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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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Chart Patterns: After the Buy
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Busted
Patterns
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 09/21/2017
22,359 -53.36 -0.2%
9,669 14.62 0.2%
731 -0.83 -0.1%
6,423 -33.35 -0.5%
2,501 -7.64 -0.3%
YTD
13.1%
6.9%
10.8%
19.3%
11.7%
Tom's Targets    Overview: 09/14/2017
22,450 or 21,500 by 10/01/2017
9,750 or 9,200 by 10/01/2017
775 or 730 by 10/01/2017
6,650 or 6,200 by 10/01/2017
2,600 or 2,425 by 10/01/2017

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April 2014 Headlines


Archives


Tuesday 4/29/14. Trading Tuesday: Dow

The index climbed by 0.5% or 87.28 points. Since 10/01/1928 the index made 878 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 480 occasions.
     Average loss was -0.7% on 398 occasions.
Expect the index to close higher 54.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 71/108 or 65.7% of the time.
     The prediction of the index closing lower has been right 20/37 or 54.1% of the time.

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.

Picture of the Dow industrials on the 5 minute scale.

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

Today the index showed a pattern that I don't talk about enough. It's a measured move down. The pattern spans from A to D.

The first leg is AB and the second leg is CD. The corrective phase is BC. The theory behind the pattern is that the second leg will approximate the price move and duration of the first leg. But wait. There's more.

Want to learn more, like how often the predictions work? You can find this chart pattern and many others with updated statistics in my book, Getting Started in Chart Pattern, Second Edition (pictured). It officially arrived on the shelves a week ago.

When price completes the second leg, it often retraces back to the corrective phase. That happened here, but the index continued moving higher.

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

© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  15,748.92    
 Monthly S1  16,098.83  349.91   
 Weekly S2  16,217.48  118.65   
 Daily S2  16,232.88  15.40   Yes! The Daily S2 is close to the Weekly S2.
 Low  16,312.66  79.78   
 Weekly S1  16,333.11  20.45   
 Daily S1  16,340.81  7.70   Yes! The Daily S1 is close to the Weekly S1.
 Open  16,363.20  22.39   
 Monthly Pivot  16,365.23  2.03   Yes! The Monthly Pivot is close to the Open.
 61.8% Down from Intraday High  16,384.37  19.13   
 50% Down from Intraday High  16,406.52  22.15   
 Daily Pivot  16,420.59  14.07   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  16,428.66  8.07   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  16,448.74  20.08   
 Weekly Pivot  16,449.41  0.67   Yes! The Weekly Pivot is close to the Close.
 High  16,500.37  50.96   
 Daily R1  16,528.52  28.15   
 Weekly R1  16,565.04  36.52   
 Daily R2  16,608.30  43.26   
 Weekly R2  16,681.34  73.04   
 Monthly R1  16,715.14  33.80   
 Monthly R2  16,981.54  266.40   

Monday 4/28/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow transports on the daily scale.

I show the Dow transports on the daily chart.

I picked this chart because of the broadening top that appears on the chart as two diverging red lines. It appears that the index is going down, as the last price bar shows. The index could race to the bottom of the chart pattern then either continue lower or bounce upward.

What's my guess on what will happen? I suspect that the index will not touch the bottom trendline, but will instead curve around and zip out the top. The index might drop two-thirds of the way across and then execute what's called a partial decline. That's the drop and upward move I just described.

Of course, not if but when Russia invades Ukraine, it'll upset things and take the markets lower, but my guess is we're feeling that now. When the event actually happens, the market will drop but not much and then begin a recovery a day or two later. Since I'm not on Putin's short list, I don't know about the timing.

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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 40.71 points.
Tuesday: Up 65.12 points.
Wednesday: Down 12.72 points.
Thursday: Up 0 points.
Friday: Down 140.19 points.

For the Week...

The Dow industrials were down 47.08 points or 0.3%.
The Nasdaq composite was down 19.96 points or 0.5%.
The S&P 500 index was down 1.45 points or 0.1%.

Year to Date...

Dow Industrials
     1.6% down from the high of 16,631.63 on 04/04/2014.
     6.7% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     6.8% down from the high of 4,371.71 on 03/06/2014.
     3.3% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     1.8% down from the high of 1,897.28 on 04/04/2014.
     7.2% up from the low of 1,737.92 on 02/05/2014.

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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 confidence10:00 TB-Surveys 5,000 households for trends.
Gross domestic product8:30 WBMeasures economic activity; GDP deflator measures inflation.
Chicago purchasing managers index9:45 WBMonitors regional manufacturing activity.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Rate decision2:00 W?The Federal Reserves reports on interest rate changes.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Personal income & consumption8:30 ThC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 ThC+Covers durables, non-durables, and services.
Construction spending10:00 ThDCovers residential/non-residential/public spending on new construction.
Auto & truck sales2:00 ThC-Monthly sales of domestically produced vehicles.
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 04/25/2014, the CPI had:

28 bearish patterns,
18 bullish patterns,
406 patterns waiting for breakout.
The CPI signal is 39.1%, 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  16,230  16,296  16,400  16,465  16,569 
Weekly  16,188  16,275  16,420  16,507  16,652 
Monthly  15,720  16,041  16,336  16,657  16,952 
S&P500 (^GSPC): Daily  1,849  1,856  1,867  1,874  1,885 
Weekly  1,844  1,854  1,869  1,879  1,895 
Monthly  1,775  1,819  1,858  1,902  1,941 
Nasdaq (^IXIC): Daily  4,031  4,053  4,090  4,112  4,149 
Weekly  3,998  4,037  4,107  4,146  4,216 
Monthly  3,724  3,900  4,122  4,298  4,520 
  • 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 30.4%   The trend may continue. 
 1 month down 19.7%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week down 28.2%   The trend may continue. 
 1 month down 20.7%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week down 31.4%   The trend may continue. 
 2 months down 16.1%   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 indices, 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.

I found 36 pipe bottoms last week, which is very bullish! Large numbers of pipe bottoms often signal the start of a short to intermediate-term move up before price drops back down, forming an unconfirmed double bottom.

 Found Chart Pattern Name
37Pipe bottom
18Triangle, symmetrical
13Head-and-shoulders top
8Broadening top
7Scallop, ascending and inverted
7Broadening wedge, descending
6Triple top
5Diamond top
5Broadening top, right-angled and ascending
5Double Bottom, 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, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The industries I follow were the best (rank 1) and worst performing.

This WeekLast Week
1. Cement and Aggregates1. Cement and Aggregates
2. Drug2. Drug
3. Shoe3. Shoe
4. Semiconductor4. Semiconductor
5. Aerospace/Defense5. Aerospace/Defense
50. Toiletries/Cosmetics50. Toiletries/Cosmetics
51. Retail Building Supply51. Retail Building Supply
52. E-Commerce52. E-Commerce
53. Retail (Special Lines)53. Retail (Special Lines)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 4/26/14. Common Breakout Directions

I was looking at my book, "Encyclopedia of Chart Patterns, Second Edition," pictured, and thought I'd list a few of the more common chart patterns, and the breakout direction.

You can derive this yourself from table 2 in each chapter by combining the number of formations for upward or downward breakouts and bull or bear markets.

The list is based on information from years ago, so the percentages will have changed with additional samples, but this gives you an indication of the breakout direction. This is for bull markets only.

Here's a list of the most common breakout direction for the chart pattern.

Broadening bottoms: 53% breakout upward
Broadening tops: 50.3% downward
Flags: 54% upward
Pennants: 61% upward
Rectangle bottoms: 55% downward
Rectangle tops: 68% upward
Ascending triangles: 70% upward
Descending triangles: 64% downward
Symmetrical triangles: 54% upward

-- Thomas Bulkowski

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Thursday 4/24/14. Trading Thursday: Nasdaq

The index dropped by -0.8% or -34.49 points. Since 02/05/1971 the index made 226 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 110 occasions.
     Average loss was -1.4% on 116 occasions.
Expect the index to close lower 51.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 59/100 or 59.0% of the time.
     The prediction of the index closing lower has been right 24/48 or 50.0% of the time.

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.

Picture of the Nasdaq composite on the 5 minute scale.

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

This is a wonderful example of a descending triangle.

The breakout from this chart pattern is downward but the drop doesn't last long. That's expected since stocks often pull back to the breakout price or triangle trendline, as in this case (A). The index has dropped from then and that's expected, too. This maneuver suggests the index will continue lower tomorrow (Thursday).

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

© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,740.77    
 Weekly S2  3,896.72  155.95   
 Monthly S1  3,933.87  37.15   
 Weekly S1  4,011.85  77.98   
 Weekly Pivot  4,061.15  49.31   
 Daily S2  4,101.91  40.76   
 Daily S1  4,114.44  12.53   
 Low  4,125.41  10.97   
 Close  4,126.97  1.56   Yes! The Close is close to the Low.
 Daily Pivot  4,137.94  10.97   
 Monthly Pivot  4,139.13  1.19   Yes! The Monthly Pivot is close to the Daily Pivot.
 61.8% Down from Intraday High  4,139.17  0.04   Yes! The 61.8% Down from Intraday High is close to the Monthly Pivot.
 50% Down from Intraday High  4,143.42  4.25   
 38.2% Down from Intraday High  4,147.68  4.25   
 Daily R1  4,150.47  2.79   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Open  4,160.90  10.43   
 High  4,161.44  0.54   Yes! The High is close to the Open.
 Daily R2  4,173.97  12.53   
 Weekly R1  4,176.28  2.31   Yes! The Weekly R1 is close to the Daily R2.
 Weekly R2  4,225.58  49.31   
 Monthly R1  4,332.23  106.65   
 Monthly R2  4,537.49  205.26   

Tuesday 4/22/14. Trading Tuesday: Dow

The index climbed by 0.2% or 40.71 points. Since 10/01/1928 the index made 1228 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 669 occasions.
     Average loss was -0.6% on 559 occasions.
Expect the index to close higher 54.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 70/107 or 65.4% of the time.
     The prediction of the index closing lower has been right 20/37 or 54.1% 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 Friday's and Monday's trading.

A broadening top chart pattern appears at C. This one was special since it highlighted the breakout direction: up. At A, a partial decline appears that suggests an upward breakout. Unfortunately, the chart pattern hasn't staged a breakout yet since it hasn't close above the top or below the bottom of the chart pattern. Plus the upward move came today (Monday) and not Friday when the chart pattern appeared.

Today, a symmetrical triangle appears at B. Price did close above the top of the chart pattern, staging an upward breakout. Then price threw back to the triangle's apex, D, and has started moving up. This suggests the upward move will continue, at least in the morning. World events over night could change that, of course. And so could daytime events. Sigh. Did you know that a day without sunshine is like night?

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

© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  15,749.09    
 Weekly S2  15,880.48  131.39   
 Monthly S1  16,099.17  218.69   
 Weekly S1  16,164.86  65.69   
 Weekly Pivot  16,312.68  147.81   
 Monthly Pivot  16,365.40  52.72   
 Daily S2  16,379.34  13.94   
 Low  16,402.08  22.74   
 Open  16,408.92  6.84   
 Daily S1  16,414.29  5.37   Yes! The Daily S1 is close to the Open.
 61.8% Down from Intraday High  16,424.12  9.83   
 50% Down from Intraday High  16,430.93  6.81   
 Daily Pivot  16,437.04  6.11   
 38.2% Down from Intraday High  16,437.74  0.70   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  16,449.25  11.51   
 High  16,459.78  10.53   
 Daily R1  16,471.99  12.21   
 Daily R2  16,494.74  22.74   
 Weekly R1  16,597.06  102.33   
 Monthly R1  16,715.48  118.42   
 Weekly R2  16,744.88  29.40   
 Monthly R2  16,981.71  236.83   

Monday 4/21/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

This is a picture of the Dow utilities index.

I remarked in an earlier blog that since the utilities under performed last year, that they might outperform this year. The chart seems to agree.

Notice how price has been climbing at a good angle. Too steep and the run higher won't last. Too shallow and little progress is made.

Strong and lasting moves tend to be those from the shallower angles but it's hard to measure that. I attempted to do that in my second book, Trading Classic Chart Patterns" in my study of trendlines.

 

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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 166.84 points.
Tuesday: Up 10.27 points.
Wednesday: Up 181.04 points.
Thursday: Down 266.96 points.
Friday: Down 143.47 points.

For the Week...

The Dow industrials were down 4.17 points or 0.0%.
The Nasdaq composite was down 32.21 points or 0.8%.
The S&P 500 index was down 0.24 points or 0.0%.

Year to Date...

Dow Industrials
     1.3% down from the high of 16,631.63 on 04/04/2014.
     7.0% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     6.3% down from the high of 4,371.71 on 03/06/2014.
     3.8% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     1.7% down from the high of 1,897.28 on 04/04/2014.
     7.3% up from the low of 1,737.92 on 02/05/2014.

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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
Leading indicators10:00 MD-Summary of already known reports.
Existing home sales10:00 TCCounts sales of used homes.
New home sales10:00 WC+Shows sales of single-family homes.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Durable goods orders8:30 ThBMeasures orders, shipments of goods with lifespans >3 years.
Michigan sentiment9:55 FB-Consumer sentiment: Measures strength of consumer spending.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 04/17/2014, the CPI had:

4 bearish patterns,
28 bullish patterns,
415 patterns waiting for breakout.
The CPI signal is 87.5%, 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  16,320  16,364  16,412  16,457  16,505 
Weekly  15,853  16,131  16,293  16,571  16,734 
Monthly  15,736  16,072  16,352  16,688  16,968 
S&P500 (^GSPC): Daily  1,851  1,858  1,864  1,871  1,877 
Weekly  1,792  1,829  1,851  1,887  1,909 
Monthly  1,776  1,820  1,859  1,903  1,942 
Nasdaq (^IXIC): Daily  4,044  4,070  4,090  4,116  4,136 
Weekly  3,897  3,996  4,091  4,190  4,284 
Monthly  3,773  3,934  4,153  4,314  4,533 
  • 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 43.5%   Expect a random direction. 
 1 month down 19.7%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week up 42.8%   Expect a random direction. 
 1 month down 20.7%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week up 43.3%   Expect a random direction. 
 2 months down 16.1%   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 indices, 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
17Triangle, symmetrical
14Head-and-shoulders top
7Triple top
7Scallop, ascending and inverted
7Double Top, Eve and Adam
6Double Top, Adam and Adam
6Double Top, Eve and Eve
6Broadening wedge, descending
6Broadening top
6Head-and-shoulders bottom

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, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The industries I follow were the best (rank 1) and worst performing.

This WeekLast Week
1. Cement and Aggregates1. Cement and Aggregates
2. Air Transport2. Air Transport
3. Chemical (Specialty)3. Chemical (Specialty)
4. Aerospace/Defense4. Aerospace/Defense
5. Drug5. Drug
50. Retail Building Supply50. Retail Building Supply
51. E-Commerce51. E-Commerce
52. Toiletries/Cosmetics52. Toiletries/Cosmetics
53. Retail (Special Lines)53. Retail (Special Lines)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 4/19/14. The Best Performing Candlesticks

Tip: The best performing candlesticks appear within a third of the yearly low.

I used a database of 4.7 million candle lines and found 103 different candlestick patterns. Then I measured the move from the breakout to the trend end and sorted them into where the breakout was in the yearly price range.

This is one of the discoveries I made and discuss in my book, Encyclopedia of Candlestick Charts (shown). In each candlestick chapter, I sort candle performance into the yearly price range, just to see if a trend develops. Most of the time, candles that showed the highest post breakout move began their life within the lowest third of the yearly price range. Here are the results.

Highest Third:5%
Middle Third: 11%
Lowest Third: 84%

As an example, the bullish belt hold candlestick in a bear market after a downward breakout drops an average of 11.21% for those candlesticks within a third of the yearly low. Belt holds in the middle third drop 9.35% and those with breakouts in the highest third drop 7.76%. The other breakout directions (up/down) and markets (bull/bear) show similar results, but check the candlestick type you are interested in. The decline in this example measures from the breakout to the trend low (often the nearest minor low).

Knowing that candlesticks within a third of the yearly low tend to be more reliable (meaning price trends farther than otherwise, so you are more likely to walk away with a profitable trade) is the kind of information that gives traders like me an edge. And you can buy that edge from Amazon at the link. Just click on the book picture and it will take you there.

-- Thomas Bulkowski


Friday 4/18/14. Markets Closed. Vertical Run Down!

I released research on a new chart patterns called a vertical run down. Click the link to learn more about how price behaves after a strong plunge.

-- Thomas Bulkowski


Thursday 4/17/14. Trading Thursday: Nasdaq

The index climbed by 1.3% or 52.07 points. Since 02/05/1971 the index made 127 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 81 occasions.
     Average loss was -1.3% on 46 occasions.
Expect the index to close higher 63.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 58/99 or 58.6% of the time.
     The prediction of the index closing lower has been right 24/48 or 50.0% 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 Tuesday's and Wednesday's trading.

I had to search the chart for a few minutes before I found a chart pattern to highlight. It's a triple bottom which I show as 123. The pattern confirms as a valid chart pattern at A when the index closes above the red line.

Price rises far enough, I think, to meet the measure rule target. That's the height of the chart pattern added to the highest peak in the pattern. It gives an estimate of a minimum price move and it's surprising how accurate it can be on the day trading scale (intraday). However, only an hour remained in the session, so that's a danger when trading a pattern so late in the day.

On a happier note, the chart pattern indicator has flipped to bullish 2 days ago. Whether it will remain bullish is anyone's guess but I'm hopeful that this is the start of a swift move up. Clearly the utilities are doing well.

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,769.99    
 Weekly S2  3,894.12  124.13   
 Monthly S1  3,928.11  33.99   
 Weekly S1  3,990.18  62.07   
 Daily S2  4,022.97  32.79   
 Low  4,038.81  15.84   
 Daily S1  4,054.60  15.79   
 61.8% Down from Intraday High  4,056.94  2.34   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  4,062.54  5.60   
 Open  4,066.82  4.28   Yes! The Open is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  4,068.15  1.33   Yes! The 38.2% Down from Intraday High is close to the Open.
 Daily Pivot  4,070.44  2.29   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  4,086.23  15.79   
 High  4,086.28  0.05   Yes! The High is close to the Close.
 Weekly Pivot  4,087.68  1.40   Yes! The Weekly Pivot is close to the High.
 Daily R1  4,102.07  14.39   
 Daily R2  4,117.91  15.84   
 Monthly Pivot  4,149.75  31.84   
 Weekly R1  4,183.74  33.99   
 Weekly R2  4,281.24  97.51   
 Monthly R1  4,307.87  26.63   
 Monthly R2  4,529.51  221.64   

Tuesday 4/15/14. Trading Tuesday: Dow

The index climbed by 0.9% or 146.49 points. Since 10/01/1928 the index made 482 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 285 occasions.
     Average loss was -0.7% on 197 occasions.
Expect the index to close higher 59.1% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 68/105 or 64.8% of the time.
     The prediction of the index closing lower has been right 20/37 or 54.1% 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 Friday's and Monday's trading.

On Friday, a head-and-shoulders bottom chart pattern appeared too late in the session to be meaningful (shown in blue).

Today, the complex variety showed with peaks 1 and 2 mirroring those at 3 and 4 and a head sandwiched in between. The pattern broke out downward and confirmed when the index closed below the red neckline. That preceded a pullback at A. The index made a swift plunge followed by a sharp recovery.

As I look at my returns for the day, I feel as if the gain was a narrow one with the Dow stocks doing well but not the broad market. Thus, I think this upward move at the day's end is fake, that tomorrow we'll see the index close lower. That's at odds with the above probabilities, however.

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  15,657.09    
 Weekly S2  15,774.09  117.01   
 Monthly S1  15,915.16  141.07   
 Daily S2  15,972.29  57.13   
 Weekly S1  15,973.67  1.37   Yes! The Weekly S1 is close to the Daily S2.
 Low  16,028.29  54.62   
 Open  16,028.29  0.00   Yes! The Open is close to the Low.
 Daily S1  16,072.77  44.48   
 61.8% Down from Intraday High  16,088.06  15.29   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  16,106.53  18.46   
 38.2% Down from Intraday High  16,124.99  18.46   
 Daily Pivot  16,128.76  3.78   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  16,173.24  44.48   
 High  16,184.76  11.52   Yes! The High is close to the Close.
 Weekly Pivot  16,214.89  30.13   
 Daily R1  16,229.24  14.34   Yes! The Daily R1 is close to the Weekly Pivot.
 Monthly Pivot  16,273.40  44.16   
 Daily R2  16,285.23  11.84   Yes! The Daily R2 is close to the Monthly Pivot.
 Weekly R1  16,414.47  129.23   
 Monthly R1  16,531.47  117.01   
 Weekly R2  16,655.69  124.22   
 Monthly R2  16,889.71  234.01   

Monday 4/14/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

I show a picture of the Dow industrials on the daily scale.

Yes, there is blood all over the chart as price tumbled this week. To those of you still alive, have hope. Why? Because I see a turn coming.

Look at the two small green circles at the February low and April high. A Fibonacci retrace of that rise appears as three red lines. The top one is a 38% retrace. The middle and lower ones are 50% and 62% retraces, respectively, of the move down from the April high.

The Dow is at the 50% retrace. We could drop to the 62% line (or turn sooner), but I see a turn there or perhaps slightly below that when the index meets more support. I could be wrong, but I'm looking at this opportunity as a chance to buy the dip. I don't think we have the bad news to form a bear market.

$ $ $

I released version 4.1z of Patternz. This fixes two bugs.

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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 166.84 points.
Tuesday: Up 10.27 points.
Wednesday: Up 181.04 points.
Thursday: Down 266.96 points.
Friday: Down 143.47 points.

For the Week...

The Dow industrials were down 385.96 points or 2.4%.
The Nasdaq composite was down 128 points or 3.1%.
The S&P 500 index was down 49.4 points or 2.6%.

Year to Date...

Dow Industrials
     3.6% down from the high of 16,631.63 on 04/04/2014.
     4.5% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     8.5% down from the high of 4,371.71 on 03/06/2014.
     0.8% up from the low of 3,968.19 on 02/05/2014.
S&P 500
     4.3% down from the high of 1,897.28 on 04/04/2014.
     4.5% up from the low of 1,737.92 on 02/05/2014.

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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
Retail sales8:30 MA-Reports total retail sales (not services). Are people spending?
Business inventories10:00 MC-Reports manufacturing, wholesale, retail inventories.
Consumer price index8:30 TB+Inflation report. Measures cost of goods and services.
Housing starts8:30 WB-Number of homes beginning construction.
Building permits8:30 WB-Measures building permits for new construction.
Industrial production9:15 WB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 WB-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.

Options Expiration

The following is courtesy of the Options Industry Council.

OptionDate
VIX expires and A.M. settled index options cease trading.Wednesday
Expiring equity and P.M. settled index options cease trading. Expiring cash-settled currency options cease trading at 12:00 P.M. EST.Thursday
Market holidayFriday
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 04/11/2014, the CPI had:

32 bearish patterns,
0 bullish patterns,
127 patterns waiting for breakout.
The CPI signal is 0.0%, which is bearish (<= 35%).

The chart pattern indicator is bearish with 3 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  15,917  15,972  16,070  16,125  16,224 
Weekly  15,725  15,876  16,166  16,317  16,607 
Monthly  15,608  15,818  16,225  16,434  16,841 
S&P500 (^GSPC): Daily  1,801  1,808  1,822  1,829  1,842 
Weekly  1,776  1,796  1,834  1,854  1,892 
Monthly  1,760  1,788  1,842  1,871  1,925 
Nasdaq (^IXIC): Daily  3,944  3,972  4,020  4,047  4,095 
Weekly  3,865  3,933  4,059  4,126  4,252 
Monthly  3,741  3,870  4,121  4,250  4,501 
  • 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 30.5%   The trend may continue. 
 1 month down 19.7%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week down 28.3%   The trend may continue. 
 1 month down 20.7%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 3 weeks down 11.9%   Expect a reversal soon. 
 2 months down 16.1%   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 indices, 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 2 days.

 Found Chart Pattern Name
20Triangle, symmetrical
17Head-and-shoulders top
14Scallop, ascending and inverted
7Pipe bottom
7Double Top, Eve and Adam
6Double Top, Adam and Adam
6Triple top
6Broadening wedge, descending
6Broadening top
6Head-and-shoulders bottom

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, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The industries I follow were the best (rank 1) and worst performing.

This WeekLast Week
1. Cement and Aggregates1. Cement and Aggregates
2. Air Transport2. Aerospace/Defense
3. Chemical (Specialty)3. Chemical (Specialty)
4. Aerospace/Defense4. Air Transport
5. Drug5. Drug
50. Retail Building Supply50. Retail Building Supply
51. E-Commerce51. Retail (Special Lines)
52. Toiletries/Cosmetics52. E-Commerce
53. Retail (Special Lines)53. Toiletries/Cosmetics
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 4/12/14. Newborn Arrives!

 Getting Started in Chart Patterns, Second Edition

List price: $22.95 but Amazon.com has it for $17.34 and kindle (due April 21) is $11.48. Those prices are as of Friday 4/11/14.

Chart pattern analysis is not only one of the most important investing tools, but also one of the most popular. Filled with expert insights and practical advice from one of the best in the business, Getting Started in Chart Patterns, Second Edition helps new and seasoned traders alike profit by tracking and identifying specific chart patterns.

Substantially revised and expanded, this new edition of the popular guide now includes additional charts for ETFs and mutual funds. It introduces more than 40 key chart formations, as well as trading tactics that can be used in conjunction with them. It supplies actual trades (with dollar amounts), along with author Thomas Bulkowski's frank discussion of how trading behavior can affect the bottom line.

Interwoven throughout the technical presentations are fascinating anecdotes drawn from the author's quarter-century as a professional trader that vividly demonstrate how one of the best in the business leverages the power of chart patterns.

Table of Contents

Preface to First and Second Editions
Acknowledgments
Chapter 1: Introduction to Chart Patterns
Chapter 2: Identifying Chart Patterns
Chapter 3: The Truth about Trendlines
Chapter 4: Support and Resistance: The most Important Chart Patterns
Chapter 5: Ten Buy Signals
Chapter 6: Ten Sell signals
Chapter 7: Special Situations
Chapter 8: Busted Patterns: Making Money by Trading Failure
Chapter 9: More Trades: Putting it All Together
Chapter 10: The Art of Trading: Checklists
Chapter 11: Crunching the Numbers
Glossary
Visual Index of Chart Patterns
About the Author
Index

Amazon.com may have a limited-time special discount related to buying this book with some of my others. Click on the above image to take you there.

If you like the book, please post a customer review on Amazon.com and BN.com. If you don't like the book, then lie and post a good review anyway. Your support helps make this website possible.

Thanks! -- Thomas Bulkowski


Thursday 4/10/14. Trading Thursday: Nasdaq

The index climbed by 1.7% or 70.91 points. Since 02/05/1971 the index made 68 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 43 occasions.
     Average loss was -1.3% on 25 occasions.
Expect the index to close higher 63.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 58/98 or 59.2% of the time.
     The prediction of the index closing lower has been right 24/48 or 50.0% 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 Tuesday's and Wednesday's trading.

The chart shows an up-sloping channel as the only good chart pattern today. The index closed below the bottom of the lower line (red) signaling a downward breakout. That was around 1:30 and it was a fake out. Of course, no one knew it at the time.

The index recovered and snuck back into the channel where it remained to the close. Since the probabilities suggest a higher close on Thursday and the index remains in the middle of the channel, my guess is the index will close higher, agreeing with the probabilities.

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,971.77    
 Weekly S2  4,028.85  57.08   
 Monthly S1  4,077.84  48.98   
 Daily S2  4,099.40  21.56   
 Weekly S1  4,106.38  6.98   
 Low  4,121.17  14.79   
 Open  4,129.63  8.46   
 Daily S1  4,141.65  12.02   
 61.8% Down from Intraday High  4,145.63  3.98   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  4,153.18  7.55   
 38.2% Down from Intraday High  4,160.73  7.55   
 Daily Pivot  4,163.42  2.69   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  4,183.90  20.48   
 High  4,185.19  1.29   Yes! The High is close to the Close.
 Weekly Pivot  4,196.23  11.04   
 Daily R1  4,205.67  9.44   
 Monthly Pivot  4,224.77  19.10   
 Daily R2  4,227.44  2.67   Yes! The Daily R2 is close to the Monthly Pivot.
 Weekly R1  4,273.76  46.32   
 Monthly R1  4,330.84  57.08   
 Weekly R2  4,363.61  32.78   
 Monthly R2  4,477.77  114.16   

Tuesday 4/8/14. Trading Tuesday: Dow

The index dropped by -1.0% or -166.84 points. Since 10/01/1928 the index made 357 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 173 occasions.
     Average loss was -0.9% on 184 occasions.
Expect the index to close lower 51.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 68/105 or 64.8% of the time.
     The prediction of the index closing lower has been right 20/36 or 55.6% 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 Friday's and Monday's trading.

Nothing much happens in this figure. A channel forms on Friday that carries into trading today. At A, the index punctures the upper trendline, staging an upward breakout.

I view that as good news for Tuesday's trading. The index has thrown back to the top of the channel. Thus, I expect the index to recover tomorrow and trend upward for a higher close. That disagrees with the above probabilities, so one thing is guaranteed. Either I'm wrong or the probabilities are.

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  15,723.52    
 Monthly S1  15,984.70  261.17   
 Weekly S2  16,093.16  108.47   
 Daily S2  16,126.38  33.22   
 Weekly S1  16,169.52  43.13   
 Daily S1  16,186.13  16.61   Yes! The Daily S1 is close to the Weekly S1.
 Low  16,244.01  57.88   
 Close  16,245.87  1.86   Yes! The Close is close to the Low.
 Daily Pivot  16,303.75  57.88   
 Monthly Pivot  16,308.16  4.41   Yes! The Monthly Pivot is close to the Daily Pivot.
 61.8% Down from Intraday High  16,311.77  3.60   Yes! The 61.8% Down from Intraday High is close to the Monthly Pivot.
 50% Down from Intraday High  16,332.70  20.93   
 38.2% Down from Intraday High  16,353.63  20.93   
 Daily R1  16,363.50  9.87   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Weekly Pivot  16,400.57  37.08   
 Open  16,414.15  13.58   Yes! The Open is close to the Weekly Pivot.
 High  16,421.38  7.23   Yes! The High is close to the Open.
 Weekly R1  16,476.93  55.54   
 Daily R2  16,481.12  4.20   Yes! The Daily R2 is close to the Weekly R1.
 Monthly R1  16,569.34  88.21   
 Weekly R2  16,707.98  138.65   
 Monthly R2  16,892.80  184.82   

Monday 4/7/14. Market Monday: The Week Ahead

My Prediction

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

I show a pic of the S&P 500 index on the daily scale.

I use what's called internal trendlines to show a symmetrical triangle, outlined here in red. If you're unfamiliar with internal trendlines, I discuss them in several of my books, but I usually don't like to use them. You draw a trendline through price instead of on top or bottom of the price bar.

Anyway, what is shown in the figure is a throwback to the top of the triangle. A throwback happens 54% of the time, according to my book, Encyclopedia of Chart Patterns, Second Edition

When a throwback completes, price resumes rising 65% of the time. So, I'm looking for the indices to resume their climb. That's what the blue up-arrow signifies. Do you think the markets will listen? I was accused of manipulating the markets once since what I predicted happened too often for one person's taste.

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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 134.6 points.
Tuesday: Up 74.95 points.
Wednesday: Up 40.39 points.
Thursday: Down 0.45 points.
Friday: Down 159.84 points.

For the Week...

The Dow industrials were up 89.65 points or 0.5%.
The Nasdaq composite was down 28.03 points or 0.7%.
The S&P 500 index was up 7.47 points or 0.4%.

Year to Date...

Dow Industrials
     1.3% down from the high of 16,631.63 on 04/04/2014.
     7.0% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     5.6% down from the high of 4,371.71 on 03/06/2014.
     4.0% up from the low of 3,968.19 on 02/05/2014.
S&P 500
     1.7% down from the high of 1,897.28 on 04/04/2014.
     7.3% up from the low of 1,737.92 on 02/05/2014.

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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 credit3:00 MD-Measures auto, credit card and other debt.
Wholesale inventories10:00 WD-Wholesale sales and inventory statistics.
Crude inventories10:30 W?My guess: Measures oil inventory.
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.
Treasury budget2:00 ThDTracks budget deficit. Important in April (tax filing).
Producer price index8:30 FB-Measures wholesale goods cost. An indication of future inflation.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 04/04/2014, the CPI had:

51 bearish patterns,
11 bullish patterns,
369 patterns waiting for breakout.
The CPI signal is 17.7%, which is bearish (<= 35%).

The chart pattern indicator is bearish with 1 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  16,240  16,326  16,479  16,565  16,718 
Weekly  16,149  16,281  16,456  16,588  16,764 
Monthly  15,779  16,096  16,364  16,681  16,948 
S&P500 (^GSPC): Daily  1,841  1,853  1,875  1,887  1,909 
Weekly  1,836  1,850  1,874  1,889  1,912 
Monthly  1,803  1,834  1,866  1,897  1,928 
Nasdaq (^IXIC): Daily  4,023  4,075  4,171  4,224  4,320 
Weekly  4,010  4,069  4,178  4,236  4,345 
Monthly  3,953  4,040  4,206  4,293  4,459 
  • 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) 3 weeks up 20.9%   Expect a reversal soon. 
 1 month down 19.7%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week up 42.9%   Expect a random direction. 
 1 month down 20.7%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 2 weeks down 18.7%   Expect a reversal soon. 
 2 months down 16.1%   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 indices, 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 9 days.

 Found Chart Pattern Name
16Triangle, symmetrical
14Scallop, ascending and inverted
11Head-and-shoulders top
8Rising wedge
7Pipe bottom
7Broadening top
6Double Top, Adam and Adam
6Broadening wedge, descending
6Double Top, Eve and Adam
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, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The industries I follow were the best (rank 1) and worst performing.

This WeekLast Week
1. Cement and Aggregates1. Cement and Aggregates
2. Aerospace/Defense2. Drug
3. Chemical (Specialty)3. Internet
4. Air Transport4. Chemical (Specialty)
5. Drug5. Information Services
50. Retail Building Supply50. Retail Building Supply
51. Retail (Special Lines)51. E-Commerce
52. E-Commerce52. Retail (Special Lines)
53. Toiletries/Cosmetics53. Toiletries/Cosmetics
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Thursday 4/3/14. Trading Thursday: Nasdaq

The index climbed by 0.2% or 8.42 points. Since 02/05/1971 the index made 601 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 353 occasions.
     Average loss was -0.8% on 248 occasions.
Expect the index to close higher 58.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 58/97 or 59.8% of the time.
     The prediction of the index closing lower has been right 24/48 or 50.0% 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 Tuesday's and Wednesday's trading.

A descending triangle appears in red, from 11:00 to about 1:00. This one has broken out downward, as expected (meaning descending triangles are known for their downward breakout predictions), but price recovered (pulled back). It bumped up against overhead resistance at 4280. Is the decline over and will the index rise from here?

The above probabilities says yes, the index will close higher on Thursday. I'm not so sure. My guess is the index will drop and close lower.

$ $ $

Chapter 1 of my Visual Guide to Chart Patterns talks about how to learn to recognize chart patterns. When contemplating how I do recognize chart patterns, I thought of a baby. How does a child begin to recognize shapes? Does a golf ball register as a round object? Then why doesn't a basketball get labeled as a golf ball?

To answer those questions for the reader, I decided to break pattern recognition into shapes: peaks, valleys, curves, and diagonals. When you glue those shapes together, you get different types of chart patterns.

It's a lot like teaching a computer to do pattern recognition. They say the attention span of a computer is as long as its power cord. When it misbehaves, just unplug it.

Since the book is a "visual guide," there are plenty of pictures and the paperback book is in color. Sorry, no centerfolds. The e-book version comes with four videos, too, but those buying the paper version can access the videos for free, too, via the publisher's website.

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  4,020.09    
 Weekly S2  4,074.91  54.81   
 Monthly S1  4,148.28  73.37   
 Weekly S1  4,175.68  27.41   
 Weekly Pivot  4,232.59  56.90   
 Daily S2  4,246.57  13.99   
 Low  4,258.86  12.29   
 Monthly Pivot  4,259.99  1.13   Yes! The Monthly Pivot is close to the Low.
 Daily S1  4,261.52  1.52   Yes! The Daily S1 is close to the Monthly Pivot.
 61.8% Down from Intraday High  4,269.26  7.75   
 50% Down from Intraday High  4,272.48  3.21   
 Daily Pivot  4,273.80  1.33   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  4,275.69  1.88   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  4,276.46  0.77   Yes! The Close is close to the 38.2% Down from Intraday High.
 Open  4,281.61  5.15   
 High  4,286.09  4.48   
 Daily R1  4,288.75  2.66   Yes! The Daily R1 is close to the High.
 Daily R2  4,301.03  12.29   
 Weekly R1  4,333.36  32.33   
 Monthly R1  4,388.18  54.81   
 Weekly R2  4,390.27  2.09   Yes! The Weekly R2 is close to the Monthly R1.
 Monthly R2  4,499.89  109.63   

Tuesday 4/1/14. Trading Tuesday: Dow

The index climbed by 0.8% or 134.6 points. Since 10/01/1928 the index made 554 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 305 occasions.
     Average loss was -0.7% on 249 occasions.
Expect the index to close higher 55.1% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 67/104 or 64.4% of the time.
     The prediction of the index closing lower has been right 20/36 or 55.6% 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 Friday's and Monday's trading.

A double top appears at A, which confirms as valid when the index closes below the red line. This chart pattern led to a whopper of a drop on Friday even though it didn't occur until 1:00 (when traders came back from lunch).

Today, an alarming chart pattern appears. It's an ascending triangle. That sounds good, but the breakout from this chart pattern was downward (at C). The index is attempting a pullback to the apex of the triangle. That's bad news since price tends to drop after a pullback.

That's not completely accurate since "only" 47% continue lower. That means there's a 53% chance that the index will go higher. Either way, the direction is about random.

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.

$ $ $

On page 12 of my book, Swing and Day Trading (pictured), I list 15 trendline trading tips as bullet items. Two of the less-well knows tips include:

Pg 14: "Begin drawing a trendline at the bar after a tall or unusual price spike. Doing so often results in better alignment and better trading signals."

And...

"Draw a vertical line from a recent peak or valley and imagine price reflected around that peak or valley. These price mirrors may help you determine what price will do in the future."

-- Thomas Bulkowski

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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  15,878.07    
 Weekly S2  16,097.58  219.51   
 Monthly S1  16,167.87  70.29   
 Daily S2  16,264.28  96.41   
 Weekly S1  16,277.62  13.34   Yes! The Weekly S1 is close to the Daily S2.
 Low  16,324.22  46.60   
 Open  16,324.22  0.00   Yes! The Open is close to the Low.
 Monthly Pivot  16,336.78  12.56   Yes! The Monthly Pivot is close to the Open.
 Daily S1  16,360.97  24.19   
 Weekly Pivot  16,371.83  10.86   Yes! The Weekly Pivot is close to the Daily S1.
 61.8% Down from Intraday High  16,384.05  12.22   Yes! The 61.8% Down from Intraday High is close to the Weekly Pivot.
 50% Down from Intraday High  16,402.54  18.48   
 Daily Pivot  16,420.91  18.38   
 38.2% Down from Intraday High  16,421.02  0.11   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  16,457.66  36.64   
 High  16,480.85  23.19   
 Daily R1  16,517.60  36.75   
 Weekly R1  16,551.87  34.27   
 Daily R2  16,577.54  25.67   
 Monthly R1  16,626.58  49.04   
 Weekly R2  16,646.08  19.50   
 Monthly R2  16,795.49  149.41   

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