1=DLow(1) c2=DLow(2) d1=DClose(1) d2=DClose(2) IF a1=1 THEN b1=b2 c1=c2 d1=d2 ELSE b1=b1 c1=c1 d1=d1 ENDIF H1 = b1//High L1 = c1//Low C = d1//Close aa1=OpenDayOfWeek bb1=DHigh(2) bb2=DHigh(3) //bb3= DHigh(3) cc1=DLow(2) cc2=DLow(3) //cc3=DLow(1) dd1=DClose(2) dd2=DClose(3) //dd3=DClose(1) IF aa1=7 or aa1=1 or aa1=2 THEN bb1=bb2 cc1=cc2 dd1=dd2 ELSE bb1=bb1 cc1=cc1 dd1=dd1 ENDIF HH1 = bb1//High LL1 = cc1//Low CC = dd1//Close //Pivot1 = (HH1 + LL1 + CC) / 3 R11 = 2*((HH1 + LL1 + CC) / 3)- LL1 S11 = 2*((HH1 + LL1 + CC) / 3)- HH1 //Pivot = (H1 + L1 + C) / 3 R1 = 2*((H1 + L1 + C) / 3)- L1 S1 = 2*((H1 + L1 + C) / 3)- H1 //Outside Pivot IF R1 > R11 and S1 < S11 THEN Flagup = 3 FlagDown = -3 R = 0 G = 0 B = 255 ENDIF //Up Pivot IF R1 > R11 and S1 > S11 THEN Flagup = 2 FlagDown = -2 R = 0 G = 255 B = 0 ENDIF //Down Pivot IF R1 < R11 and S1 < S11 THEN Flagup = 2 FlagDown = -2 R = 255 G = 0 B = 0 ENDIF //Inside Pivot IF R1 < R11 and S1 > S11 THEN FlagUp = 1 FlagDown = -1 R = 0 G = 0 B = 255 ENDIF return FlagUp coloured(R,G,B) Style(Histogram,2) as "Pivot Analysis",FlagDown coloured(R,G,B) Style(Histogram,2) as "Pivot Analysis" |
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I forgot to mention in the description that Sunday pivot lines are ignored and Monday’s pivot lines are calculated from Fridays price movements.
Like that, simple and clear!
Thanks AVT. I like simple – some people would say that I do simple very well! Sometimes you don’t need all the bells and whistles to work out market sentiment.