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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Busted
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 05/26/2017
21,080 -2.67 0.0%
9,176 12.36 0.1%
720 -0.08 0.0%
6,210 4.93 0.1%
2,416 0.75 0.0%
YTD
6.7%
1.5%
9.2%
15.4%
7.9%
Tom's Targets    Overview: 05/15/2017
21,400 or 20,450 by 06/01/2017
9,500 or 8,700 by 06/01/2017
730 or 700 by 06/15/2017
6,350 or 6,000 by 06/01/2017
2,450 or 2,375 by 06/15/2017

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April 2013 Headlines


Archives


Tuesday 4/30/13. Trading Tuesday: Dow

The index climbed by 0.7% or 106.2 points. Since 10/01/1928 the index made 616 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 338 occasions.
     Average loss was -0.7% on 278 occasions.
Expect the index to close higher 54.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 48/71 or 67.6% of the time.
     The prediction of the index closing lower has been right 13/22 or 59.1% of the time.

Picture of the Dow industrials on the 5 minute scale.

Since I post this entry the night before, be sure to check how the futures are trading before the market opens. Large plus or minus numbers in the futures often sets the opening direction up or down, respectively.

I show a picture of the Dow industrials on the 5-minute scale from Monday's trading.

Trading was comparatively sedate today. The index moved slowly like a snake unhurried by threat. A rectangle top (A) formed early in the session but it wasn't a tall one. Price climbed easily enough to reach the price target setup by the height added to the top of the pattern.

In the afternoon, an ascending scallop appeared (B). The move after this pattern completed was downward but it took its time. A downward breakout is unusual for this pattern since the pattern completes at the top. Does this mean a downward move tomorrow (Tuesday)?

The open may be lower, but the probabilities suggest it'll close higher. The 10-day, 5 minute scale shows a lot of support at 14,680. We closed at 14,818. The daily chart shows the index moving to form a double top. Whether that will actually happen is open to debate. I'm skeptical that tomorrow will post a higher close because I suspect that today is the start of a 2B chart pattern. I'll vote for a lower close. If I'm wrong, then look for the index to start another run higher. Think that's unlikely? Look at the Dow utility index. It's been heading higher in a straight-line run since January. Who knew?

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

Top

© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,207.91    
 Weekly S2  14,371.02  163.11   
 Monthly S1  14,513.33  142.31   
 Weekly S1  14,594.88  81.55   
 Daily S2  14,659.68  64.79   
 Weekly Pivot  14,681.47  21.79   
 Monthly Pivot  14,700.42  18.95   
 Low  14,712.55  12.13   Yes! The Low is close to the Monthly Pivot.
 Open  14,712.55  0.00   Yes! The Open is close to the Low.
 Daily S1  14,739.21  26.66   
 61.8% Down from Intraday High  14,763.13  23.92   
 50% Down from Intraday High  14,778.75  15.62   
 Daily Pivot  14,792.09  13.33   
 38.2% Down from Intraday High  14,794.38  2.29   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  14,818.75  24.37   
 High  14,844.96  26.21   
 Daily R1  14,871.62  26.66   
 Weekly R1  14,905.33  33.71   
 Daily R2  14,924.50  19.16   
 Weekly R2  14,991.92  67.42   
 Monthly R1  15,005.84  13.92   
 Monthly R2  15,192.93  187.09   

Monday 4/29/13. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq composite on the daily scale.

I show a picture of the Nasdaq composite on the daily scale not because of the broadening top chart pattern outlined here in red.

Rather, it's the peak at A that interests me. Why?

On Friday, the index failed to make a new high. In fact, the index closed lower. That suggests it's going down. The peak marks what I call a partial rise.

A partial rise occurs when a stock (or index in this case) makes an attempt to touch the top trendline but doesn't nor does it come that close. A downward breakout often follows immediately.

I get the suspicion that this type of behavior used to work better in the past than it does now. If it's true, the markets are going to tumble in the coming weeks. I really don't expect that to happen, but you never know.

Top

A Brief Look Back

Picture of a flower from my garden.

The following are economic reports that moved the markets last week. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Up 19.66 points.
Tuesday: Up 152.29 points.
Wednesday: Down 43.16 points.
Thursday: Up 24.5 points.
Friday: Up 11.75 points.

For the Week...

The Dow industrials were up 165.04 points or 1.1%.
The Nasdaq composite was up 73.2 points or 2.3%.
The S&P 500 index was up 26.99 points or 1.7%.

Year to Date...

Dow Industrials
     1.2% down from the high of 14,887.51 on 04/11/2013.
     12.3% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     0.8% down from the high of 3,306.95 on 04/11/2013.
     6.6% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     0.9% down from the high of 1,597.35 on 04/11/2013.
     10.9% up from the low of 1,426.19 on 01/02/2013.

Top

Economic Reports

The following information is derived from yahoo!finance and sometimes Bloomberg.com with times local to the east coast.

ReportTimeA-F
Rating
Description
Personal income & consumption8:30 MC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 MC+Covers durables, non-durables, and services.
Chicago purchasing managers index9:45 TBMonitors regional manufacturing activity.
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Construction spending10:00 WDCovers residential/non-residential/public spending on new construction.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Rate decision2:15 W?The Federal Reserves reports on interest rate changes.
Auto & truck sales3:00 WC-Monthly sales of domestically produced vehicles.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Productivity & costs8:30 ThD+Cost of producing a unit of output.
International trade8:30 ThC+Import/export prices, trade balance. US economy vs others.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Factory orders10:00 FD+Durable/non-durable goods orders w/factory inventories.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 04/26/2013, the CPI had:

19 bearish patterns,
18 bullish patterns,
406 patterns waiting for breakout.
The CPI signal is 48.6%, which is neutral (between 35% and 65%).

The chart pattern indicator is bullish with 2 of 3 full triangles showing (). Additional triangles are a measure of strength with solid triangles meaning a more reliable signal than half triangles.

Swing Traders: Pivot Points

The following is based on an SFO article in December 2004 by John Seekinger, titled, "Take a two-dimensional approach." He offers these tips.

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  14,655  14,684  14,714  14,742  14,772 
Weekly  14,336  14,524  14,646  14,835  14,957 
Monthly  14,173  14,443  14,665  14,935  15,158 
S&P 500 (^GSPC): Daily  1,574  1,578  1,582  1,586  1,590 
Weekly  1,530  1,556  1,574  1,601  1,619 
Monthly  1,511  1,546  1,572  1,608  1,633 
Nasdaq (^IXIC): Daily  3,259  3,269  3,278  3,288  3,298 
Weekly  3,157  3,218  3,260  3,321  3,362 
Monthly  3,095  3,187  3,247  3,339  3,399 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3
First resistance level: R1 = (2 * P) - L
First support level: S1 = (2 * P) - H)
Second resistance level: R2 = P + (R1 - S1)
Second support level: S2 = P - (R1 - S1)
H = high price , L=low price, C=closing price

Top

Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week up 43.6%  Expect a random direction.
 5 months up 11.2%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week up 43.6%  Expect a random direction.
 6 months up 14.8%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 1 week up 42.5%  Expect a random direction.
 6 months up 10.2%  Expect a reversal soon.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indexes, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Buy-and-Hold: 12-Month SMA

This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly. See 12-Month Moving Average for more details.
Dow Industrials: bullish.
Nasdaq Composite: bullish.
S&P 500 Index: bullish.
Dow Transports: bullish.
Dow Utilities: bullish.

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Earnings, Chart Patterns & Industries

Earnings season is either underway or should be starting soon. The sessions could be more volatile.

 Found Chart Pattern Name
26Head-and-shoulders top
15Broadening top
13Double Top, Eve and Adam
9Triangle, symmetrical
8Head-and-shoulders complex top
6Double Top, Adam and Adam
6Head-and-shoulders bottom
6Scallop, ascending
6Triangle, descending
5Double Top, Eve and Eve

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example). However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indexes, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The following industries, of 52 that I follow, were the best (1) and worst (52) performing.

This WeekLast Week
1. Shoe1. Biotechnology
2. Biotechnology2. Human Resources
3. Semiconductor3. Shoe
4. Retail Building Supply4. Semiconductor
5. Advertising5. Trucking/Transp. Leasing
48. Investment Co. (Foreign)48. E-Commerce
49. Telecom. Equipment49. Homebuilding
50. Oilfield Svcs/Equipment50. Petroleum (Producing)
51. Medical Supplies51. Oilfield Svcs/Equipment
52. Metals and Mining (Div.)52. Short ETFs
53. Computers and Peripherals53. Metals and Mining (Div.)
54. Short ETFs54. Computers and Peripherals

-- Thomas Bulkowski

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Thursday 4/25/13. Trading Thursday: Nasdaq

The index climbed by 0.0% or 0.32 points. Since 02/05/1971 the index made 572 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 318 occasions.
     Average loss was -1.0% on 254 occasions.
Expect the index to close higher 55.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 37/62 or 59.7% of the time.
     The prediction of the index closing lower has been right 20/35 or 57.1% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

Since I post this entry the night before, be sure to check how the futures are trading before the market opens. Large plus or minus numbers in the futures often sets the opening direction up or down, respectively.

I show a picture of the Nasdaq composite on the 5-minute scale from Wednesday's trading.

A symmetrical triangle appears at A, between the two red trendlines. This breaks out upward and makes a strong push higher until B. That's where a throwback begins even though the drop didn't last long nor come close to the triangle trendline.

The move after the breakout from the triangle was far enough to meet the measure rule target (the height of the pattern added to the breakout price).

Looking to Thursday's close, the probabilities say the index will close higher. On the daily chart, the pattern over the last month looks like a W, even though entry to this W is from below. That makes it look weird. Looked at another way, it could be a head-and-shoulders top, too, with the right shoulder forming now. With overhead resistance, I can make a case for a lower close tomorrow. So, I'll just step aside and let you decide if we'll close higher or not.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

Top

© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,091.86    
 Weekly S2  3,107.56  15.70   
 Monthly S1  3,180.76  73.19   
 Weekly S1  3,188.61  7.85   
 Weekly Pivot  3,236.00  47.40   
 Monthly Pivot  3,243.85  7.85   
 Daily S2  3,245.72  1.87   Yes! The Daily S2 is close to the Monthly Pivot.
 Low  3,255.44  9.72   
 Daily S1  3,257.69  2.25   
 Open  3,262.21  4.52   
 61.8% Down from Intraday High  3,263.72  1.51   Yes! The 61.8% Down from Intraday High is close to the Open.
 50% Down from Intraday High  3,266.28  2.56   
 Daily Pivot  3,267.40  1.12   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  3,268.84  1.43   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  3,269.65  0.81   Yes! The Close is close to the 38.2% Down from Intraday High.
 High  3,277.12  7.47   
 Daily R1  3,279.37  2.25   
 Daily R2  3,289.08  9.72   
 Weekly R1  3,317.05  27.96   
 Monthly R1  3,332.75  15.70   
 Weekly R2  3,364.44  31.70   
 Monthly R2  3,395.84  31.40   

Tuesday 4/23/13. Trading Tuesday: Dow

The index climbed by 0.1% or 19.66 points. Since 10/01/1928 the index made 1221 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 626 occasions.
     Average loss was -0.7% on 595 occasions.
Expect the index to close higher 51.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 47/70 or 67.1% of the time.
     The prediction of the index closing lower has been right 13/22 or 59.1% of the time.

Picture of the Dow industrials on the 5 minute scale.

Since I post this entry the night before, be sure to check how the futures are trading before the market opens. Large plus or minus numbers in the futures often sets the opening direction up or down, respectively.

I show a picture of the Dow industrials on the 5-minute scale from Monday's trading.

This chart shows an unusual chart pattern. It's one I found (or named), called an ugly double bottom. The two bottoms are at A and B. The pattern confirms as a valid pattern when the index closes above C. Since this chart pattern often occurs in a down trend, it's important to wait for confirmation before taking a position.

Looking ahead to Tuesday's close, the probabilities suggest a higher close. On the daily chart, the index moved higher today, not by much, but it climbed. I expect that this marks a turn higher so I'm looking for a higher close, too.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

Top

© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,106.84    
 Weekly S2  14,204.39  97.55   
 Monthly S1  14,337.00  132.61   
 Weekly S1  14,385.78  48.78   
 Daily S2  14,406.64  20.86   
 Low  14,457.60  50.96   
 Daily S1  14,486.90  29.30   
 61.8% Down from Intraday High  14,507.73  20.83   
 50% Down from Intraday High  14,523.21  15.49   
 Daily Pivot  14,537.87  14.65   
 38.2% Down from Intraday High  14,538.70  0.83   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Open  14,547.51  8.81   Yes! The Open is close to the 38.2% Down from Intraday High.
 Close  14,567.17  19.66   
 High  14,588.83  21.66   
 Monthly Pivot  14,612.26  23.43   
 Daily R1  14,618.13  5.88   Yes! The Daily R1 is close to the Monthly Pivot.
 Weekly Pivot  14,625.42  7.29   Yes! The Weekly Pivot is close to the Daily R1.
 Daily R2  14,669.10  43.68   
 Weekly R1  14,806.81  137.71   
 Monthly R1  14,842.42  35.61   
 Weekly R2  15,046.45  204.03   
 Monthly R2  15,117.68  71.23   

Monday 4/22/13. Market Monday: The Week Ahead

My Prediction

Picture of the S and P 500 index on the daily scale.

I show this picture of the S & P 500 index on the daily scale because of the chart pattern highlighted. It's called a bullish Wolfe Wave and it's one I'm studying.

It has five turning points. The idea is to buy at point 5 when it touches the bottom trendline and sell when it reaches the diagonal line that connects points 1 and 4. That would have worked well since the index reached the line.

I still expect the indices to recover but it could take longer for that to occur.

 

 

Top

A Brief Look Back

Picture of my dog.

The following are economic reports that moved the markets last week. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Down 265.86 points.
Tuesday: Up 157.58 points.
Wednesday: Down 138.19 points.
Thursday: Down 81.45 points.
Friday: Up 10.37 points.

For the Week...

The Dow industrials were down 317.55 points or 2.1%.
The Nasdaq composite was down 88.89 points or 2.7%.
The S&P 500 index was down 33.6 points or 2.1%.

Year to Date...

Dow Industrials
     2.3% down from the high of 14,887.51 on 04/11/2013.
     11.0% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     3.1% down from the high of 3,306.95 on 04/11/2013.
     4.2% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     2.6% down from the high of 1,597.35 on 04/11/2013.
     9.0% up from the low of 1,426.19 on 01/02/2013.

Top

Economic Reports

The following information is derived from yahoo!finance and sometimes Bloomberg.com with times local to the east coast.

ReportTimeA-F
Rating
Description
Existing home sales10:00 MCCounts sales of used homes.
New home sales10:00 TC+Shows sales of single-family homes.
Durable goods orders8:30 WBMeasures orders, shipments of goods with lifespans >3 years.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Gross domestic product8:30 FBMeasures economic activity; GDP deflator measures inflation.
Michigan sentiment9:55 FB-Consumer sentiment: Measures strength of consumer spending.

Options Expiration

No options expire this week.

Top

Swing and Position Traders: Chart Pattern Indicator

On 04/19/2013, the CPI had:

5 bearish patterns,
18 bullish patterns,
173 patterns waiting for breakout.
The CPI signal is 78.3%, which is bullish (>= 65%).

The chart pattern indicator is bullish with 2 of 3 half triangles showing (). Additional triangles are a measure of strength with solid triangles meaning a more reliable signal than half triangles.

Swing Traders: Pivot Points

The following is based on an SFO article in December 2004 by John Seekinger, titled, "Take a two-dimensional approach." He offers these tips.

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  14,405  14,476  14,515  14,586  14,625 
Weekly  14,198  14,373  14,619  14,794  15,040 
Monthly  14,100  14,324  14,606  14,829  15,111 
S&P 500 (^GSPC): Daily  1,534  1,544  1,550  1,561  1,567 
Weekly  1,507  1,531  1,560  1,584  1,613 
Monthly  1,502  1,528  1,563  1,590  1,624 
Nasdaq (^IXIC): Daily  3,153  3,180  3,195  3,221  3,237 
Weekly  3,086  3,146  3,215  3,275  3,343 
Monthly  3,071  3,138  3,223  3,290  3,375 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3
First resistance level: R1 = (2 * P) - L
First support level: S1 = (2 * P) - H)
Second resistance level: R2 = P + (R1 - S1)
Second support level: S2 = P - (R1 - S1)
H = high price , L=low price, C=closing price

Top

Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week down 29.0%  The trend may continue.
 1 month down 20.4%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week down 27.7%  The trend may continue.
 1 month down 21.4%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 1 week down 31.2%  The trend may continue.
 1 month down 26.6%  The trend may continue.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indexes, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Buy-and-Hold: 12-Month SMA

This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly. See 12-Month Moving Average for more details.
Dow Industrials: bullish.
Nasdaq Composite: bullish.
S&P 500 Index: bullish.
Dow Transports: bullish.
Dow Utilities: bullish.

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Earnings, Chart Patterns & Industries

Earnings season is either underway or should be starting soon. The sessions could be more volatile.

 Found Chart Pattern Name
28Wolfe wave, bull
26Head-and-shoulders top
13Double Top, Eve and Adam
13Broadening top
9Triangle, symmetrical
8Scallop, ascending
8Head-and-shoulders complex top
6Rising wedge
6Rectangle top
6Triangle, descending

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example). However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indexes, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The following industries, of 52 that I follow, were the best (1) and worst (52) performing.

This WeekLast Week
1. Biotechnology1. Human Resources
2. Human Resources2. Furn/Home Furnishings
3. Shoe3. Semiconductor
4. Semiconductor4. Trucking/Transp. Leasing
5. Trucking/Transp. Leasing5. Shoe
48. E-Commerce48. Investment Co. (Foreign)
49. Homebuilding49. Telecom. Equipment
50. Petroleum (Producing)50. Chemical (Basic)
51. Oilfield Svcs/Equipment51. E-Commerce
52. Short ETFs52. Metals and Mining (Div.)
53. Metals and Mining (Div.)53. Computers and Peripherals
54. Computers and Peripherals54. Short ETFs

-- Thomas Bulkowski

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Thursday 4/18/13. Trading Thursday: Nasdaq

The index dropped by -1.8% or -59.96 points. Since 02/05/1971 the index made 49 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.2% on 20 occasions.
     Average loss was -1.3% on 29 occasions.
Expect the index to close lower 59.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 37/62 or 59.7% of the time.
     The prediction of the index closing lower has been right 19/34 or 55.9% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

Since I post this entry the night before, be sure to check how the futures are trading before the market opens. Large plus or minus numbers in the futures often sets the opening direction up or down, respectively.

I show a picture of the Nasdaq composite on the 5-minute scale from Wednesday's trading.

What looks like a head-and-shoulders bottom appears in the session and it spans most of the day (LS to RS, left and right shoulders). It's not a head-and-shoulders, at least not yet, because it is unconfirmed. Confirmation means the index must close above the red neckline (A). However, since the neckline slopes upward, I use the right armpit as the confirmation price (the blue line, B). I do that in all cases for up-sloping necklines. Why? Imagine that the neckline has a steeper slope. The index may never cross it. The armpit is a better entry price under those conditions.

I haven't looked at patterns that form from intraday to intraday to see how valid they are when unconfirmed during the session in which they are created.

Looking to Thursday's close, the probabilities expect a lower close. Damn. My portfolio could use a boost. This downswing could take the Nasdaq composite down to 3100 over the coming weeks. I also expect a lower close tomorrow but maybe I'll get a surprise.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,088.76    
 Weekly S2  3,124.35  35.59   
 Monthly S1  3,146.72  22.37   
 Daily S2  3,158.34  11.63   
 Weekly S1  3,164.51  6.17   
 Daily S1  3,181.51  17.00   
 Low  3,186.08  4.57   Yes! The Low is close to the Daily S1.
 Close  3,204.67  18.59   
 61.8% Down from Intraday High  3,205.52  0.85   Yes! The 61.8% Down from Intraday High is close to the Close.
 Daily Pivot  3,209.24  3.72   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  3,211.53  2.29   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  3,217.54  6.01   
 Monthly Pivot  3,226.83  9.30   
 Daily R1  3,232.41  5.57   
 Weekly Pivot  3,235.73  3.32   Yes! The Weekly Pivot is close to the Daily R1.
 Open  3,236.25  0.52   Yes! The Open is close to the Weekly Pivot.
 High  3,236.98  0.73   Yes! The High is close to the Open.
 Daily R2  3,260.14  23.16   
 Weekly R1  3,275.89  15.75   
 Monthly R1  3,284.79  8.90   
 Weekly R2  3,347.11  62.32   
 Monthly R2  3,364.90  17.79   

Tuesday 4/16/13. Trading Tuesday: Dow

The index dropped by -1.8% or -265.86 points. Since 10/01/1928 the index made 76 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 43 occasions.
     Average loss was -1.1% on 33 occasions.
Expect the index to close higher 56.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 46/69 or 66.7% of the time.
     The prediction of the index closing lower has been right 13/22 or 59.1% of the time.

Picture of the Dow industrials on the 5 minute scale.

Since I post this entry the night before, be sure to check how the futures are trading before the market opens. Large plus or minus numbers in the futures often sets the opening direction up or down, respectively.

I show a picture of the Dow industrials on the 5-minute scale from Monday's trading.

A double top appears early in the session, suggesting a downward move. That's what happened, too. The top is at AB and it confirms as a valid double top when the index closes below the valley between the two peaks, at C.

Later in the session, another double top (at CD, yes, I duplicated the Cs by mistake) appears which signals another down leg. This top also confirms. Since price enters the top from the top, the double top acts as a continuation pattern and not a reversal.

Looking to Tuesday's close, I expect a snapback rally, so that we close higher. I think the market's weakness today was just a one-day affair. Famous last words?

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,047.38    
 Weekly S2  14,271.79  224.41   
 Monthly S1  14,323.29  51.50   
 Daily S2  14,421.13  97.84   
 Weekly S1  14,435.50  14.36   Yes! The Weekly S1 is close to the Daily S2.
 Daily S1  14,510.17  74.67   
 Low  14,598.58  88.41   
 Close  14,599.20  0.62   Yes! The Close is close to the Low.
 Monthly Pivot  14,605.40  6.20   Yes! The Monthly Pivot is close to the Close.
 Weekly Pivot  14,661.50  56.10   
 Daily Pivot  14,687.61  26.11   Yes! The Daily Pivot is close to the Weekly Pivot.
 61.8% Down from Intraday High  14,700.38  12.76   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  14,731.82  31.45   
 38.2% Down from Intraday High  14,763.26  31.44   
 Daily R1  14,776.65  13.38   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Weekly R1  14,825.21  48.56   
 Open  14,865.06  39.85   
 High  14,865.06  0.00   Yes! The High is close to the Open.
 Monthly R1  14,881.31  16.25   Yes! The Monthly R1 is close to the High.
 Daily R2  14,954.09  72.78   
 Weekly R2  15,051.21  97.12   
 Monthly R2  15,163.42  112.21   

Monday 4/15/13. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq on the daily scale.

I show a picture of the Nasdaq composite for no other reason than to tell you about the trendline measure rule. Although this pic doesn't involve a trendline, the idea is the same.

Notice how the plunge to A is the same as the rise to B, as viewed from C. As far as trendlines go, the bump above/below a trendline will often equal the move after a trendline break by a similar amount. That's valuable information.

As to the coming week, I think the indices have more room to climb before returning to the corrective phase of a measured move up. To explain that, click on the link and look at "Completion" in the associated table. It tells what happens to price after a measured move.

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A Brief Look Back

Picture of a flower from my garden.

The following are economic reports that moved the markets last week. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Up 48.23 points.
Tuesday: Up 59.98 points.
Wednesday: Up 128.78 points.
Thursday: Up 62.9 points.
Friday: Down 0.08 points.

For the Week...

The Dow industrials were up 299.81 points or 2.1%.
The Nasdaq composite was up 91.09 points or 2.8%.
The S&P 500 index was up 35.57 points or 2.3%.

Year to Date...

Dow Industrials
     0.2% down from the high of 14,887.51 on 04/11/2013.
     13.4% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     0.4% down from the high of 3,306.95 on 04/11/2013.
     7.1% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     0.5% down from the high of 1,597.35 on 04/11/2013.
     11.4% up from the low of 1,426.19 on 01/02/2013.

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Economic Reports

The following information is derived from yahoo!finance and sometimes Bloomberg.com with times local to the east coast.

ReportTimeA-F
Rating
Description
Consumer price index8:30 TB+Inflation report. Measures cost of goods and services.
Housing starts8:30 TB-Number of homes beginning construction.
Building permits8:30 TB-Measures building permits for new construction.
Industrial production9:15 TB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 TB-Gauges economic activity, hints of inflation.
Crude inventories10:30 W?My guess: Measures oil inventory.
FEDs Beige book2:00 W?Reports on economic conditions.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Leading indicators10:00 ThD-Summary of already known reports.

Options Expiration

The following is courtesy of the Options Industry Council.

OptionDate
VIX expiresWednesday
A.M. settled index options cease trading.Thursday
Expiring equity and P.M. settled index options cease trading. Expiring cash-settled currency options cease trading at 12:00 P.M. EST.Friday
Equity, index, and cash-settled currency options expireSaturday

Many options expire this week, so traders will be looking to close out their positions ahead of that, and that suggests increased volatility (large daily price swings).

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Swing and Position Traders: Chart Pattern Indicator

As of 04/12/2013, the CPI had:

8 bearish patterns,
19 bullish patterns,
314 patterns waiting for breakout.
The CPI signal is 70.4%, which is bullish (>= 65%).

The chart pattern indicator is bullish with 2 of 3 half triangles showing (). Additional triangles are a measure of strength with solid triangles meaning a more reliable signal than half triangles.

Swing Traders: Pivot Points

The following is based on an SFO article in December 2004 by John Seekinger, titled, "Take a two-dimensional approach." He offers these tips.

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  14,766  14,815  14,840  14,890  14,915 
Weekly  14,360  14,613  14,750  15,002  15,140 
Monthly  14,136  14,501  14,694  15,059  15,252 
S&P 500 (^GSPC): Daily  1,574  1,581  1,587  1,595  1,601 
Weekly  1,530  1,559  1,578  1,608  1,627 
Monthly  1,516  1,552  1,575  1,611  1,634 
Nasdaq (^IXIC): Daily  3,262  3,278  3,287  3,304  3,313 
Weekly  3,154  3,225  3,266  3,336  3,377 
Monthly  3,119  3,207  3,257  3,345  3,395 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3
First resistance level: R1 = (2 * P) - L
First support level: S1 = (2 * P) - H)
Second resistance level: R2 = P + (R1 - S1)
Second support level: S2 = P - (R1 - S1)
H = high price , L=low price, C=closing price

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week up 43.8%  Expect a random direction.
 5 months up 11.2%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week up 43.8%  Expect a random direction.
 6 months up 14.8%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 1 week up 42.6%  Expect a random direction.
 6 months up 10.2%  Expect a reversal soon.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indexes, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Buy-and-Hold: 12-Month SMA

This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly. See 12-Month Moving Average for more details.
Dow Industrials: bullish.
Nasdaq Composite: bullish.
S&P 500 Index: bullish.
Dow Transports: bullish.
Dow Utilities: bullish.

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 1 days.

 Found Chart Pattern Name
13Triangle, symmetrical
10Scallop, ascending
9Head-and-shoulders top
9Broadening top
9Pipe top
6Rising wedge
6Head-and-shoulders bottom
6Triangle, descending
5Rectangle top
4Scallop, ascending and inverted

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example). However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indexes, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The following industries, of 52 that I follow, were the best (1) and worst (52) performing.

This WeekLast Week
1. Human Resources1. Trucking/Transp. Leasing
2. Furn/Home Furnishings2. Human Resources
3. Semiconductor3. Furn/Home Furnishings
4. Trucking/Transp. Leasing4. Cement and Aggregates
5. Shoe5. Air Transport
48. Investment Co. (Foreign)48. Toiletries/Cosmetics
49. Telecom. Equipment49. Chemical (Basic)
50. Chemical (Basic)50. Telecom. Equipment
51. E-Commerce51. E-Commerce
52. Metals and Mining (Div.)52. Metals and Mining (Div.)
53. Computers and Peripherals53. Short ETFs
54. Short ETFs54. Computers and Peripherals

-- Thomas Bulkowski

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Thursday 4/11/13. Trading Thursday: Nasdaq

The index climbed by 1.8% or 59.39 points. Since 02/05/1971 the index made 49 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.4% on 29 occasions.
     Average loss was -1.0% on 20 occasions.
Expect the index to close higher 59.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 36/61 or 59.0% of the time.
     The prediction of the index closing lower has been right 19/34 or 55.9% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

Since I post this entry the night before, be sure to check how the futures are trading before the market opens. Large plus or minus numbers in the futures often sets the opening direction up or down, respectively.

I show a picture of the Nasdaq composite on the 5-minute scale from Wednesday's trading.

The index shot up in the morning, as the chart shows. There were no chart patterns that would have alerted you to this move and that's sad.

In the afternoon, a rectangle top appeared. It's a pretty one but not really tall enough to buy at the bottom and sell at the top in a swing trade.

This behavior is typical, though. A strong move up followed by a horizontal move. Think of it as vigorous exercise followed by a rest period.

What does it say about Thursday's close? I have to follow the probabilities here and expect a higher close. Sweet, if that happens.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,091.42    
 Weekly S2  3,144.10  52.69   
 Monthly S1  3,194.33  50.23   
 Weekly S1  3,220.68  26.34   
 Daily S2  3,227.38  6.70   
 Monthly Pivot  3,232.32  4.94   Yes! The Monthly Pivot is close to the Daily S2.
 Weekly Pivot  3,245.45  13.14   
 Low  3,245.80  0.35   Yes! The Low is close to the Weekly Pivot.
 Open  3,246.06  0.26   Yes! The Open is close to the Low.
 Daily S1  3,262.31  16.25   
 61.8% Down from Intraday High  3,266.18  3.87   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  3,272.48  6.30   
 38.2% Down from Intraday High  3,278.78  6.30   
 Daily Pivot  3,280.74  1.96   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  3,297.25  16.51   
 High  3,299.16  1.91   Yes! The High is close to the Close.
 Daily R1  3,315.67  16.51   
 Weekly R1  3,322.03  6.35   
 Daily R2  3,334.10  12.07   
 Monthly R1  3,335.23  1.14   Yes! The Monthly R1 is close to the Daily R2.
 Weekly R2  3,346.80  11.57   
 Monthly R2  3,373.22  26.41   

Tuesday 4/9/13. Trading Tuesday: Dow

The index climbed by 0.3% or 48.23 points. Since 10/01/1928 the index made 1018 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 564 occasions.
     Average loss was -0.8% on 454 occasions.
Expect the index to close higher 55.4% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 45/68 or 66.2% of the time.
     The prediction of the index closing lower has been right 13/22 or 59.1% of the time.

Picture of the Dow industrials on the 5 minute scale.

Since I post this entry the night before, be sure to check how the futures are trading before the market opens. Large plus or minus numbers in the futures often sets the opening direction up or down, respectively.

I show a picture of the Dow industrials on the 5-minute scale from Monday's trading.

A double bottom appears early in the session (AB), but it doesn't confirm as a valid chart pattern because the index didn't close above the top of the pattern before bottom C appeared. That changed it into a triple bottom.

That confirmed as a valid pattern when the index closed above the red line at D. Then it was off to the races and up she went.

I still view the indices as cheap. I feel they will continue to move higher. The chart pattern indicator agrees. It turned from bearish to bullish today. I expect a higher close on Tuesday.

$ $ $

I found a problem with identification of the bullish Gartley so I redid the statistics.

$ $ $

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

Top

© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  13,664.97    
 Monthly S1  14,139.22  474.26   
 Weekly S2  14,327.41  188.18   
 Monthly Pivot  14,411.86  84.45   
 Daily S2  14,459.24  47.38   
 Weekly S1  14,470.44  11.20   Yes! The Weekly S1 is close to the Daily S2.
 Low  14,497.80  27.36   
 Daily S1  14,536.36  38.56   
 61.8% Down from Intraday High  14,541.99  5.63   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  14,555.64  13.65   
 Open  14,565.25  9.61   Yes! The Open is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  14,569.29  4.04   Yes! The 38.2% Down from Intraday High is close to the Open.
 Daily Pivot  14,574.92  5.63   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Weekly Pivot  14,577.47  2.55   Yes! The Weekly Pivot is close to the Daily Pivot.
 Close  14,613.48  36.01   
 High  14,613.48  0.00   Yes! The High is close to the Close.
 Daily R1  14,652.04  38.56   
 Daily R2  14,690.60  38.56   
 Weekly R1  14,720.50  29.90   
 Weekly R2  14,827.53  107.02   
 Monthly R1  14,886.11  58.59   
 Monthly R2  15,158.75  272.63   

Monday 4/8/13. Market Monday: The Week Ahead

My Prediction

Picture of the Dow transports on the daily scale.

I show the Dow transports on the daily scale.

This figure presents an interesting picture. The trany's have confirmed a double top. The plunge out of that pattern was surprisingly strong. Let's step back a bit and look closer.

The double top appears at A and B. This confirms as a valid double top when the index closes below the red line C.

It looks like the index is going to pull back to the red line (C). It does that 64% of the time, according to my book, Encyclopedia of Chart Patterns, Second Edition.

After that, I look for a decline to line D, worst case. That's my "target if wrong" value that I show at the top of this page in "Tom's Targets." However, I expect the index to move higher going into the middle of the month. That may match the top of the pullback.

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A Brief Look Back

Picture of a sunrise.

The following are economic reports that moved the markets last week. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Down 5.69 points.
Tuesday: Up 89.16 points.
Wednesday: Down 111.66 points.
Thursday: Up 55.76 points.
Friday: Down 40.86 points.

For the Week...

The Dow industrials were down 13.29 points or 0.1%.
The Nasdaq composite was down 63.66 points or 1.9%.
The S&P 500 index was down 15.91 points or 1.0%.

Year to Date...

Dow Industrials
     0.8% down from the high of 14,684.49 on 04/02/2013.
     11.1% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     2.0% down from the high of 3,270.30 on 03/28/2013.
     4.1% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     1.3% down from the high of 1,573.66 on 04/02/2013.
     8.9% up from the low of 1,426.19 on 01/02/2013.

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Economic Reports

The following information is derived from yahoo!finance and sometimes Bloomberg.com with times local to the east coast.

ReportTimeA-F
Rating
Description
Wholesale inventories10:00 TD-Wholesale sales and inventory statistics.
Crude inventories10:30 W?My guess: Measures oil inventory.
Treasury budget2:00 WDTracks budget deficit. Important in April (tax filing).
FOMC Minutes2:00 W?Minutes of the prior Federal Reserve meeting.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
International trade8:30 ThC+Import/export prices, trade balance. US economy vs others.
Retail sales8:30 FA-Reports total retail sales (not services). Are people spending?
Producer price index8:30 FB-Measures wholesale goods cost. An indication of future inflation.
Business inventories10:00 FC-Reports manufacturing, wholesale, retail inventories.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 04/05/2013, the CPI had:

21 bearish patterns,
6 bullish patterns,
188 patterns waiting for breakout.
The CPI signal is 22.2%, which is bearish (<= 35%).

The chart pattern indicator is bearish with 2 of 3 full triangles showing (). Additional triangles are a measure of strength with solid triangles meaning a more reliable signal than half triangles.

Swing Traders: Pivot Points

The following is based on an SFO article in December 2004 by John Seekinger, titled, "Take a two-dimensional approach." He offers these tips.

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  14,364  14,464  14,535  14,636  14,707 
Weekly  14,311  14,438  14,561  14,688  14,811 
Monthly  13,649  14,107  14,396  14,854  15,143 
S&P 500 (^GSPC): Daily  1,530  1,542  1,551  1,562  1,571 
Weekly  1,521  1,537  1,555  1,571  1,590 
Monthly  1,471  1,512  1,543  1,584  1,615 
Nasdaq (^IXIC): Daily  3,156  3,180  3,193  3,217  3,230 
Weekly  3,113  3,158  3,214  3,260  3,316 
Monthly  3,060  3,132  3,201  3,273  3,342 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3
First resistance level: R1 = (2 * P) - L
First support level: S1 = (2 * P) - H)
Second resistance level: R2 = P + (R1 - S1)
Second support level: S2 = P - (R1 - S1)
H = high price , L=low price, C=closing price

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week down 29.1%  The trend may continue.
 1 month down 20.4%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week down 27.8%  The trend may continue.
 1 month down 21.4%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 1 week down 31.3%  The trend may continue.
 1 month down 26.6%  The trend may continue.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indexes, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Buy-and-Hold: 12-Month SMA

This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly. See 12-Month Moving Average for more details.
Dow Industrials: bullish.
Nasdaq Composite: bullish.
S&P 500 Index: bullish.
Dow Transports: bullish.
Dow Utilities: bullish.

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 8 days.

 Found Chart Pattern Name
15Triangle, symmetrical
12Pipe top
9Head-and-shoulders top
8Scallop, ascending
5Rising wedge
5Rectangle top
5Double Top, Eve and Eve
3Broadening top
3Double Top, Adam and Adam
3Broadening top, right-angled and descending

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example). However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indexes, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The following industries, of 52 that I follow, were the best (1) and worst (52) performing.

This WeekLast Week
1. Trucking/Transp. Leasing1. Trucking/Transp. Leasing
2. Human Resources2. Human Resources
3. Furn/Home Furnishings3. Cement and Aggregates
4. Cement and Aggregates4. Furn/Home Furnishings
5. Air Transport5. Air Transport
48. Toiletries/Cosmetics48. Retail Store
49. Chemical (Basic)49. Apparel
50. Telecom. Equipment50. E-Commerce
51. E-Commerce51. Telecom. Equipment
52. Metals and Mining (Div.)52. Metals and Mining (Div.)
53. Short ETFs53. Short ETFs
54. Computers and Peripherals54. Computers and Peripherals

-- Thomas Bulkowski

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Saturday 4/6/13. Saturday Supplement.

I released analysis of the bullish Gartley chart pattern.

It has an average rise of 47% before a trend change and just 5% fail to rise at least 5%. Just one problem. You can't find it without a computer.

-- Thomas Bulkowski

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Thursday 4/4/13. Trading Thursday: Nasdaq

The index dropped by -1.1% or -36.26 points. Since 02/05/1971 the index made 140 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.6% on 72 occasions.
     Average loss was -1.3% on 68 occasions.
Expect the index to close higher 51.4% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 35/60 or 58.3% of the time.
     The prediction of the index closing lower has been right 19/34 or 55.9% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

Since I post this entry the night before, be sure to check how the futures are trading before the market opens. Large plus or minus numbers in the futures often sets the opening direction up or down, respectively.

I show a picture of the Nasdaq composite on the 5-minute scale from Wednesday's trading.

The blue lines at C show a downward sloping channel. This one breaks out upward when the index closes above the top line. The upward bounce was minimal from this pattern.

The index formed a double bottom at AB that would confirm as a valid pattern if the index closed above the peak between the two bottoms. That hasn't happened yet, so this pattern represents just squiggles on the chart.

The chart pattern indicator has been bearish for about a five trading days now, suggesting a signal that is here to stay. The probabilities suggest a higher close on Thursday. I hope so. I question if the drop is over. I don't think it is.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Nasdaq composite, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,033.15    
 Monthly S1  3,125.87  92.73   
 Daily S2  3,179.95  54.07   
 Weekly S2  3,189.31  9.36   
 Monthly Pivot  3,198.09  8.78   
 Daily S1  3,199.27  1.19   Yes! The Daily S1 is close to the Monthly Pivot.
 Weekly S1  3,203.95  4.68   Yes! The Weekly S1 is close to the Daily S1.
 Low  3,210.39  6.44   
 Close  3,218.60  8.21   
 61.8% Down from Intraday High  3,229.40  10.80   
 Daily Pivot  3,229.72  0.31   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  3,235.27  5.56   
 Weekly Pivot  3,237.13  1.85   Yes! The Weekly Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  3,241.15  4.02   Yes! The 38.2% Down from Intraday High is close to the Weekly Pivot.
 Daily R1  3,249.04  7.90   
 Weekly R1  3,251.77  2.73   Yes! The Weekly R1 is close to the Daily R1.
 Open  3,257.38  5.61   
 High  3,260.16  2.78   Yes! The High is close to the Open.
 Daily R2  3,279.49  19.33   
 Weekly R2  3,284.95  5.46   
 Monthly R1  3,290.81  5.87   
 Monthly R2  3,363.03  72.21   

Tuesday 4/2/13. Trading Tuesday: Dow

The index dropped by 0.0% or -5.69 points. Since 10/01/1928 the index made 1177 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 621 occasions.
     Average loss was -0.7% on 556 occasions.
Expect the index to close higher 52.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 44/67 or 65.7% of the time.
     The prediction of the index closing lower has been right 13/22 or 59.1% of the time.

Picture of the Dow industrials on the 5 minute scale.

Since I post this entry the night before, be sure to check how the futures are trading before the market opens. Large plus or minus numbers in the futures often sets the opening direction up or down, respectively.

I show a picture of the Dow industrials on the 5-minute scale from Monday's trading.

A double bottom appears early in the session (AB) and confirms as a valid pattern when the index closes above the peak between the two bottoms.

The height of the pattern applied to the top of it represents a target. The index met that target just after 1:00.

Looking at my results for today, my portfolio got whacked more than the indices predicted. I wonder if the entire market suffered more than the Dow or S &P 500. The patterns shown look as if the indices are going to move lower, that the stocks have peaked and are tumbling. A nice upward move in the indices could reverse that, of course, but not before some pain, I think.

Nevertheless, I expect the indices to resume rising in the coming two weeks. However, they sure are reluctant to rise right now...

$ $ $

I created a "Linked in" account today and started filling in the information. Soon, I'll get to accept the 30 or so invitations I have outstanding there. I'm toying with creating my own group that follows chart patterns and how they can be used to understand market behavior. Along with this blog, it could be the venue to introduce new research. I'm letting my facebook page handle my social life and Linked in will do the professional stuff.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the Dow industrials, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  13,512.90    
 Monthly S1  14,042.87  529.98   
 Monthly Pivot  14,313.99  271.11   
 Weekly S2  14,327.55  13.56   
 Weekly S1  14,450.20  122.65   
 Daily S2  14,495.78  45.58   
 Weekly Pivot  14,517.65  21.87   
 Low  14,531.48  13.83   
 Daily S1  14,534.31  2.83   Yes! The Daily S1 is close to the Low.
 61.8% Down from Intraday High  14,559.84  25.53   
 50% Down from Intraday High  14,568.60  8.76   
 Daily Pivot  14,570.02  1.42   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  14,572.85  2.83   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  14,577.36  4.51   Yes! The 38.2% Down from Intraday High is close to the Close.
 Open  14,578.54  1.18   Yes! The Open is close to the 38.2% Down from Intraday High.
 High  14,605.72  27.18   
 Daily R1  14,608.55  2.83   Yes! The Daily R1 is close to the High.
 Weekly R1  14,640.30  31.75   
 Daily R2  14,644.26  3.96   Yes! The Daily R2 is close to the Weekly R1.
 Weekly R2  14,707.75  63.49   
 Monthly R1  14,843.96  136.21   
 Monthly R2  15,115.08  271.11   

Monday 4/1/13. Market Monday: The Week Ahead

My Prediction

Picture of the S and P 500 index on the daily scale.

I show a chart of the S&P 500 composite on the daily scale.

This chart shows a congestion region circled at A. The index has broken out of that region, at B. Now, it's moving higher.

This is making the same type of moves that the other major indices are, except for the Dow utilities. Those have been on a tear for over a month now. The other indices are just breaking out of a congestion region, similar to that shown.

This suggests the market is going to continue doing well. That's what I believe, anyway. Of course, I could be wrong.

$ $ $

Thanks to those that have accepted my friends request on facebook. At last count, I was at 20 friends, closing in on my brother's 28. Sibling rivalry.

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A Brief Look Back

Picture of a flower from my garden.

The following are economic reports that moved the markets last week. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Down 64.28 points.
Tuesday: Up 111.9 points.
Wednesday: Down 33.49 points.
Thursday: Up 52.38 points.
Friday: Holiday or other weird event!

For the Week...

The Dow industrials were up 66.51 points or 0.5%.
The Nasdaq composite was up 22.52 points or 0.7%.
The S&P 500 index was up 12.3 points or 0.8%.

Year to Date...

Dow Industrials
     0.0% down from the high of 14,585.10 on 03/28/2013.
     11.3% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     0.1% down from the high of 3,270.30 on 03/28/2013.
     6.2% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     0.1% down from the high of 1,570.28 on 03/28/2013.
     10.0% up from the low of 1,426.19 on 01/02/2013.

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Economic Reports

The following information is derived from yahoo!finance and sometimes Bloomberg.com with times local to the east coast.

ReportTimeA-F
Rating
Description
Construction spending10:00 MDCovers residential/non-residential/public spending on new construction.
Factory orders10:00 TD+Durable/non-durable goods orders w/factory inventories.
Auto & truck sales2:00 TC-Monthly sales of domestically produced vehicles.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Trade balance8:30 FC+Signals balance of exports & imports.
Consumer credit3:00 FD-Measures auto, credit card and other debt.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 03/28/2013, the CPI had:

15 bearish patterns,
40 bullish patterns,
282 patterns waiting for breakout.
The CPI signal is 72.7%, which is bullish (>= 65%).

The chart pattern indicator is bullish with 1 of 3 full triangles showing (). Additional triangles are a measure of strength with solid triangles meaning a more reliable signal than half triangles.

Swing Traders: Pivot Points

The following is based on an SFO article in December 2004 by John Seekinger, titled, "Take a two-dimensional approach." He offers these tips.

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  14,497  14,538  14,561  14,602  14,626 
Weekly  14,329  14,454  14,520  14,644  14,710 
Monthly  13,515  14,047  14,316  14,848  15,117 
S&P 500 (^GSPC): Daily  1,558  1,563  1,567  1,573  1,576 
Weekly  1,538  1,554  1,562  1,578  1,586 
Monthly  1,456  1,513  1,541  1,598  1,627 
Nasdaq (^IXIC): Daily  3,247  3,257  3,264  3,274  3,281 
Weekly  3,206  3,237  3,253  3,284  3,301 
Monthly  3,049  3,158  3,214  3,323  3,379 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

Pivot point: P = (H + L + C)/3
First resistance level: R1 = (2 * P) - L
First support level: S1 = (2 * P) - H)
Second resistance level: R2 = P + (R1 - S1)
Second support level: S2 = P - (R1 - S1)
H = high price , L=low price, C=closing price

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week up 43.9%  Expect a random direction.
 4 months up 17.8%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week up 43.9%  Expect a random direction.
 5 months up 18.8%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 1 week up 42.8%  Expect a random direction.
 5 months up 12.2%  Expect a reversal soon.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the indexes, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Buy-and-Hold: 12-Month SMA

This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly. See 12-Month Moving Average for more details.
Dow Industrials: bullish.
Nasdaq Composite: bullish.
S&P 500 Index: bullish.
Dow Transports: bullish.
Dow Utilities: bullish.

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
15Triangle, symmetrical
6Head-and-shoulders top
6Pipe bottom
5Head-and-shoulders bottom
5Scallop, ascending
5Rectangle top
4Broadening top, right-angled and descending
3Rising wedge
3Scallop, ascending and inverted

Large numbers of bullish or bearish chart patterns can signal short- to intermediate-term market trends (many bullish chart patterns can mean an uptrend will continue, for example). However, please realize that the short-term price trend could have changed since the pattern was discovered (this is especially true of pipe tops or bottoms, which are weekly patterns).

The 10 types of most frequently appearing chart patterns in the stocks, indexes, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The following industries, of 52 that I follow, were the best (1) and worst (52) performing.

This WeekLast Week
1. Trucking/Transp. Leasing1. Trucking/Transp. Leasing
2. Human Resources2. Human Resources
3. Cement and Aggregates3. Cement and Aggregates
4. Furn/Home Furnishings4. Furn/Home Furnishings
5. Air Transport5. Air Transport
48. Retail Store48. Retail Store
49. Apparel49. Apparel
50. E-Commerce50. E-Commerce
51. Telecom. Equipment51. Telecom. Equipment
52. Metals and Mining (Div.)52. Metals and Mining (Div.)
53. Short ETFs53. Short ETFs
54. Computers and Peripherals54. Computers and Peripherals

-- Thomas Bulkowski

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