Monday, October 26, 2009

Weekly Pivot/Profit Target Numbers and Using the Numbers

As regular readers know, I publish each morning before the market open proprietary daily pivot and profit target numbers for the S&P 500 Index (SPY), along with a conversion factor (ESf) for the S&P 500 futures contract. Those numbers, along with other daily indicator data, can be accessed by following the Twitter stream for this blog. Here is an explanation of those numbers.

Reader and fellow blogger Matt recently asked a question regarding the value of pivot numbers. The way I use them is as rough guides for anticipated market movement, not as hard numbers for setting stops or taking profits. Because the figures are volatility-adjusted, I have a sense for the odds of hitting those numbers each day.

An analogy would be listening to the Chicago radio station for traffic updates. Those tell drivers roughly how long it will take to reach particular destinations, given current driving conditions. From that information, drivers can plot their path. When I have the pivot and target numbers and update my readings of sentiment (NYSE TICK, Market Delta), along with relative volume, I develop a rough road map that tells me about the likely path to various destinations. I find that useful in planning trades.

Here are the weekly pivot and profit target numbers (see this post for details):

Pivot=108.49; R1=111.23; R2=111.78; R3=112.51; S1=105.75; S2=105.20; S3=104.47. ESf=9.96.

Have a great start to the week!