Written and copyright © 2011-2013 by Thomas N. Bulkowski. All rights reserved.

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Tuesday 8/30/11. Trading Tuesday: Dow

I show a picture of the Dow industrials on the 5-minute scale from Monday's trading. I show two channels glued together by a retrace. Those two channels (AB and CD) and the retrace (BC) actually form a chart pattern called a measured move up. One of the key elements of the measured move is that once price finishes the second up-channel (CD), it drops back to the retrace area (BC). Channels AB and CD should have a similar move and slope.

Tomorrow (Tuesday), after price finishes the retrace, look for the index to close higher.

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

-- Thomas Bulkowski

Monday 8/29/11. Market Monday: The Week Ahead

• My Prediction
• A Brief Look Back
• Economic Reports
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Buy-and-Hold: 12-Month SMA
• Earnings, Chart Patterns & Industries

My Prediction

I show the Dow industrials on the daily chart. A well-formed symmetrical triangle appears outlined in red. In one respect, it's odd and that's because none of the other indices show the same pattern. Many times, if you see one chart pattern in an index, you also find variations of it in the other indices. Not this time.

If price breaks out upward, it will reach overhead resistance at B soon enough. If it pushes through that, then C is the next resistance line. If you are a candlestick lover, the long lower shadow on the most recent candle suggests an upward breakout is more likely, especially since the index closed above the open (a white candle).

The triangle forms at a support area setup by a peak in April 2010 and a congestion region in November '10. There is additional support in the 10,000 to 10,500 area, starting in February 2010 with additional support from May to October 2010. None of that appears in the chart.

If price breaks out lower, then look for it to find support in the 10,000 to 10,500 area. In other words, the index may drop but it should not drop far.

Looking forward, we are going into September and October when mutual funds begin to dress their portfolio's for the end of the quarter. That often means selling and an increase in volatility.

My guess is that the mutt funds will take this opportunity to buy stocks that have been unfairly punished. We might see a move higher during the next two months, which will take the markets by surprise. Those sitting on the sidelines will feel as if they are missing the start of the next bull run and will jump in, helping to push the index higher.

I cannot say for certain which way the index will break out. Since I'm bullish, I look for an upward breakout but it could make a false breakout lower and then shoot higher. Historically, the triangle breaks out upward 54% of the time. That's what I call "near random."

A Brief Look Back

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

For the Week...

Year to Date...

Economic Reports

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

Report	Time	A-F Rating	Description
Personal income & consumption	8:30 M	C+	Measures sources of income to predict future demand.
Personal consumption expenditures	8:30 M	C+	Covers durables, non-durables, and services.
Consumer confidence	10:00 T	B-	Surveys 5,000 households for trends.
Chicago purchasing managers index	9:45 W	B	Monitors regional manufacturing activity.
Factory orders	10:00 W	D+	Durable/non-durable goods orders w/factory inventories.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
Productivity & costs	8:30 Th	D+	Cost of producing a unit of output.
Construction spending	10:00 Th	D	Covers residential/non-residential/public spending on new construction.
Auto & truck sales	3:00 Th	C-	Monthly sales of domestically produced vehicles.
4 Employment reports	8:30 F	A	Nonfarm payrolls, unemployment rate, avg workweek, hourly earnings.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 08/26/2011, the CPI had:

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.

• 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:

Consecutive Price Trends

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

Earnings, Chart Patterns & Industries

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

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.

-- Thomas Bulkowski

Friday 8/26/11. Crash in Tour of Spain

At today's finish in the 7th stage of the Vuelta a Espana bicycle race, Tyler Farrar (about 4 wheels behind the front of the race) turned right and appears to clip the front wheel of the bike behind him. Farrar tumbled to the pavement at over 40 mph, causing those behind him to crash as well. All were trying to sprint for the finish after today's 180+ km (about 120 mile) stage.

You can view crash photos at http://www.universalsports.com/.

Crashes are common at the 3-week race. A few days ago, a child ran across the road and a rider slammed into her at over 40 mph. His bike split into two: the front wheel and steering column separated from the tubes connecting it. Neither had any broken bones, but the rider withdrew from the race the next day because his knees were bothering him.

Another crash that often appears as part of the intro to the race shows a rider with a tire going flat driving off the pavement and tumbling over.

I am happy that my 14.5 mile time trial today ended without injury or incident, but with a southwest wind and oven-type heat, my enthusiasm lacked. My ride ended with a speed that averaged 18.3 mph, well short of the 50+ mph the professional riders did on today's Vuelta. I wonder from where they get their engines?

Thursday 8/25/11. Trading Thursday: Nasdaq

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

A head-and-shoulders bottom chart pattern appears mid day with left shoulder (LS), head, and right shoulder (rs) clearly defined. Well, sort of. The right shoulder I show as two valleys merged into one turn. The two shoulders are also not symmetrical in terms of price, meaning that the left and right shoulders should bottom near the same price.

Whatever its flaws, the bottom predicted a rise in the index, which is what happened. When the neckline slopes upward, as in this case (not shown), I use a horizontal line on the right side as the neckline (shown here as a red line). A close above this line confirms the pattern and signals an entry.

At day's end, the price stalled where it began, B versus A.

Looking ahead, expect the index to suffer profit taking out of the gate but then to rebound and push through overhead resistance to close higher.

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

-- Thomas Bulkowski

Tuesday 8/23/11. Trading Tuesday: Dow

I show a picture of the Dow industrials on the 5-minute scale from Monday's trading. No significant chart patterns appear, but there is a potential one: a double bottom.

Points A and B are the two bottoms. If the index closes above the confirmation line near D, then it will confirm a valid double bottom. Should that occur, then look for the index to continue rising.

It's also possible that the potential double bottom will fail. In that case, expect the index to tumble. I do not consider that likely. With support at C and A, point B could be the turning pivot.

My guess is that the index will open higher and continue moving up, confirming the double bottom.

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

$ $ $

Over the weekend, I flushed my hot water heater. That should be done to most water heaters annually. To flush your heater, this is what I did.

1. Turn off the circuit breaker powering the heater.
2. Attach a garden hose to the spigot at the bottom of the tank and place the other end to water shrubs, grass, flowers, and, of course, the neighbor's cat that uses your lawn as a liter box.
3. Close the water intake valve at the top of the tank. This valve allows water to fill the tank.
4. Open the spigot at the bottom.
5. Open the emergency relief valve at the top of the tank. This will allow air to fill the tank.
6. Let the tank drain for 30 minutes or so.
7. When empty, close the emergency relief valve (at tank top), open the water intake valve, and flush out the sediment. If you place your fingers in the water stream, it will feel like cottage cheese but is often clear.
8. Close the water intake valve when you can't feel any more "cottage cheese."
9. Repeat the procedure of allowing the tank to drain and then filling it again. I did this 3 times.
10. When finished, close the spigot at the bottom of the tank, close the emergency relief valve, open the intake valve and allow the tank to fill with water. You might want to place a few drops of oil on the relief valve stem to make sure it will open and close easily.
11. "Burp" the tank by opening the emergency relief valve until you hear water flowing out. You may also have to burp your hot water pipes inside the home by opening a few hot water faucets (especially those on the upper floors).
12. I left the unit powered down since it's so hot down here (100+ degrees), the cold water is warm enough that it does not need to be heated. I'm not kidding.
13. If you haven't put your heater on a timer, consider doing so. Why heat your water overnight or when you're at work when no one is going to use it? The hot water will remain hot for days.
14. When you're finished, check that the spigot is not leaking and that the drain tube for the emergency relief value is not showing any water coming out. If it does, apply oil to the valve stem as discussed, cycle it a few times, and then ask that cat if it needs another shower.

-- Thomas Bulkowski

Monday 8/22/11. Market Monday: The Week Ahead

• My Prediction
• A Brief Look Back
• Economic Reports
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Buy-and-Hold: 12-Month SMA
• Earnings, Chart Patterns & Industries

My Prediction

I show a chart of the Dow industrials on the daily scale. To the right of the blue vertical line is an example of what could happen. It's a guess but I think it unlikely. Let me explain.

I expect price to find a bottom here as it drops to support near the prior bottom just a week or so ago. After that, the index should rise but such a straight-line run back up would be very unusual. More likely is a less vertical rise, one that takes not just a week or so, but longer to make the journey back to A and B.

If the chart is correct, the index will form a Big W chart pattern. The pattern from A to B looks like a W with tall sides.

Alternatively, the index could continue lower. Based on all the fear that's going around, you would think that is a likely scenario, but that negative sentiment also suggests we are closer to the bottom.

In short, I still expect a V-shaped recovery, just not one that is as vertical as the image suggests.

A Brief Look Back

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

For the Week...

Year to Date...

Economic Reports

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

Report	Time	A-F Rating	Description
New home sales	10:00 T	C+	Shows sales of single-family homes.
Durable goods orders	8:30 W	B	Measures orders, shipments of goods with lifespans >3 years.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
Gross domestic product	8:30 F	B	Measures economic activity; GDP deflator measures inflation.
Michigan sentiment	9:55 F	B-	Consumer sentiment: Measures strength of consumer spending.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 08/19/2011, the CPI had:

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.

• 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:

Consecutive Price Trends

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

Earnings, Chart Patterns & Industries

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

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.

-- Thomas Bulkowski

Thursday 8/18/11. Car Troubles

On my way to Walmart to do some grocery shopping today, I had a brief thought that I would have car trouble. An hour later, that's what happened.

This type of premonition happens occasionally and it always surprises me when it comes true. The last time I remember this happening is with my ex-fiancé. She broke off our engagement back in the 80s. Fast forward to two years ago when her name kept popping into my mind for several days in a row. I sent her an email, just to ask if she was alright and her reply came back that she and hubby had a wicked fight.

Anyway, I finished my shopping, loaded the groceries into my car and inserted the ignition key. It wouldn't turn. I bought this car new in March and the odometer is still below 500 miles. I played with the darn thing for 5 minutes then gave up. I called their free roadside assistance. They dispatched a tow truck but hoped it would be less than an hour's wait.

While waiting, I tried several more times to unlock the ignition, but with no luck.

An hour later, I had an idea. I returned to the car (from the air conditioning of the store), rotated the steering wheel a few inches, and bingo! The ignition unlocked.

I was not aware that if you turn the wheel when the ignition is off, it has an interlock that engages. That lock prevents the steering wheel from begin turned (past a certain point), but also freezes the ignition key. Turning the wheel in the opposite direction removes the interlock and frees the ignition key.

Maybe this explains why I prefer to ride a bicycle.

-- Thomas Bulkowski

Thursday 8/18/11. Trading Thursday: Nasdaq

I show a picture of the Nasdaq composite on the 5-minute scale from Wednesday's trading. A head-and-shoulders bottom chart pattern appears in the afternoon. It becomes an actual reversal when price closes above the red neckline, which happens at A. This suggests price will rise and it does. Price attempts to throw back to the neckline at 3:30, but then resumes its upward march going into the close.

What does this pattern say about Thursday's trading? By itself, not much. However, looking at the price action of several days (not shown in the figure) suggests that there is overhead resistance at 2520, 2535, and 2550.

Four economic reports come out on Thursday, and they will probably be bad. Thus, any upward momentum will get crushed. So, I expect the market to open weak since two of the reports are released an hour before the market opens. The above probabilities suggest a lower close and my tea leaves seem to agree.

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

-- Thomas Bulkowski

Tuesday 8/16/11. Trading Tuesday: Dow

With no wind blowing today, I was able to power my bicycle over a 14.5 mile course to a personal best: 19.16 miles per hour. That beats the prior record of 18.91 set late last year, a few weeks after I bought my new bike.

Trying for an average of 20 mph would require trimming the time by 2 minutes. My flat road speed is 20 to 24 mph, faster if I have a tail wind, but cutting 2 minutes off the time seems impossible right now.

One of the benefits of going so fast is that I can ride down 2-lane roads and few cars catch me. Thus, having cars pass me is not as much of a concern as it used to be, but there are still people that up to pass then slow down after having done so. It's rather stupid when they turn soon after.

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

A v-shaped turn is highlighted by red trendlines. This is a more relaxed turn than your typical v-bottom, I think. Following that, a small rectangle top appeared from 1:00 to 2:00. The index didn't so much as break out of this consolidation pattern as eased its way out of it. Notice that the slope of prices before the rectangle and after it are similar.

What will happen tomorrow? The above probabilities give a good indication that the Dow will close lower. It's always possible, of course, that the economic reports due out will send the index higher. That will be a welcome surprise.

I noticed that on my relative strength screen, the utility stocks have been pushing higher and all 3 of the industries are in the top 11 (1 is strongest). Apparently, others view their tasty yields as much as I do. Also, you may notice that corporations are buying back their stock. That is another indication that they see value at these prices.

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

-- Thomas Bulkowski

Monday 8/15/11. Market Monday: The Week Ahead

• My Prediction
• A Brief Look Back
• Economic Reports
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Buy-and-Hold: 12-Month SMA
• Earnings, Chart Patterns & Industries

My Prediction

Each Sunday is a blessing, not because I am religious. Rather, I skip breakfast and go straight to my bicycle. I say a short prayer for a safe ride then pedal away, minutes after 7 AM.

This morning (Sunday), the wind was out of the north at 6 mph with temperatures a "cold" 78 (they are usually in the mid 80s). A north wind is perfect because I only have to struggle for two miles going against it before I transition for most of my ride going east-west. A north wind means it will push me up the mile-long Everest-sized mountain (small hill, really) which is a killer after going flat out for 13 miles.

Anyway, as I was riding, I felt drained of energy, not because I skipped breakfast, but probably more to do with the wind at the beginning. Anyway, I covered my 14.5 mile course at an average speed of 18.88 miles per hour, a season's best, but just short of the 18.91 all-time record.

# # #

I show a picture the Dow utility index on the daily scale. Does this index lead the others?

Some say that it does and judging from this picture, the index has retraced more than the other indices. That retrace is a clue to what is likely to happen next.

The index is bumping up against the 62% ceiling of the move down from A to B. Point C suggests that the upward retrace is over, that price will drop again, perhaps forming a double bottom.

If that is true, then wait for the second bottom before buying any stocks.

Alternatively, the index will continue rising. When it reaches 425 (which is close to where it is now), it should bump up against overhead resistance and struggle to move higher. You can begin to see that by the length of candle C. It is much shorter than the prior candles. This might suggest a lack of upward momentum, given strength to the idea that the retrace is coming to an end.

However, there are economic reports out on Tuesday, so the market may wait for those before deciding to scare the dickens out of us again.

A Brief Look Back

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

For the Week...

Year to Date...

Economic Reports

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

Report	Time	A-F Rating	Description
Housing starts	8:30 T	B-	Number of homes beginning construction.
Building permits	8:30 T	B-	Measures building permits for new construction.
International trade	8:30 T	C+	Import/export prices, trade balance. US economy vs others.
Industrial production	9:15 T	B-	Production of utilities, mines, and manufacturers.
Capacity utilization	9:15 T	B-	Gauges economic activity, hints of inflation.
Producer price index	8:30 W	B-	Measures wholesale goods cost. An indication of future inflation.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
Consumer price index	8:30 Th	B+	Inflation report. Measures cost of goods and services.
Existing home sales	10:00 Th	C	Counts sales of used homes.
Leading indicators	10:00 Th	D-	Summary of already known reports.

Options Expiration

The following is courtesy of the Options Industry Council.

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).

Swing and Position Traders: Chart Pattern Indicator

As of 08/12/2011, the CPI had:

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.

• 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:

Consecutive Price Trends

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

Earnings, Chart Patterns & Industries

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

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.

-- Thomas Bulkowski

Thursday 8/11/11. Trading Thursday: Nasdaq

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

Two chart patterns appears. The first is a triple bottom, shown quite cleverly by the numbers, 1, 2, and, yes, 3. When price closes above the highest peak in the pattern, it confirms it as a valid reversal. I show the confirmation price as a blue line drawn along the peak between 1 and 2.

Price wobbled after confirmation, forming a second chart pattern, a symmetrical triangle. For confirmation of the triangle, all price had to do was pierce one of the red trendlines. That was upward and price zoomed higher as a result. After about half an hour of trending, profit taking by fearful bulls or short selling by greedy bears forced the index back down, way down, to finish lower for the day.

With the strength of the drop from 2460 to 2380, it appears that downward momentum will continue tomorrow (Thursday). That is my guess and it agrees with the probabilities listed above.

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

-- Thomas Bulkowski

Tuesday 8/9/11. Trading Tuesday: Dow

By the way the markets have been plunging, you would think that an asteroid was heading toward the earth and astronomers were predicting an extinction level event. Yawn.

I have been on the wrong side of this market since it started to plunge, so take what I say and ignore it. But eventually this decline will end. And when it does, it will be a wonderful buying opportunity.

My guess is you won't get much warning when it does bottom. I expect a V-shaped bounce because traders will recognize value and buy. When one starts buying, everyone will, sending prices shooting back up. That's why I keep lowering my price targets for the indices, but still expect a rebound.

I show a picture of the Dow industrials on the 5-minute scale from Monday's trading. After making a swift drop at the open, price formed a descending triangle. Those breakout downward 64% of the time, and that's what happened.

Following the breakout, price pulled back, which they do 54% of the time after a descending triangle. Then the decline resumed.

Since the probabilities are evenly split as to tomorrow's direction, I am reminded that tall candles often act as reversals within a day. With the Federal Reserve meeting tomorrow, my guess is they will throw some kind of bone to the market. I expect the Dow to closer higher tomorrow. Or it will choke on the bone... Take your pick.

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

-- Thomas Bulkowski

Monday 8/8/11. Market Monday: The Week Ahead

• My Prediction
• A Brief Look Back
• Economic Reports
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Buy-and-Hold: 12-Month SMA
• Earnings, Chart Patterns & Industries

My Prediction

Everyone wants to know what is going to happen to the stock market at Monday's open, given that S&P lowered their rating on US debt on Friday evening. My answer is a guess, right along with everyone else's guess.

I think the downgrade will be a non-event. The market has been dropping like a stone through water for almost two weeks now. I think the market is oversold, but I have been bullish for a long time, as you know. The market will probably sell off at the open, flushing out those nervous about holding equities. Then the smart money will come in and buy stocks that have been punished enough. I bought one near the close on Thursday and three more on Friday -- electric utilities all. Each pays over a 5% dividend, so even if the market continues to drop, I will make 5% to 5.5% and can wait for a rebound. The trades on Friday were too quick (I thought of buying them just before the open) to add to my watch list.

After the markets sell off at or near the open, I expect a rebound, the same rebound I have been expecting for days. Look for it to carry the indices higher going into mid August.

As to the chart, I show the S&P 500 index on the weekly scale. A diamond bottom appears in mid 2010 and it should act as support if the index ignores my bullish stance and has the audacity to continue lower. It is approaching support now, setup by bottoms in November 2011.

A head-and-shoulders top chart pattern appears in early 2011. A neckline connects the armpits (shown in red).

I show the measure rule in blue (the thin lines down from the head and near the breakout) but it appears black on my screen. Measure vertically down from the high price at the head to the neckline at A (1370 to 1259, or 111 points). Subtract this value from the breakout price (1262 - 111) to get the 1151 target. Round that down to 1,150 for round-number support. I show that with the thin line to the left of candle B. It bottoms just below a support level.

This chart pattern says there is more down moving coming. We may see the index spike down to 1150 on Monday morning. It's also possible that the index will shoot higher right from the start. That would be a nice gift, especially if it can continue higher for, say, the rest of the year. I have some damage to my net worth caused by the recent down turn to repair.

A Brief Look Back

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

For the Week...

Year to Date...

Economic Reports

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

Report	Time	A-F Rating	Description
Productivity & costs	8:30 T	D+	Cost of producing a unit of output.
FOMC Rate decision	2:15 T	?	The Federal Reserves reports on interest rate changes.
Wholesale inventories	10:00 W	D-	Wholesale sales and inventory statistics.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
Treasury budget	2:00 W	D	Tracks budget deficit. Important in April (tax filing).
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
Trade balance	8:30 Th	C+	Signals balance of exports & imports.
Retail sales	8:30 F	A-	Reports total retail sales (not services). Are people spending?
Business inventories	10:00 F	C-	Reports manufacturing, wholesale, retail inventories.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 08/05/2011, the CPI had:

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.

• 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:

Consecutive Price Trends

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

Earnings, Chart Patterns & Industries

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

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.

-- Thomas Bulkowski

Wednesday 8/3/11. Trading Thursday on Wednesday: Dow

Inside my home, I have two LCD thermometers. They are way cool looking (one of which is pictured in the photo, left panel), about 4" wide and tall, and they look like sheets of clear glass hanging on the wall. Numbers appear on the glass panel from a projector that sits on top of the unit. It has three digits, so it can go up to 99.9 degrees. My question was this: how would it handle the triple digits?

I found out today. I went downstairs to my living room and the thermometer registered 101.6 degrees. This was inside my home. Outside, it was 112 (right side of the photo). Ouch. Upstairs, in my office, it was a cool 87 degrees because of the window unit I install each spring to keep my computers happy. I will probably have to turn on my central air around 9 pm this evening, about an hour sooner than normal.

Limiting use of the central air and relying on box fans allows me to keep my electrical usage to about $50 to $70 a month. With me running the A/C each night, I expect my bill to triple.

To the markets... I decided to post "What's Hot Wednesday's" tomorrow (that's an appropriate title, don't you think? Maybe in the winter, I'll change it to "What's Cold Wednesdays").

Since the market dropped such a large amount, I decided to take a closer look.

I show a picture of the Dow industrials on the 5-minute scale from the last 10 days of trading.

There is not much to see on the chart, except a continuation of the downward trend. I am both gratified that my prediction yesterday about today's price action got some of it right. I wrote "I expect the index to retrace back to 12,050 level....Once it finds support, then I expect the index to move higher." It did drop to the 12,05x level and then bounced. I thought it would continue moving higher, but alas, I was wrong as the chart shows.

The index has been dropping for 8 days now. I think the drop is oversold, but you can call me a perma-bull. I have been waiting for the index to make a smart run back up to the old highs. That will happen, hopefully in my lifetime.

The index has reached support, so I expect a bounce today. I'm not in the mood to go shopping, but if I was, I would be looking to pick up some stocks on the cheap here. If I am wrong, then the index will continue to drop, and what you buy today will be cheaper tomorrow. Maybe it would be best to wait a day to see how this turns out?

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

-- Thomas Bulkowski

Tuesday 8/2/11. Trading Tuesday: Dow

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

To my mind, the Dow acted as I expected, shooting up on news that the debt ceiling deal might, just might, be closer to a solution. And then it did the unexpected. It dropped, changing a 100-point gain into a 150 point deficit. After that, the index began a slow recovery.

The chart shows the action today. It formed a head-and-shoulders bottom chart pattern. I do not consider this one easy to spot. The head found support at the round number 12,000. The left (LS) and right (RS) shoulders mirrored themselves about the head, forming a symmetrical pattern. When price closed above the neckline, it confirmed the chart pattern and confirmed a reversal from down to up. Buying then was the smart move but it did not amount to a large gain by day's end.

Looking forward, I expect the index to retrace back to 12,050 level since the move up from the bottom consisted of two straight-line runs (or nearly so). The move up from the head resembles a measured move up chart pattern. I expect a drop back to the corrective phase, which happens 35% of the time, the highest of the four areas of support I looked at. You can find an explanation of those four measures on pages 517-518 (and Table 33.4) of my book, Encyclopedia of Chart Patterns, Second Edition, pictured on the right.

The drop means the index has to tunnel through support at 12,100 (after 3:00, you can see the bottoms of candles bouncing off that level). Once it finds support, then I expect the index to move higher, and at the end of the day, look for the index to close up, too, just as the probabilities suggest.

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

-- Thomas Bulkowski

Monday 8/1/11. Market Monday: The Week Ahead

• My Prediction
• A Brief Look Back
• Economic Reports
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Buy-and-Hold: 12-Month SMA
• Earnings, Chart Patterns & Industries

My Prediction

I show the Dow utilities on the daily scale.

I show this chart because I find it interesting to see that price is dropping in a straight-line run toward an up-sloping trendline, shown here in red.

With news on a possible deal to raise the debt ceiling in the works, I believe that the index will bounce off the trendline and head higher. I also expect the other indices to follow this one and move up as well.

The really good news is that it's August, and that justifies the triple digit temperatures that I have been seeing since June when I look at my thermometer.

It's even hotter outside!

A Brief Look Back

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

For the Week...

Year to Date...

Economic Reports

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

Report	Time	A-F Rating	Description
Construction spending	10:00 M	D	Covers residential/non-residential/public spending on new construction.
Personal income & consumption	8:30 T	C+	Measures sources of income to predict future demand.
Personal consumption expenditures	8:30 T	C+	Covers durables, non-durables, and services.
Auto & truck sales	3:00 T	C-	Monthly sales of domestically produced vehicles.
Factory orders	10:00 W	D+	Durable/non-durable goods orders w/factory inventories.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
4 Employment reports	8:30 F	A	Nonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Consumer credit	3:00 F	D-	Measures auto, credit card and other debt.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 07/29/2011, the CPI had:

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.

• 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:

Consecutive Price Trends

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

Earnings, Chart Patterns & Industries

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

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.

-- Thomas Bulkowski