When you plot your lines on the charts the s&p sure enough ralies to or bounces off those Pivots, R1, S1 lines, etc. What, does everybody use these formulas?
I hear what you are saying and you are correct in that without a study to compare the common pivot point forumlas with random lines to check for statistical signifigance, I can't say for a fact that they have any credibility.
I'd say it's largely a misattribution of significance via selective memory. By shifting any line up or down, you can run the gamut between initial support, failed breakout, retested support, stop-run headfake, and finally resistance. Sure there are some lines that many watch and therefore prove to be self-fulfilling, but I don't think these are as common as purported by some. The lines that don't offer any kind of impact at all are very quickly forgotten and swept under the rug. I'm guessing some find that the price action is too boring without the flaky commentary on the side; slap on those fibonacci levels to your hearts content and you can make every single tick a life-and-death struggle between support and resistance, if that's what floats your boat.
It's like the news. After the close, the reporters try to figure out which piece of news to give credit/assign blame to.
Many of the possible support and resistance lines (fibs/pivots/trendlines) have validity of a kind. I'm not sure which ones relate to some fundamental issue and which relate to the amount of support they get from traders looking at them. The funny thing is that you can find lots of denial and lots of support. My guess is it depends whether the party concerned has been able to figure out how to use them profitably (for example I wouldn't expect a trend follower to be able to make 78% fibs work for them ... its a different mentality). __________________ The things people believe in are usually just what they instinctively feel is right; the justifications and arguments are the least important part of the belief. That's why you can win the argument, prove them wrong, and still they believe what they did in the first place. You've attacked the wrong thing. So what do you do? Agree to disagree. Or fight. - C. Zakalwe.
In my opinion pivots are useful for the specific reason that they provide some potential guidelines regarding price action. This doesn't mean that equities, futures, etc. will automatically conform to the pivots, they are just another indicator to potentially use as a tool for decision making.
Makes sense, prices will trend to and stall where the liquidity is deep but it doesn't explain why the liquidity is where it is, and how this can be determined by a simple formula.