PIVOTAL POINTS

Montauk Point, what a terrific place. This morning the SPY hit its daily resistance at 129.15 and immediately reversed lower. It is pretty interesting to watch the action in the SPY as it moves to its daily pivot point, support and resistance levels.

The calculations for these points are fairly simple. The daily Pivot Point is the average of the prior day high, low and close.

The formulas for the daily Support and Resistance levels are a bit more complex and they are as follows:

The First Resistance Level is R1 = (Twice the Pivot Point) less prior day's low.

The Second Resistance Level is R2 = (Pivot Point plus prior day's high) less prior day's low.

The First Support Level is S1 = (Twice the Pivot Point) less prior day's high.

The Second Support Level is S2 = (Pivot Point less prior day's high) plus prior day's low.

Most major real time charting software have these "points" built in to the programs and I always keep all the lines clearly visible on the charts. It is quite interesting to watch (and maybe profit from) the action around the Pivot Points and the Support and Resistance levels. One note of caution, sometimes there are bad ticks and these at times will cause incorrect caluculations.