Tuesday, January 05, 2010

Pivots & the Gathering of Crows

A slap on the back for the VXX Dashboard. Every once in a while it hits a 3 run homer and yesterday was a great example. In the coming months we intend to make the PDQ available to traders on a subscription basis. It will provide daily forecasts for a variety of ETFs including SPY, QQQQ, EEM, SMH, EWC, SLV, GLD and XLE . I've been testing various PDQs for several months now and have found these 8 ETFs to offer the widest range of trading opportunities and the most consistent results.
PDQ signals will be provided through a new dedicated PDQ site or as a TradeStation add-on.
Until then, here's a quick look at yesterday's early pivot action in the NYAD, SPX, QQQQ, IWM and GE. "Birds of a feather flock together" and in an evolving market environment where HFT capitalizes on every arbitrage disparity almost instantaneously, the striking similarity in behavior on these 4 charts displays the tendency for equalization among the indices.
For daytraders looking for "how far, how soon" setups, watching the action of the underlying major indices against the pivots can be extremely helpful. Days like Monday when equities make a PP to R2 pop and then level off provide an opportunity to see what's really strong and what's being carried along for the ride.
In this case GE stands out for it's breakout action up to R3. Long time traders who watch the pivots know that pops from PP to R2 across the majors are a fairly rare occurrence and typically result is sustained strength for the remainder of the day. While there are rare days when the majors will pop to R3 or R4, these are true outliers and usually the product of some uber-hyped news event.

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