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Percentage of Stocks Trading Above their Pivot Point
The percentage of stocks trading above their pivot point is a breadth indicator that measures the overall market sentiment.
It calculates the total number of stocks trading above their tomorrow's pivot point level and divides that value by the number of stocks trading below their tomorrow's pivot point level.
The formula of the floor pivot point is:
PP = (high + low + close) / 3;
This market breadth indicator should be used mainly for very short-term predictions (one or two days). It creates the following ticker symbol: "_Stocks_Above_PP"
When applied to S&P 500 index (^GSPC), for example, I found the following trading rule to be quite profitable:
- Buy the S&P 500 when the "percentage of stocks trading above their pivot point" decreases (one-bar return)
- And when the S&P 500 index decreases too
You can of course add additional rules to make the trading system even better, but I won't tell you which indicators or time-series to use.
