Where And How To Go If The Market Holds

Before we talk about the recent rotation from growth into value and how that did relative to the phases, a note about managing large selloffs.

A while back we talked about market timing based on the previous day's high and low.

Watching for breakouts and breakdowns based on those price levels could help give short-term bias on the direction of the market.

Today we saw a large market selloff as all four major indices closed red on the day.

A choppy market is not fun to trade, but with some market timing tools, we can quickly grasp if today was a day for us to buy, go short, or just wait on the side for better opportunities.

Watching the highs and lows of the previous day are still very important, but today I want to add an indicator that gives us another layer of support and resistance levels to watch.

That indicator, standard on all platforms, is Floor Trader Pivots (FTP).

Floor trader pivots use a calculation based on prior day’s high, low, and close that determine multiple support and resistance levels.

Above we have a 5 minutes chart of the QQQs overlaid with the FTPs.

Here are the pivot level names starting from the top of the chart to the bottom.

I have also matched the colors to the pivot levels for clarity.

Resistance 2 (R2)

Resistance 1 (R1)

Pivot Point (PP)

Support 1 (S1)

Support 2 (S2)

The idea of using these levels is to watch how the price reacts to them and where it is trading compared to these levels.

Ideally, when the price is over the PP level you have a more bullish bias and more of a cautious/bearish bias when the price is trading under the PP level.

You are then watching to see if resistance or support pivot levels are broken.

In the chart above you can see that we had a good start to the day running up past the PP level, but then sold off, breaking back under the PP level.

This was the first sign to be more cautious, even though the QQQs were still trading over the day's opening price.

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