Abbreviations and chart notes

This site shares my thought process on markets, especially technical analysis through pivots. 

I tend to "think out loud" on the posts and cannot really get around referring to pivots in posting. Please refer to the FAQ page and video for more explanation. Perhaps this list will also be helpful.

Pivot abbreviations & charts
YP = yearly pivot, large orange crosses in charts
YR1 = yearly resistance 1, large red crosses
YR2 = yearly resistance 2, large red crosses
YR3 = yearly resistance 3, large red crosses
YS1 = yearly support 1, large green crosses
YS2 = yearly support 2, large green crosses
YS3 = yearly support 3, large green crosses

1HP, 2HP = 1st half (Jan-Jun) pivot, 2nd half (Jul-Dec) pivot, large orange dots
1HR1, 2HR1 = 1st half resistance 1, 2nd half resistance 1, large red dots
1HR2 , 2HR2 = 1st half resistance 2, 2nd half resistance 2, large red dots
1HR3, 2HR3 = 1st half resistance 3, 2nd half resistance 3, large red dots
1HS1, 2HS1 = 1st half support 1, 2nd half support 1, large green dots
1HS2, 2HS2 = 1st half support 2, 2nd half support 2, large green dots
1HS3, 2HS3 = 1st half support 3, 2nd half support 3, large green dots

Q1P, Q2P, Q3P, Q4P = 1st quarter (Q) pivot, 2nd Q pivot, 3rd Q pivot, 4th Q pivot, medium orange crosses
Q1R1, Q2R1, Q3R1, Q4R1 = quarterly resistance 1 in 1st, 2nd, 3rd, 4th quarters respectively, medium red crosses
Q1R2, Q2R2, Q3R2, Q4R2 = quarterly resistance 2, medium red crosses
Q1R3, Q2R3, Q3R3, Q4R3 = quarterly resistance 3, medium red crosses
Q1S1, Q2S1, Q3S1, Q4S1 = quarterly support 1 in 1st, 2nd, 3rd, 4th quarters, medium green crosses
Q1S2, Q2S2, Q3S2, Q4S2, quartelry support 2, medium green crosses
Q1S3, Q2S3, Q3S3, Q4S3, quarterly support 3, medium green crosses

JanP, FebP, MarP, etc = monthly pivot, small orange dots
JanR1, FebR1, MarR1 = monthly resistance 1, small red dots
JanR2, FebR2, MarR2 = monthly resistance 2, small red dots
JanR3, FebR3, MarR3 = monthly resistance 3, small red dots
JanS1, FebS1, MarS1 = monthly support 1, small green dots
JanS2, FebS2, MarS2 = monthly support 2, small green dots
JanS3, FebS3, MarS3 = monthly support 3, small green dots

Long term = yearly and half year pivots, often shown on weekly chart, included on daily charts
Medium term = quarterly and monthly pivots, shown on daily charts
Short term = weekly and daily pivots, shown on 1-2 hour charts

Pivot only charts = refer to charts where I show pivots, but no support or resistance for clarify of trends. You will see crosses and dots showing yearly, half-year, quarterly and monthly pivots, and moving averages as below. I may also start referring to these as P4 charts meaning yearly pivot, half-year pivot, quarterly pivot and monthly pivot. 

Common charts and other abbreviations
USA main indexes = SPX S&P500, NDX Nasdaq 100, INDU Dow Industrials, RUT Russell small caps, NYA New York Composite, VTI Vanguard Total Stock Market Index Fund

SPX set, Tech set, INDU set, RUT set, all refer to the index and other variations which are the ETFs and futures related to the index. Futures are both '1' continuous contract or H, M, U or Z. Thus the "SPX set" means SPX index, SPY ETF, ES1 continuous contract futures, and ESZ or whatever current month futures. Pivots will be similar but not the same and often the group together will give the best signals instead of picking just one. For simplicity and ease of access I often refer to the ETFs in the SPY daily comment, but in blog posts will often be more comprehensive. 

ETFs & indexes - if you don't know what these are, please search google or a common finance or market related site like CNBC or yahoo finance
SPY
DIA
IWM
NYA
VTI
DXY USA dollar index

Safe havens - my collective term for TLT bonds, GLD gold, GDX gold miners, and VIX & variations
VIX - used extensively, CBOE options pricing index often works very well in confirming other setups
XIV - inverse ETF relating to VIX, but not the same

USA sectors
SMH/SOXX - two common semi-conductors ETFs
XBI/IBB - two common biotech ETFs
XLF/IYF - two common financial ETFs

Global ETFs
EEM - emerging markets
FXI - China via Hong Kong
RSX - Russia
INDA - India
EWZ - Brazil
ACWI - Broad international index

Other chart abbreviations
MA = simple moving average
10MA in aqua
20MA in orange
50MA in purple
100MA in thin black
200MA in thick black
400MA in thick brown

D, W, M, Q = daily, weekly, monthly, quarterly 

BB = Bollinger band, standard setting
RSI = relative strength index, standard 14 settig
MACD, common technical indicator, tweaked setting 7, 12, 5

Divergence = higher in price, lower in indicator (usually RSI, can also be Bollinger bands) OR lower in price, higher in indicator

Valuation = primarily SPX forward P/E ratio
Fundamentals = Citigroup Economic Surprise Index

Sentiment = standard CBOE put-call ratio, ISEE meter, AAII individual sentiment, NAAIM managers exposure

Timing = proprietary timing model
 

The Pivotal Perspective

I've been working with pivots for a few years now. I used to have all the moving averages, Bollinger bands, RSIs on charts and then I started noticing how often the daily and weekly pivots were on the turns and moves that mattered. Then I wondered - could there be a monthly pivot? I checked it out and was soon convinced. While I still like RSI, and Bollinger bands also can be helpful in spotting divergence, Pivots have been my number one choice for years. 

Again in response to recent feedback, here are a few key points:

1. The Pivot is a basic bull bear line; bullish above, bearish below. 

2. Support (S) levels indicate a possible low area; Resistance (R) levels indicate a possible high area. 

3. The bigger (ie longer) the level, the more important. This gives a clear hierarchy: year, half-year, quarter, month, week, day. I call the year and half year long term because these impact the market 6 months to a year; quarter and month are medium term; week and day are short term. 

These Pivotal key points give us a number of corresponding conclusions and strategies:

1. Best uptrend is a vehicle above all pivots, especially the long and medium term levels. While we can monitor weekly levels for short term moves, an asset could easily break a daily or weekly pivot several times over the course of weeks or months and remain in a screaming uptrend. Correspondingly, the worst downtrend is below all pivots. Sometimes there are no strong trends, and you can look for above 3 or below 3 giving more weight to the long term levels. 

Examples: Following this simple idea meant shorting oil without thinking about it too much in July 2015 (before that too, in 2014, but just selecting a few recent examples here), then again in November; buying USA especially QQQ early October, adding to full position mid October; shorting EEM, FXI, EWZ, RSX, PIN at various points last November; scramming from USA longs 1/4-7, adding shorts; long TLT 1/6 and adding 1/22+, long GLD in January too. There are others, but these have been the big moves. 

This doesn't mean you buy willy nilly or after a huge run. You are looking for times when the market changes pivot status and you can enter near the pivot ie change of trend and define your risk. Like on 1/6/2016 when SPY broke its YP targeting YS1 186 area, possible short or at least scram for longs. On the very same day TLT jumped above 3 pivots that were all clustered and an excellent buy signal. 

Changes of pivot status, especially when multiple indexes are moving the same way, is important in the market. Think USA indexes early January, on 12/29 SPY was above 3 pivots and was appearing to open 2016 above all levels; on 12/30 perhaps the next monthly was still a toss up; on 12/31 the 2HP broke on the last trading day, more important looked like the open would definitely be under the new JanP; then actually opened below the JanP and the Q1P in other words above 2 and below 2, long term testing but medium term down; 2 days later broke the YP and HP so "below all pivots" and then the breakdown followed, The same thing was happening in USA indexes across the board, and of course the weaker global indexes had already opened below all pivots.

After a correction in a larger uptrend, often the best choice for long is any vehicle that has held more pivot support compared to others. This kept you playing the long side in IBB, for example, 2012-2015, one of the best trends in the market. Conversely on the downside, EWZ was below all pivots from at many points in 2015. So despite bouncing from March to April along with oil, you didn't have to wonder too long where to put on some shorts - just scan for "below all pivots." 

2. Turns happen on R or S levels. If there aren't multiple indexes on pivot resistance or support, it probably isn't an important turn in the market. This saves a lot of mental energy, because can stop wondering if this is the day to buy or sell. No pivot no new position or position adjustment! So, R levels are potential profit areas on longs and S levels are potential profit areas on shorts. It is very tempting to short Rs and buy Ss, and once in a while this works, but really this is counter-trend and we all know the trend is your friend. Here is a detailed post on why it is generally better to buy above pivots and sell below, despite the temptation to short Rs and buy Ss. Note "shorting" and "buying" is much different than "taking profits" and "covering." 

Recent examples: taking partial profits on TLT longs near YR1, especially when it tagged the 1HR2 and dropped back under both levels on high volume. 

There are times an R level overthrows then falls back under (like Shanghai Comp YR3 in 2015), or an S level breaks and recovers (like INDU YS1 just last week) so a 1 day move is not forever. Overshoot and rejection is still a rejection; break and recovery is still a recovery. There are also incidences when a previously exceeded R level can turn into support, or a previously broken S level can turn into resistance. Think an index that had a nice rally above an YR1 to and YR2, then corrected and held the YR1 as support. Ditto in reverse for down.

3. The biggest moves are on the biggest levels. Sometimes you have to wait months for a yearly pivot move but this year almost everything delivered (meaning YP to YR1, or YP to YS1) in 6 weeks. Maybe we are about to have a huge turn in markets, or we will see YR2s.

4. Even if you are trying to buy a severe downtrend, you will avoid losing too much money by waiting for when the market is at least above a quarterly pivot. Conversely, if you are short a market in severe downtrend, you could hold a portion of positions until you see it recover at least a monthly pivot and in many cases a quarterly.

Same logic in reverse the other way; if you are trying to short a screaming uptrend, you won't lose too much if you wait for when the index breaks a quarterly pivot. You may have a break and recovery a few times, but still - example IBB, shorting only below a QP, kept you out of trouble and eventually gain a huge gain. Or if you are long IBB, then holding a portion until a quarterly pivot broke kept you in the trade for longer (instead of taking all profits on first tag of a big R level). 

5. When do pivots NOT work? When they chop. It is rare but it can happen. While it is common to see a few changes of status on major turns in the market - more on this in another post someday - once in a great while pivots chop excessively. For example, in year 2000 the SPX YP and HPs changed status 16 times on a weekly basis, where the average is just 4. Some years don't change at all. There was a similar sideways congestion chop fest in USDJPY for months from January 2014 to August on the 1HP until another decent move got going. So I think best to have some limit on reversals per the period you are trading, and if you have struck out too often just come back for the next quarter or half. OR, if one level is chopping, then get a combination of levels for your next entry. 

 

 

Important note on all my charts

Intro note: If you are new to my terminology please see the FAQ page and especially the video posted there.

Recently two different people quickly looked at my charts and had the same first reaction: are the levels that look so convincing on the turn still in play? It looks like they only go to the last trading day. 

Here's the TLT weekly chart with long term levels only (yearly and half-year). It does appear that the levels cease to be in play for the next week. In fact the turn looks so convincing maybe you think the level was generated after the fact! Not so!

The basic definition of a pivot is:

Previous period (High + Low + Close)/3 ; in other words, the average of the high low & close of the previous period.

And once that level is defined, that's it for the period! In other words:

2016 yearly pivot (YP) average of 2015 high, low & close
2016 1H pivot average of 2015 2H high, low & close
2016 Q1 pivot average of 2015 Q4 high, low & close
2016 Feb pivot avg of 2016 Jan high, low & close

And so on. Once the 2016 YP and corresponding support (S1, S2, etc) and resistance (R1, R2, etc) are determined, that's IT - they are fixed for the year. 

So the chart would more correctly look like this, with the yearly pivots in play already showing for all year, and the first half pivots in play until the end of June. We cannot draw the 2H pivots yet because they will be based on 2016 1H high low and close!

However, the script on trading view only allows me to show the pivot on the current bar, and I just drew in the solid lines manually (which I cannot do on every post). Maybe I will get this sorted out with a script that generates a line in play for the entire duration, but I'm not a programmer and this was accomplishment enough. For now, just know that when I say the TLT tagged 1HR2 (nearly exact on the high) at 135.16 and YR1 at 134.42 combo as above, those levels have been sitting there from the close of 12/31/2015; in the case of the yearly level, it will remain the same until the close of trading on 12/30/2016, and for the first half pivots, they are fixed and in play until 6/30/2016 at which point the 2H pivots will take over. 

This is what allowed me to have the 134+ target on TLT mentioned from 1/13, and the SPY 186 target from 1/6! This was simply and example of one of The Pivotal Perspective key points, above the YP means look for YR1, below the YP means look for YS1. This is a very good probability move and happens most of the time on most asset classes. In fact, nearly everything I follow has already delivered in just 6 weeks!