Analysis of today’s pivot line positions relative to yesterdays pivot line positions can give us a very good idea of market sentiment.

This simple indicator helps us see market sentiment at a glance. It can be applied on any time frame and any market.

1. Rising Pivots. If today’s R1 is higher than yesterdays R1 and today’s S1 is higher than yesterdays S1 then sentiment is bullish.
2. Falling Pivots. If today’s R1 is lower than yesterdays R1 and today’s S1 is lower than yesterdays S1 then sentiment is bearish.
3. Outside Pivots. If today’s R1 is higher than yesterdays R1 and today’s S1 is lower than yesterdays S1 then the bulls and bears had a big fight resulting in increased volatility and the market may be at a point of indecision.
4. Inside Pivots. If today’s R1 is lower than yesterdays R1 and today’s S1 is higher than yesterdays S1 then the bulls and bears had a very evenly matched fight and the market may be at a point of indecision.

A green bar indicates that yesterday was a bullish day.

A red bar indicates that yesterday was a bearish day.

A long blue bar indicates that yesterday was a more volatile day that neither side won.

A short blue bar indicates that yesterday was a day of indecision.

The latter two are of the most interest and can be used to predict possible changes of market direction.

I have written a simple strategy based on this theory which is currently under forward testing. Hopefully to be shared later!

a1=OpenDayOfWeek

b1=DHigh(1)
b2=DHigh(2)
c1=DLow(1)
c2=DLow(2)
d1=DClose(1)
d2=DClose(2)
IF a1=1 THEN
b1=b2
c1=c2
d1=d2
ELSE
b1=b1
c1=c1
d1=d1
ENDIF

H1 = b1//High
L1 = c1//Low
C = d1//Close

aa1=OpenDayOfWeek

bb1=DHigh(2)
bb2=DHigh(3)
//bb3= DHigh(3)
cc1=DLow(2)
cc2=DLow(3)
//cc3=DLow(1)
dd1=DClose(2)
dd2=DClose(3)
//dd3=DClose(1)

IF aa1=7 or aa1=1 or aa1=2 THEN
 bb1=bb2
 cc1=cc2
 dd1=dd2
ELSE
 bb1=bb1
 cc1=cc1
 dd1=dd1
ENDIF

HH1 = bb1//High
LL1 = cc1//Low
CC = dd1//Close

//Pivot1 = (HH1 + LL1 + CC) / 3
R11 = 2*((HH1 + LL1 + CC) / 3)- LL1
S11 = 2*((HH1 + LL1 + CC) / 3)- HH1
//Pivot = (H1 + L1 + C) / 3
R1 = 2*((H1 + L1 + C) / 3)- L1
S1 = 2*((H1 + L1 + C) / 3)- H1

//Outside Pivot
IF R1 > R11 and S1 < S11 THEN
 Flagup = 3
 FlagDown = -3
 R = 0
 G = 0
 B = 255
ENDIF

//Up Pivot
IF R1 > R11 and S1 > S11 THEN
 Flagup = 2
 FlagDown = -2
 R = 0
 G = 255
 B = 0
ENDIF

//Down Pivot
IF R1 < R11 and S1 < S11 THEN
 Flagup = 2
 FlagDown = -2
 R = 255
 G = 0
 B = 0
ENDIF

//Inside Pivot
IF R1 < R11 and S1 > S11 THEN
 FlagUp = 1
 FlagDown = -1
 R = 0
 G = 0
 B = 255
ENDIF

return FlagUp coloured(R,G,B) Style(Histogram,2) as "Pivot Analysis",FlagDown coloured(R,G,B) Style(Histogram,2) as "Pivot Analysis"