HedgeFundLIVE.com — On Friday, the S&P E-Minis rallied off the open to just shy of R4. While not a huge fan of pivot trading for equities, I do like to pay attention to Camarilla pivots on the ES intra day as they often hold up well. Friday was one example of R4 resistance holding firm. In fact, the high print in the ES was just 3 small bps below R4. Not too surprisingly, given the strength of the market over the past week and a half, failing at R4 did not lead to a steep sell off. The ES drifted slightly lower to close right around R3.
Failing right below R4 and then closing right around R3 is in reality a very rare occurrence. To reiterate, the high on Friday was 3bps shy of R4 and the close was not even 1bp from R3. I set the criteria of my model to search for days when the high tick was within 4bps below R4 and the close was within 5bps (above or below) R3.
This scenario has happened only 12 times since 2000, which is less than 0.5% of the time. In order to derive potential tradable value in this analysis, I also looked at what occurred on the following day, which would correspond to Monday the 28th in our current case. Below are the probability outputs:
1D High % Off R4 0.04% Close % Off R3 0.05% Next Day Pct Chg Input 0.00% Number of Instances 12 Number that Meets Criteria 4 Number of Higher High Next Days 9 Number of Lower Low Next Days 7 Number of High Above R4 Next Days 4 Number of Low Below S4 Next Days 8 Probability of Up 0% Next Time Period 33.33% Probability of Higher High Next Day 75.00% Probability of Lower Low Next Day 58.33% Probability of Ticking Above R4 Next Day 33.33%Probability of Ticking Below S4 Next Day
Click Here for full article.