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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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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 11/22/2017
23,526 -64.65 -0.3%
9,627 11.94 0.1%
758 -0.24 0.0%
6,867 4.88 0.1%
2,597 -1.95 -0.1%
YTD
19.0%
6.4%
14.9%
27.6%
16.0%
Tom's Targets    Overview: 11/14/2017
23,700 or 22,800 by 12/01/2017
9,300 or 9,800 by 12/01/2017
800 or 750 by 12/01/2017
7,000 or 6,500 by 12/01/2017
2,625 or 2,540 by 12/01/2017

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August 2012 Headlines


Archives


Thursday 8/30/12. Trading Thursday: Nasdaq

The index climbed by 0.1% or 4.05 points. Since 02/05/1971 the index made 590 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 330 occasions.
     Average loss was -0.9% on 260 occasions.
Expect the index to close higher 55.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 23/38 or 60.5% of the time.
     The prediction of the index closing lower has been right 14/26 or 53.8% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

Trading began today with an unusual pattern, a V bottom with an extension, shown here in red, at A. These types of reversals are hard to recognize at the time and hard to trade profitably (at least in the V portion). The pennant (in this case) type extension allows nimble traders to enter the trade after an upward breakout and by placing a stop below support shown by the bottom of the pennant.

In the afternoon, a head-and-shoulders top chart pattern appears, a type I have discussed many times before. A close below the blue neckline at B signals a valid chart pattern with a downward breakout. It looks like price dropped far enough to fulfill the measure rule (which sets a target price).

Looking to tomorrow's close, the probabilities suggest a higher close. On the daily chart, the index has been struggling to move higher. The other indices have dropped for the most part (the S&P 500 being an exception). The 10-day, 5 min chart shows the index resting on underlying support, so I am inclined to agreed with the probabilities for a higher close on Thursday.

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

Top

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,746.38    
 Monthly S1  2,913.79  167.40   
 Monthly Pivot  3,007.16  93.38   
 Weekly S2  3,016.33  9.17   
 Weekly S1  3,048.76  32.43   
 Daily S2  3,059.06  10.30   
 Low  3,067.62  8.56   
 Daily S1  3,070.13  2.51   
 Weekly Pivot  3,074.65  4.52   
 61.8% Down from Intraday High  3,075.11  0.46   Yes! The 61.8% Down from Intraday High is close to the Weekly Pivot.
 50% Down from Intraday High  3,077.43  2.32   
 Open  3,078.05  0.62   Yes! The Open is close to the 50% Down from Intraday High.
 Daily Pivot  3,078.68  0.63   Yes! The Daily Pivot is close to the Open.
 38.2% Down from Intraday High  3,079.75  1.06   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  3,081.19  1.44   Yes! The Close is close to the 38.2% Down from Intraday High.
 High  3,087.24  6.05   
 Daily R1  3,089.75  2.51   
 Daily R2  3,098.30  8.56   
 Weekly R1  3,107.08  8.78   
 Weekly R2  3,132.97  25.89   
 Monthly R1  3,174.57  41.60   
 Monthly R2  3,267.94  93.38   

Tuesday 8/28/12. Trading Tuesday: Dow

The index dropped by -0.3% or -33.3 points. Since 10/01/1928 the index made 955 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 450 occasions.
     Average loss was -0.8% on 505 occasions.
Expect the index to close lower 52.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 30/48 or 62.5% of the time.
     The prediction of the index closing lower has been right 7/12 or 58.3% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

The circled area in blue is an unnamed congestion zone that acted as a reversal of the downward plunge. The move up from this area was as swift as the decline going into it and it ended right where it began, in terms of price. Then the index formed a triple top ABC, confirmed when price closed below the horizontal line at D.

The drop following the triple top was worth waiting for and it took the index back down to the price level of the circled area.

Today's rise bumped the index into overhead resistance setup by the index 9 and 10 days ago (5 min scale). That suggests the index is going to close lower tomorrow.

On the daily chart, the index is still right at overhead resistance setup by prior peaks, so that also votes for a lower close on Tuesday.

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

Top

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  12,183.50    
 Monthly S1  12,654.09  470.58   
 Weekly S2  12,857.32  203.23   
 Weekly S1  12,990.99  133.68   
 Monthly Pivot  12,992.42  1.43   Yes! The Monthly Pivot is close to the Weekly S1.
 Daily S2  13,078.06  85.63   
 Daily S1  13,101.36  23.31   
 Low  13,115.46  14.10   
 Close  13,124.67  9.21   
 61.8% Down from Intraday High  13,138.65  13.98   
 Daily Pivot  13,138.77  0.12   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  13,145.82  7.05   
 38.2% Down from Intraday High  13,152.98  7.16   
 Open  13,157.74  4.76   Yes! The Open is close to the 38.2% Down from Intraday High.
 Weekly Pivot  13,160.88  3.14   Yes! The Weekly Pivot is close to the Open.
 Daily R1  13,162.07  1.20   Yes! The Daily R1 is close to the Weekly Pivot.
 High  13,176.17  14.10   
 Daily R2  13,199.48  23.31   
 Weekly R1  13,294.55  95.08   
 Monthly R1  13,463.01  168.45   
 Weekly R2  13,464.44  1.43   Yes! The Weekly R2 is close to the Monthly R1.
 Monthly R2  13,801.34  336.91   

Monday 8/27/12. Market Monday: The Week Ahead

My Prediction

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

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

Overhead resistance appears as highlighted by the two red lines. The index has reached that ceiling of resistance and bounced downward.

The two blue lines outline support. Will the index drop into the blue lines and then rebound or did the bounce upward start on Friday?

No one knows the answer, of course. My guess is that the index will continue lower, probably moving into the middle of the blue lines within the next week or two and then resume the upward run.

$ $ $

On Saturday, I drained my water heater to flush out the cottage cheese looking stuff that accumulates as sediment at the bottom of the heater. That helps prolong the life of the unit. If you read the instructions that come with water heater's, my guess is that most will tell you to flush the unit annually.

I also hung three shelves in my bedroom, giving me more room to store books, DVDs and VCR tapes.

Today, Sunday, I finished my 27 mile bike ride, logging just over 17 mph on the trip. That's slower than I wanted but I was fighting a painful bike seat along the way (and winds). Since I've gone to clipless pedals, the seat needed to be adjusted, which is what I've been doing. Last weekend, it hurt my two seat bones. This time, the soft tissue hurt -- a lot. When I'm in the drops (handlebars), the pain goes away. When I have my hands on the brake hoods, the pain is intense. Looks like I'll have to adjust the seat more to get it right. What a pain in the ass.

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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 3.56 points.
Tuesday: Down 68.07 points.
Wednesday: Down 30.81 points.
Thursday: Down 115.3 points.
Friday: Up 100.51 points.

For the Week...

The Dow industrials were down 117.23 points or 0.9%.
The Nasdaq composite was down 6.8 points or 0.2%.
The S&P 500 index was down 7.03 points or 0.5%.

Year to Date...

Dow Industrials
     1.4% down from the high of 13,338.66 on 05/01/2012.
     9.3% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     2.1% down from the high of 3,134.17 on 03/27/2012.
     16.8% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     1.1% down from the high of 1,426.68 on 08/21/2012.
     12.1% up from the low of 1,258.86 on 01/03/2012.

Top

Economic Reports

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

ReportTimeA-F
Rating
Description
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Gross domestic product8:30 WBMeasures economic activity; GDP deflator measures 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.
Personal income & consumption8:30 ThC+Measures sources of income to predict future demand.
Chicago purchasing managers index9:45 FBMonitors regional manufacturing activity.
Michigan sentiment9:55 FB-Consumer sentiment: Measures strength of consumer spending.
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 08/24/2012, the CPI had:

11 bearish patterns,
16 bullish patterns,
322 patterns waiting for breakout.
The CPI signal is 59.3%, which is neutral (between 35% and 65%).

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  12,972  13,065  13,120  13,213  13,269 
Weekly  12,868  13,013  13,172  13,317  13,476 
Monthly  12,195  12,676  13,004  13,485  13,812 
S&P 500 (^GSPC): Daily  1,392  1,402  1,408  1,417  1,423 
Weekly  1,383  1,397  1,412  1,426  1,441 
Monthly  1,292  1,351  1,389  1,449  1,486 
Nasdaq (^IXIC): Daily  3,028  3,049  3,063  3,084  3,098 
Weekly  3,013  3,041  3,071  3,099  3,129 
Monthly  2,743  2,906  3,003  3,167  3,264 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

Top

Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week down 30.2%  The trend may continue.
 3 months up 24.0%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week down 30.6%  The trend may continue.
 3 months up 31.5%  The trend may continue.
 Nasdaq composite (^IXIC) 1 week down 33.5%  The trend may continue.
 3 months up 27.9%  The trend may continue.

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

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

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

Buy-and-Hold: 12-Month SMA

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

Top

Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
25Triangle, symmetrical
23Pipe bottom
19Rising wedge
12Channel
10Dead-cat bounce
6Double Bottom, Adam and Adam
6Head-and-shoulders bottom
5Flag
5Broadening top
5Triangle, descending

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

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

 

 

 

 

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

This WeekLast Week
1. Homebuilding1. Homebuilding
2. Retail Building Supply2. Retail Building Supply
3. Computers and Peripherals3. Chemical (Basic)
4. Chemical (Basic)4. Retail Store
5. Biotechnology5. Computers and Peripherals
48. Precision Instrument48. Precision Instrument
49. Semiconductor49. Shoe
50. Furn/Home Furnishings50. Semiconductor
51. Petroleum (Producing)51. Petroleum (Producing)

-- Thomas Bulkowski

Top


Thursday 8/23/12. Trading Thursday: Nasdaq

The index climbed by 0.2% or 6.41 points. Since 02/05/1971 the index made 582 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 346 occasions.
     Average loss was -0.9% on 236 occasions.
Expect the index to close higher 59.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 23/37 or 62.2% of the time.
     The prediction of the index closing lower has been right 14/26 or 53.8% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

Early in the session, a descending triangle appears, shown on the chart outlined in blue. The breakout from this chart pattern was downward but the decline didn't last long.

Following the triangle, a head-and-shoulders bottom forms and confirms as a valid pattern when the index closed above the red neckline at A.

This chart pattern worked better than the triangle since it lead to a good rise in the index.

Notice how the index jumped as the FED released its minutes at 2:00. Also notice how the index moved horizontally in the last 45 minutes or so. Is that a clue to Thursday's behavior?

On the daily chart, the index looks as if it wants to move lower since overhead resistance setup by the peak in March is blocking the way upward. I would be more confident of that statement if the index closed lower today but it didn't.

On the 10-day, 5 minute scale, the index is resting on support, not underneath a ceiling of overhead resistance. Thus, it looks as if tomorrow's close will be 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

Top

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,759.76    
 Monthly S1  2,916.71  156.96   
 Weekly S2  2,972.24  55.52   
 Monthly Pivot  2,996.72  24.48   
 Weekly S1  3,022.95  26.24   
 Daily S2  3,041.98  19.02   
 Weekly Pivot  3,049.84  7.86   
 Low  3,053.43  3.59   
 Daily S1  3,057.82  4.39   
 Open  3,059.94  2.12   Yes! The Open is close to the Daily S1.
 61.8% Down from Intraday High  3,063.86  3.92   
 50% Down from Intraday High  3,067.08  3.22   
 Daily Pivot  3,069.28  2.20   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  3,070.30  1.02   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  3,073.67  3.37   
 High  3,080.73  7.06   
 Daily R1  3,085.12  4.39   
 Daily R2  3,096.58  11.45   
 Weekly R1  3,100.55  3.98   
 Weekly R2  3,127.44  26.88   
 Monthly R1  3,153.67  26.24   
 Monthly R2  3,233.68  80.00   

Tuesday 8/21/12. Trading Tuesday: Dow

The index dropped by 0.0% or -3.56 points. Since 10/01/1928 the index made 1164 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 617 occasions.
     Average loss was -0.7% on 547 occasions.
Expect the index to close higher 53.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 30/47 or 63.8% of the time.
     The prediction of the index closing lower has been right 7/12 or 58.3% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

A head-and-shoulders bottom chart pattern appears in the morning with a left shoulder (LS), head, and right shoulder (RS) and breakout at A. The breakout confirms the chart pattern as a valid one and not just squiggles on the price chart.

The height of the chart pattern, from head low to the neckline directly above, didn't have a prayer of fulfilling the measure rule today. In other words, price never made it to the target setup by the height added to the breakout price at A.

Later in the day, the blue trendlines remind me of a rising wedge. Yes, I used an "internal trendline" to slice through price to illustrate the chart pattern.

Looking to Tuesday's close, doesn't the narrow index moves suggest that the indices are tired? Do you think a big move is coming? High volatility (tall daily price swings or range) follow low volatility. The coming move is going to be huge.

The daily chart shows the index still mired within overhead resistance. The 10-day, 5 minute chart doesn't add value since three trading days ago, the index made a big move up. Since then, the index has moved sideways.

My guess is the index is going to fall but it could soar just as easily. The probabilities suggest a higher close on Tuesday.

$ $ $

Picture of my dog.

On Saturday's 33 mile bike ride, I was able to keep up with the lead pack since they decided to take it slow (just under 17 mph). At the end of the run, I asked them about the duration of the ride. One guy told me about ride time and elapsed time. My bike computer only shows elapsed time and yet "ride time" is what I've been tracking manually (stopping my computer at stop lights and such).

The new bike computers keep track of the time that the wheel is in motion. Way cool. So, I ditched the computer that came with my last bike and bought a new one, $30, Patriot Protege 5.0. I installed it today, raised my seat since my new clipless pedals are higher than my sneakers, adjusted the shoe brackets, and tried to ride without a gel cushion on my seat. Forget that. The plywood I'm sitting on hurts too much without the gel even though I ride with padded bike shorts.

I'm looking forward to tomorrow's time trial around time to test out my new computer, and seat height. (My butt was hurting during the 33 mile run on Saturday whereas it didn't using pedals the week before. Hence the seat adjustment).

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

Top

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  12,265.45    
 Monthly S1  12,768.55  503.09   
 Monthly Pivot  13,024.93  256.39   
 Weekly S2  13,053.59  28.65   
 Weekly S1  13,162.61  109.03   
 Daily S2  13,213.19  50.58   
 Weekly Pivot  13,221.97  8.77   
 Low  13,230.06  8.09   
 Daily S1  13,242.42  12.36   
 61.8% Down from Intraday High  13,247.67  5.25   
 50% Down from Intraday High  13,253.11  5.44   
 38.2% Down from Intraday High  13,258.54  5.44   
 Daily Pivot  13,259.28  0.74   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  13,271.64  12.36   
 Open  13,274.58  2.94   Yes! The Open is close to the Close.
 High  13,276.15  1.57   Yes! The High is close to the Open.
 Daily R1  13,288.51  12.36   
 Daily R2  13,305.37  16.87   
 Weekly R1  13,330.99  25.62   
 Weekly R2  13,390.35  59.35   
 Monthly R1  13,528.03  137.68   
 Monthly R2  13,784.41  256.39   

Monday 8/20/12. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq composite on the daily scale.

I show the Nasdaq composite on the daily scale since I haven't talked about it for a month or so.

A head-and-shoulders top chart pattern appears, but it's a weird looking one. I've marked the left shoulder (LS), Head, and right shoulder (RS) on the chart. The pattern confirms as valid when the index closes below the red neckline. That is difficult to see on this chart, but I believe it happened.

However, the index did not follow through with the downward breakout. Instead, it busted the head-and-shoulders top by closing above the head. When that happens, it can lead to a strong move higher.

That is what happened, but is the move over?

I drew overhead resistance as two parallel blue lines on the chart. The top one matches the March peak and the bottom one matches another peak (May) and a consolidation region surrounding the March peak.

Is the resistance strong enough to push the index down? My guess is yes. It's also possible that the index will move horizontally once it moves into the blue zone (between the parallel lines) before deciding on a new direction, or I could be wrong and it just soars.

Top

A Brief Look Back

Picture of a flower from my garden.

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

Monday: Down 38.52 points.
Tuesday: Up 2.71 points.
Wednesday: Down 7.36 points.
Thursday: Up 85.33 points.
Friday: Up 25.09 points.

For the Week...

The Dow industrials were up 67.25 points or 0.5%.
The Nasdaq composite was up 55.73 points or 1.8%.
The S&P 500 index was up 12.29 points or 0.9%.

Year to Date...

Dow Industrials
     0.5% down from the high of 13,338.66 on 05/01/2012.
     10.3% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     1.8% down from the high of 3,134.17 on 03/27/2012.
     17.1% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     0.3% down from the high of 1,422.38 on 04/02/2012.
     12.7% up from the low of 1,258.86 on 01/03/2012.

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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
FOMC Minutes2:00 W?Minutes of the prior Federal Reserve meeting.
Existing home sales10:00 WCCounts sales of used homes.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
New home sales10:00 ThC+Shows sales of single-family homes.
Durable goods orders8:30 FBMeasures orders, shipments of goods with lifespans >3 years.

Options Expiration

OptionDate
VIX expireWednesday

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Swing and Position Traders: Chart Pattern Indicator

As of 08/17/2012, the CPI had:

12 bearish patterns,
54 bullish patterns,
345 patterns waiting for breakout.
The CPI signal is 81.8%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  13,231  13,253  13,267  13,289  13,304 
Weekly  13,055  13,165  13,223  13,333  13,392 
Monthly  12,267  12,771  13,026  13,530  13,786 
S&P 500 (^GSPC): Daily  1,413  1,416  1,417  1,420  1,421 
Weekly  1,390  1,404  1,411  1,425  1,433 
Monthly  1,299  1,359  1,389  1,448  1,478 
Nasdaq (^IXIC): Daily  3,055  3,066  3,071  3,082  3,088 
Weekly  2,973  3,025  3,051  3,103  3,128 
Monthly  2,761  2,919  2,998  3,156  3,235 
  • 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) 6 weeks up 7.0%  Expect a reversal soon.
 3 months up 24.0%  Expect a reversal soon.
 S & P 500 (^GSPC) 6 weeks up 4.1%  Expect a reversal soon.
 3 months up 31.5%  The trend may continue.
 Nasdaq composite (^IXIC) 5 weeks up 6.7%  Expect a reversal soon.
 3 months up 27.9%  The trend may continue.

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
23Pipe bottom
22Triangle, symmetrical
14Channel
11Rising wedge
11Horn bottom
9Head-and-shoulders bottom
8Dead-cat bounce
6Double Bottom, Adam and Adam
6Broadening top
6Triangle, ascending

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

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

 

 

 

 

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

This WeekLast Week
1. Homebuilding1. Homebuilding
2. Retail Building Supply2. Retail Building Supply
3. Chemical (Basic)3. Retail Store
4. Retail Store4. Chemical (Basic)
5. Computers and Peripherals5. Biotechnology
48. Precision Instrument48. Semiconductor
49. Shoe49. Furn/Home Furnishings
50. Semiconductor50. Shoe
51. Petroleum (Producing)51. Petroleum (Producing)

-- Thomas Bulkowski

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Thursday 8/16/12. Trading Thursday: Nasdaq

The index climbed by 0.5% or 13.95 points. Since 02/05/1971 the index made 484 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 341 occasions.
     Average loss was -0.9% on 143 occasions.
Expect the index to close higher 70.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 22/36 or 61.1% of the time.
     The prediction of the index closing lower has been right 14/26 or 53.8% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

Today's (Wednesday's) trading was uneventful from a pattern perspective. You have to look hard to see a double top which I show as AB. When the index closed below the red line, it confirmed the pattern as a valid one. The height of the pattern subtracted from the value of the red line shows a target which the index reached and then exceeded.

Will the close tomorrow be up or down?

The probabilities says the index will close higher and that's the smart play with it closing higher 70.5% of the time.

The index is still mired in a congestion region. With today's close, the index is sitting on top of support, so my guess is that the index will close higher tomorrow.

$ $ $

I tried out my new clipless bike pedals and missed exceeding the season's best time by just 8 seconds. Over a 14.6 mile course, I averaged 19.45 miles per hour. Once I get used to the pedals, tone my muscles, I expect to hit or exceed 20 mph over the same course.

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

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,774.86    
 Monthly S1  2,902.90  128.03   
 Weekly S2  2,956.88  53.98   
 Monthly Pivot  2,965.75  8.88   
 Weekly S1  2,993.90  28.15   
 Daily S2  3,006.71  12.81   
 Weekly Pivot  3,011.26  4.55   
 Low  3,013.33  2.07   
 Open  3,013.33  0.00   Yes! The Open is close to the Low.
 Daily S1  3,018.82  5.49   
 61.8% Down from Intraday High  3,020.48  1.66   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  3,022.70  2.21   
 38.2% Down from Intraday High  3,024.91  2.21   
 Daily Pivot  3,025.44  0.53   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  3,030.93  5.49   
 High  3,032.06  1.13   Yes! The High is close to the Close.
 Daily R1  3,037.55  5.49   
 Daily R2  3,044.17  6.62   
 Weekly R1  3,048.28  4.11   
 Weekly R2  3,065.64  17.35   
 Monthly R1  3,093.79  28.15   
 Monthly R2  3,156.64  62.86   

Tuesday 8/14/12. Trading Tuesday: Dow

The index dropped by -0.3% or -38.52 points. Since 10/01/1928 the index made 954 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 449 occasions.
     Average loss was -0.8% on 505 occasions.
Expect the index to close lower 52.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 30/47 or 63.8% of the time.
     The prediction of the index closing lower has been right 7/11 or 63.6% of the time.

Picture of the Dow industrials on the 5 minute scale.

I adjusted Tom's Targets (see top of page) for the indices over the next two weeks. I'm looking for weakness in the Dow and S&P and if it occurs, it usually happens about two days after I flip my targets. It could happen sooner or later or never, of course.

$ $ $

I also have posted information on the first of four books coming out in November. This one is called Visual Guide to Chart Patterns. I include a detailed table of contents so you can see what it covers. This is a color paperback, a first for me.

$ $ $

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

Around noon, the index formed a descending triangle with an upward breakout. The height of the triangle added to the breakout price represents the target. The index easily exceeded the target.

Such a strong move up recovered most of the morning's sharp sell-off, but it also suggests the rebound is overdone.

With the Dow sitting on or under resistance on the daily chart, I expect a drop. On the 10-day, 5 min scale, the index has been moving horizontally with a slight downward tilt. That might mean a coming decline. That's what I'm expecting. I look for the Dow to close lower on Tuesday. That also agrees with the above probabilities.

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

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  12,235.50    
 Monthly S1  12,702.46  466.97   
 Monthly Pivot  12,959.22  256.75   
 Weekly S2  13,039.11  79.89   
 Daily S2  13,070.39  31.28   
 Weekly S1  13,104.27  33.88   
 Low  13,112.94  8.67   Yes! The Low is close to the Weekly S1.
 Daily S1  13,119.91  6.97   Yes! The Daily S1 is close to the Low.
 61.8% Down from Intraday High  13,148.11  28.20   
 50% Down from Intraday High  13,158.97  10.86   
 Weekly Pivot  13,160.12  1.15   Yes! The Weekly Pivot is close to the 50% Down from Intraday High.
 Daily Pivot  13,162.46  2.34   Yes! The Daily Pivot is close to the Weekly Pivot.
 Close  13,169.43  6.97   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  13,169.84  0.41   Yes! The 38.2% Down from Intraday High is close to the Close.
 Open  13,204.93  35.09   
 High  13,205.01  0.08   Yes! The High is close to the Open.
 Daily R1  13,211.98  6.97   Yes! The Daily R1 is close to the High.
 Weekly R1  13,225.28  13.30   
 Daily R2  13,254.53  29.25   
 Weekly R2  13,281.13  26.60   
 Monthly R1  13,426.18  145.05   
 Monthly R2  13,682.94  256.75   

Monday 8/13/12. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

I show the Dow industrials on the daily scale.

The index it bumping up against overhead resistance setup by prior peaks as the red line shows. That resistance could be why the index has stalled at the circled congestion region.

As you may know, September has historically been the worst performing month of the year (for the Dow and S&P). The percentage of time the index has closed higher is 39.5, which is well below the next worst, June at 50.6%.

If you look at the Nasdaq composite, you'll see a nice the downward trend starting in April that bottoms in October (it's the end of the trend, not the lowest one on the chart).

What does this mean? The Dow has been gathering strength for another move. Will it be higher or lower? If you believe overhead resistance works, then the index will drop. I'm not so sure. I'm hoping for an upward breakout but recognize that with October coming, the index will probably head lower sometime in the coming weeks. Options expire this week and quarterly earnings are still being reported.

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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 21.34 points.
Tuesday: Up 51.09 points.
Wednesday: Up 7.04 points.
Thursday: Down 10.45 points.
Friday: Up 42.76 points.

For the Week...

The Dow industrials were up 111.78 points or 0.9%.
The Nasdaq composite was up 52.96 points or 1.8%.
The S&P 500 index was up 14.88 points or 1.1%.

Year to Date...

Dow Industrials
     1.0% down from the high of 13,338.66 on 05/01/2012.
     9.7% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     3.6% down from the high of 3,134.17 on 03/27/2012.
     15.0% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     1.2% down from the high of 1,422.38 on 04/02/2012.
     11.7% up from the low of 1,258.86 on 01/03/2012.

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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 TA-Reports total retail sales (not services). Are people spending?
Producer price index8:30 TB-Measures wholesale goods cost. An indication of future inflation.
Business inventories10:00 TC-Reports manufacturing, wholesale, retail inventories.
Consumer price index8:30 WB+Inflation report. Measures cost of goods and services.
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.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Housing starts8:30 ThB-Number of homes beginning construction.
Building permits8:30 ThB-Measures building permits for new construction.
Leading indicators10:00 FD-Summary of already known reports.

Options Expiration

The following is courtesy of the Options Industry Council.

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

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

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Swing and Position Traders: Chart Pattern Indicator

As of 08/10/2012, the CPI had:

1 bearish patterns,
42 bullish patterns,
518 patterns waiting for breakout.
The CPI signal is 97.7%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  13,057  13,133  13,170  13,246  13,284 
Weekly  13,052  13,130  13,173  13,251  13,294 
Monthly  12,248  12,728  12,972  13,452  13,696 
S&P 500 (^GSPC): Daily  1,392  1,399  1,402  1,409  1,413 
Weekly  1,385  1,396  1,401  1,412  1,417 
Monthly  1,298  1,352  1,379  1,434  1,461 
Nasdaq (^IXIC): Daily  2,998  3,009  3,015  3,027  3,033 
Weekly  2,954  2,987  3,008  3,042  3,062 
Monthly  2,772  2,896  2,962  3,087  3,153 
  • 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) 5 weeks up 8.1%  Expect a reversal soon.
 3 months up 24.0%  Expect a reversal soon.
 S & P 500 (^GSPC) 5 weeks up 7.4%  Expect a reversal soon.
 3 months up 31.5%  The trend may continue.
 Nasdaq composite (^IXIC) 4 weeks up 14.8%  Expect a reversal soon.
 3 months up 27.9%  The trend may continue.

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
22Triangle, symmetrical
20Pipe bottom
16Head-and-shoulders bottom
16Channel
11Horn bottom
8Head-and-shoulders top
7Dead-cat bounce
6Rising wedge
6Triangle, ascending
6Triple top

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

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

 

 

 

 

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

This WeekLast Week
1. Homebuilding1. Homebuilding
2. Retail Building Supply2. Internet
3. Retail Store3. Retail Building Supply
4. Chemical (Basic)4. Computers and Peripherals
5. Biotechnology5. Retail Store
48. Semiconductor48. Semiconductor Cap Equip.
49. Furn/Home Furnishings49. Furn/Home Furnishings
50. Shoe50. Semiconductor
51. Petroleum (Producing)51. Petroleum (Producing)

-- Thomas Bulkowski

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Saturday 8/11/12. Saturday Bike Ride

Picture of my dog.

For the first time in my life, I went bicycle riding with a group of riders sponsored by the local bike shop. Wow. I thought I was fast based on the all the riders I pass on my 14.5 mile time trials. First off, everyone but me had clipless pedals (that's what they are called even though they clip onto the pedal). I wore sneakers but everyone else had shoes that snap onto the pedal so you can power on both the up and down strokes. According to Brian, the shop's owner, you can probably get 3/4 to 1 mph speed from them alone. The downside of those is that you tend to fall over when you stop. Everyone I've talked to about them has taken such a spill even though all you have to do to unclip from the pedal is swing your ankle out. I've already broken enough bones riding that getting into an accident has prevented me from using them. Needless to say, after the run I picked up a pair. No doubt, I'll be either dead soon or posting how I fell over at a stop light.

The ride broke up into several clumps. The 20 milers were the first to drop off. The 50 milers took off at a 18-19 mph pace. I didn't know the route, but soon recognized that if I didn't leave the slow pack I was with (other 50 milers), I'd get lost then they continued on their route and my 33 mile group peeled off. The leader of the 33 pack was in the first group, shooting off into the sunrise.

By the time I realized I was in the wrong group, it was too late. There was no way I could catch the 50 milers and tag up with the 33 leader.

Picture of a flower from my garden.

Fortunately, I met up with another Tom who was undecided about doing a 50 or 33. He hung back and we rode together (he knew both routes). Also the leader from the 33 route dropped back and we tagged up near a park.

For the first hour, when we stopped at the park, I had logged 58 minutes and covered over 18 miles, so we had a decent pace. This is exactly the pace I ride on my 14.5 mile runs, so it should not have effected me but this route had more rollers (hills). I struggled.

There were 5 of us in the 33 mile group. We took off and headed back to the shop using a different route that included Biscuit hill. Think of Mount Everest with a road going up the side. At the bottom of this hill, I switched to the lower chain ring (lower gear on the pedals), which I never use. My chain fell off and the other two fellows I was drafting shot up this beast. It probably took me a good 5 minutes to get the chain back on. I kept trying to put it on the larger gear and finally put it on the smaller one and it worked. I cruised up the hill.

Tom, thank heaven, was waiting for me up the road at a turn off. The leader continued on, which was disappointing since he's supposed to stay with the group (or so I thought. This being my first ride, what do I know?). Anyway, we tagged up and then scratched our heads when we came to the next intersection. This time, the leader was to our right about 1/3 to 1/2 of a mile away, waiting. Hard to see him at that distance until he started doing circles on the road. But we tagged up and our threesome took off again.

We lost the other two riders miles back, almost from the start.

Picture of my dog.

Anyway, the last challenge for me was climbing the hill to the overpass. After doing 50 rides of 14.5 miles each, this overpass hurt going up at mile 33. The overpass was as tall as those triple decker ones you see in cities, probably 100 feet high. I should have down shifted to the smaller chain ring but didn't want my chain to fall off again, so I powered up the darn thing and it felt like my muscles were going to cram.

At the end of the ride, I was disappointed that I didn't perform as well as I had expected (averaging about 18 mph for the trip). That's really not bad for a new route where I was stressed about getting lost in the wilderness. I didn't like the pack leader going off on his own. This was supposed to be a no-drop ride. I'm still not sure what that means or how it's supposed to work. Maybe "no drop" means "not dropped dead."

Once I get used to clipless pedals and ride the route a few more times, I'll enjoy it more. I'll recognize that if you're not in the first pack, you'll be dropped. Fortunately, the weather was cool for this time of year (72 at the start and 78 at the end) and the winds were light (8-9 mph). Drafting the other riders was way-cool.

I'd like to thank Tom for hanging back and riding with me, making sure I didn't get lost. I couldn't get a route map to print (I tried a few times days before the ride) and after the ride, the shop owner sent me the map. Next time, I'll have the map with me.

The bottom line is that I survived my longest ride ever and didn't cause anyone else to crash (nor me). When buying my clipless shoes, the owner told me that a rider in his group fell over at the stop sign. She unclipped her dominant foot but the bike tilted in the other direction and she hit the pavement. Ouch. No bones broken, but some scrapes. My guess she's not 55 like I am. I think I was the oldest one there. Have you tried to keep up with 20 somethings on a bicycle? I think I was riding in a motorcycle gang.

-- Thomas Bulkowski

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Thursday 8/9/12. Trading Thursday: Nasdaq

The index dropped by -0.2% or -4.61 points. Since 02/05/1971 the index made 421 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 213 occasions.
     Average loss was -1.0% on 208 occasions.
Expect the index to close higher 50.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 21/35 or 60.0% of the time.
     The prediction of the index closing lower has been right 14/26 or 53.8% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

The index forms a double top at A and B. What strikes me about this pattern is it reminds me of a diamond top. Diamonds seem to form after a swift move up from the launch price, such as that shown starting at D. A swift drop sometimes, but not always, follows.

An ascending triangle appears at C. Oddly, since most triangles breakout upward, this one breaks out downward. The measure rule prediction for the double top fulfills easily enough but not the triangle's, at least so far. The measure rule helps set a price target based on the height of most patterns subtracted from the breakout price for downward breakouts.

In what direction will the index close tomorrow? On the daily chart, the index has made a strong run for the last three trading days (not counting today), so it looks like it needs to take a rest. I think a throwback is likely. I don't even have to look at the intraday chart to form my stance, but the 10-day, 5 min chart looks like it's forming a descending triangle. I'm looking for a lower close on Thursday. The above probabilities say otherwise.

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

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,795.42    
 Weekly S2  2,873.28  77.86   
 Monthly S1  2,903.33  30.06   
 Weekly S1  2,942.26  38.93   
 Monthly Pivot  2,945.64  3.37   
 Weekly Pivot  2,959.84  14.20   
 Daily S2  2,994.36  34.53   
 Low  3,002.41  8.05   
 Daily S1  3,002.81  0.40   Yes! The Daily S1 is close to the Low.
 Open  3,003.77  0.96   Yes! The Open is close to the Daily S1.
 61.8% Down from Intraday High  3,008.71  4.94   
 50% Down from Intraday High  3,010.66  1.95   
 Daily Pivot  3,010.85  0.20   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  3,011.25  0.40   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  3,012.60  1.35   Yes! The 38.2% Down from Intraday High is close to the Close.
 High  3,018.90  6.30   
 Daily R1  3,019.30  0.40   Yes! The Daily R1 is close to the High.
 Daily R2  3,027.34  8.05   
 Weekly R1  3,028.82  1.48   Yes! The Weekly R1 is close to the Daily R2.
 Weekly R2  3,046.40  17.57   
 Monthly R1  3,053.55  7.16   
 Monthly R2  3,095.86  42.30   

Tuesday 8/7/12. Trading Tuesday: Dow

The index climbed by 0.2% or 21.34 points. Since 10/01/1928 the index made 1208 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 661 occasions.
     Average loss was -0.6% on 547 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 29/46 or 63.0% of the time.
     The prediction of the index closing lower has been right 7/11 or 63.6% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

The index formed a descending triangle at A. This chart pattern broke out upward and completed a throwback at B. Instead of continuing to move up, as it usually does 65% of the time (but that's on the daily scale), the index collapsed and busted the pattern at C. After a pattern busts (breaks out in one direction and then reverses), the new direction can be a powerful move. That's what happened here.

What does that mean for tomorrow? The swift move down suggests a lower opening tomorrow, but no guarantee, of course. On the 10-day, 5 minute chart, there is lots of support between 13,020 and 13,080. On the daily chart, the index is bumping up against overhead resistance. My guess, and it's only a guess, is that the index will close lower tomorrow. That contradicts what the probabilities say.

$ $ $

I spent about 3 hours this morning digging a trench and burying a soaker hose around part of my house. That went well. Then I tried to find a washer for an outside faucet that I bought years ago from Home Depot. I replaced the faucet once because it was leaking, and I couldn't find a replacement washer (it's like dropping your toothbrush into the toilet. Instead of retrieving it, you move to a new house).

No luck at HD. So I tried Lowes. They usually have a plumber on staff (HD did not) and showed him my problem. In this case, I had water flowing up the valve stem toward the handle when you turn on the faucet.

He didn't have a washer either, but he did suggest using "graphite valve packing" (cost about $3.00). You wrap it three times around the valve stem (between the washer and faucet) so that when you reconnect it, it compresses, forms new packing, and plugs the leak. Teflon tape won't work, according to him. Anyway, I tried it and the leak is stopped...for now. Yippee!

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

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  12,273.38    
 Weekly S2  12,655.58  382.20   
 Monthly S1  12,695.45  39.86   
 Weekly S1  12,886.55  191.10   
 Monthly Pivot  12,914.31  27.77   
 Weekly Pivot  13,009.86  95.55   
 Daily S2  13,047.28  37.41   
 Daily S1  13,082.39  35.12   
 Low  13,099.72  17.33   
 Open  13,099.88  0.16   Yes! The Open is close to the Low.
 Close  13,117.51  17.63   
 61.8% Down from Intraday High  13,133.17  15.66   
 Daily Pivot  13,134.84  1.67   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  13,143.50  8.66   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  13,153.83  10.33   
 Daily R1  13,169.95  16.12   
 High  13,187.28  17.33   
 Daily R2  13,222.40  35.12   
 Weekly R1  13,240.83  18.43   
 Monthly R1  13,336.38  95.55   
 Weekly R2  13,364.14  27.77   
 Monthly R2  13,555.24  191.10   

Monday 8/6/12. Market Monday: The Week Ahead

My Prediction

Picture of the Dow transports on the daily scale.

I show a picture of the Dow transports on the daily scale. I haven't talked about the transports for a few weeks, so I thought it was time.

The chart shows a symmetrical triangle, but probably one you have not seen before. I show the top of it outlined in segments, making it appear rounded.

This is the same type of construction your eyes perform when searching for patterns. How would I know? I don't. I'm just making that up.

How can you tell which direction the breakout will be? You can't. But you can use the other indices to give a breakout suggestion. The Nasdaq, utilities, and industrials look as if they are breaking out upward or will be soon. Thus, my guess is the transports will also move higher in the coming week.

That could change in the blink of an eye, of course, and that is what makes trading the markets so interesting.

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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 2.65 points.
Tuesday: Down 64.33 points.
Wednesday: Down 37.62 points.
Thursday: Down 92.18 points.
Friday: Up 217.29 points.

For the Week...

The Dow industrials were up 20.51 points or 0.2%.
The Nasdaq composite was up 9.81 points or 0.3%.
The S&P 500 index was up 5.02 points or 0.4%.

Year to Date...

Dow Industrials
     1.8% down from the high of 13,338.66 on 05/01/2012.
     8.8% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     5.3% down from the high of 3,134.17 on 03/27/2012.
     13.0% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     2.2% down from the high of 1,422.38 on 04/02/2012.
     10.5% up from the low of 1,258.86 on 01/03/2012.

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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 TD-Measures auto, credit card and other debt.
Productivity & costs8:30 WD+Cost of producing a unit of output.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Trade balance8:30 ThC+Signals balance of exports & imports.
Wholesale inventories10:00 ThD-Wholesale sales and inventory statistics.
International trade8:30 FC+Import/export prices, trade balance. US economy vs others.
Treasury budget2:00 FDTracks budget deficit. Important in April (tax filing).

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 08/03/2012, the CPI had:

0 bearish patterns,
50 bullish patterns,
317 patterns waiting for breakout.
The CPI signal is 100.0%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  12,790  12,943  13,038  13,191  13,286 
Weekly  12,648  12,872  13,003  13,227  13,357 
Monthly  12,266  12,681  12,907  13,322  13,548 
S&P 500 (^GSPC): Daily  1,355  1,373  1,384  1,402  1,412 
Weekly  1,340  1,366  1,380  1,405  1,419 
Monthly  1,301  1,346  1,370  1,415  1,439 
Nasdaq (^IXIC): Daily  2,932  2,950  2,964  2,982  2,995 
Weekly  2,859  2,913  2,945  3,000  3,032 
Monthly  2,781  2,874  2,931  3,025  3,081 
  • 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) 4 weeks up 16.3%  Expect a reversal soon.
 3 months up 24.0%  Expect a reversal soon.
 S & P 500 (^GSPC) 4 weeks up 15.6%  Expect a reversal soon.
 3 months up 31.5%  The trend may continue.
 Nasdaq composite (^IXIC) 3 weeks up 19.9%  Expect a reversal soon.
 3 months up 27.9%  The trend may continue.

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
18Triangle, symmetrical
14Head-and-shoulders bottom
14Channel
8Head-and-shoulders top
8Dead-cat bounce
8Pipe top
6Broadening top
6Triple top
6Triangle, ascending
4Rising wedge

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

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

 

 

 

 

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

This WeekLast Week
1. Homebuilding1. Homebuilding
2. Internet2. Internet
3. Retail Building Supply3. Biotechnology
4. Computers and Peripherals4. Retail Building Supply
5. Retail Store5. Retail Store
48. Semiconductor Cap Equip.48. Semiconductor Cap Equip.
49. Furn/Home Furnishings49. Petroleum (Producing)
50. Semiconductor50. Semiconductor
51. Petroleum (Producing)51. Furn/Home Furnishings

-- Thomas Bulkowski

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Thursday 8/2/12. Trading Thursday: Nasdaq

The index dropped by -0.7% or -19.31 points. Since 02/05/1971 the index made 236 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 108 occasions.
     Average loss was -1.2% on 128 occasions.
Expect the index to close lower 54.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 21/35 or 60.0% of the time.
     The prediction of the index closing lower has been right 13/25 or 52.0% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

A small double top at AB appears and confirms when the index closes below the horizontal red line. The height of the pattern projected below the red line is the measure rule and it gives an exit target. The index exceeded the target easily enough.

With the index making a strong move down in the last half hour, it's easy to conclude that tomorrow's opening will also be lower. However, check the futures before the opening to get a better assessment of the opening activities. Large moves in the futures often mean a large move in the indices in the opening minutes.

The daily chart shows the Nasdaq has bounced off overhead resistance and is headed lower.

The 10-day, 5 minute chart shows the index hitting a gap (support) setup by a week ago Monday's gap down opening. That gap closed a few days later and I don't like gaps as support entities anyway. Barring some news from Europe, I expect the Nasdaq to close lower on Thursday. That assessment also agrees with the above probabilities.

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

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,739.03    
 Weekly S2  2,785.17  46.14   
 Monthly S1  2,829.62  44.45   
 Weekly S1  2,852.69  23.07   
 Daily S2  2,891.59  38.90   
 Daily S1  2,905.90  14.31   
 Weekly Pivot  2,907.28  1.38   Yes! The Weekly Pivot is close to the Daily S1.
 Monthly Pivot  2,908.78  1.50   Yes! The Monthly Pivot is close to the Weekly Pivot.
 Low  2,917.78  9.00   
 Close  2,920.21  2.43   Yes! The Close is close to the Low.
 Daily Pivot  2,932.09  11.88   
 61.8% Down from Intraday High  2,933.25  1.16   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  2,938.03  4.78   
 38.2% Down from Intraday High  2,942.81  4.78   
 Daily R1  2,946.40  3.59   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Open  2,956.72  10.32   
 High  2,958.28  1.56   Yes! The High is close to the Open.
 Daily R2  2,972.59  14.31   
 Weekly R1  2,974.80  2.21   Yes! The Weekly R1 is close to the Daily R2.
 Monthly R1  2,999.37  24.57   
 Weekly R2  3,029.39  30.02   
 Monthly R2  3,078.53  49.14   

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