Thursday, December 8, 2011

Multi Time-Frame Pivot Analysis Explanation

Multi Time-Frame Pivot Analysis

Many of you are familiar with Pivot Point analysis, which is a mathematical derivation based on previous price action.  It defines levels of probability for likely future price action.  Market Makers have often used Pivot Points across multiple time frames to find common adjacent levels between time frames that served as confluence zones - stronger levels of resistance or support ,than a single area alone.

Have you ever noticed that price stops or rises to a certain level that never particularly coincides with a previous level of support or resistance?  Oftentimes you will find that those levels coincide with prices calculated as a multi-time frame level.

I regularly employ charts of the SPY and IWM that map these levels, along with significant Fibonacci retracements, to define levels that may affect price action should they reach those levels.  Sometimes single levels end up affecting price action, many times, areas that contain multiple levels from multiple time zones, serve as confluence zones that are more likely to affect price.

Be warned, these levels are not predictive, but they do provide areas that may warrant your attention as price action approaches them.  I will provide on a weekly basis, these levels for the SPY and IWM, and will hopefully provide a recap of how those levels played out at the end of the week for the SPY to illustrate the concept.  So...

  •        Pivot levels will be demarcated in Yellow and noted as Weekly, Monthly, Quarterly, Semesterly, Yearly.
  •        Resistance levels will be in progressively darker blues.  The darker the color, the longer the time-frame.
  •        Support levels will be in progressively darker reds.
  •        Fibonacci levels will be
       Red-most recent swing low or high
       Turquoise-from July '10 swing low
       White-from March '09 swing low to April '10 swing high
       Green- (SPY only) from 2007 high-2009 low.

Fibonacci retracements are subject to change so pay attention to the Fib tab in the chart

  •       The 50 SMA and 200 SMA will be labeled (remember these will change daily so you will need to import the format links to adjust them)
  •       I will also provide subjective price levels as defined by the price action..I have found that some price levels, contrary to “Candle Theory”, will continue to have some significance even after they have been eclipsed.    
  •       You will also find links to import the format into, and you may amend them as you see fit.

  • I have also broken down the time-frames by tab from left to right.  
    • The farthest left tab is the composite chart of all levels combined. 
    • The second tab from the left are the weekly levels, the third-the monthly, etc.
    • The next to last tab are the fib. retracements
    • The last is the subjective price levels.
  •  The charts will look very busy on larger time-scales.  They are primarily designed to be used for the upcoming week.  The 15-30 minute scale is optimum.
Here is a chart to explain the tabs: