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

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Chart Patterns: After the Buy
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Busted
Patterns
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Patterns
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 04/28/2017
20,941 -40.82 -0.2%
9,098 -96.36 -1.0%
704 -3.23 -0.5%
6,048 -1.33 0.0%
2,384 -4.57 -0.2%
YTD
6.0%
0.6%
6.8%
12.3%
6.5%
Tom's Targets    Overview: 04/17/2017
20,100 or 21,150 by 05/01/2017
8,500 or 9,500 by 05/01/2017
725 or 685 by 05/01/2017
6,150 or 5,900 by 05/15/2017
2,275 or 2,425 by 05/01/2017
Mutt Winners: None YTD

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August 2013 Headlines


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Thursday 8/29/13. Trading Thursday: Nasdaq

The index climbed by 0.4% or 14.83 points. Since 02/05/1971 the index made 519 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 333 occasions.
     Average loss was -0.8% on 186 occasions.
Expect the index to close higher 64.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 45/74 or 60.8% of the time.
     The prediction of the index closing lower has been right 21/40 or 52.5% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

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

A triple top appears at ABC. It confirms as a valid pattern when the index closes below the red line near D. The height of the pattern is short enough that the index met the measure-rule target, which is the height subtracted from the breakout price.

Earlier in the day, a rising wedge (E) appears but this one was a dud. The measure rule for a rising wedge is the bottom of the pattern. In this case, the index didn't drop far enough to reach that. You win some. You lose some. Unless you're a broker, in which case you always win.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,499.70    
 Weekly S2  3,542.70  43.01   
 Monthly S1  3,546.52  3.82   
 Daily S2  3,564.61  18.09   
 Weekly S1  3,568.03  3.42   
 Low  3,578.80  10.77   
 Daily S1  3,578.98  0.18   Yes! The Daily S1 is close to the Low.
 Open  3,579.11  0.13   Yes! The Open is close to the Daily S1.
 61.8% Down from Intraday High  3,589.71  10.60   
 50% Down from Intraday High  3,593.08  3.37   
 Daily Pivot  3,593.17  0.09   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  3,593.35  0.18   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  3,596.45  3.10   
 High  3,607.36  10.91   
 Daily R1  3,607.54  0.18   Yes! The Daily R1 is close to the High.
 Weekly Pivot  3,614.34  6.80   
 Monthly Pivot  3,620.36  6.01   
 Daily R2  3,621.73  1.37   Yes! The Daily R2 is close to the Monthly Pivot.
 Weekly R1  3,639.67  17.94   
 Monthly R1  3,667.18  27.52   
 Weekly R2  3,685.98  18.80   
 Monthly R2  3,741.02  55.03   

Tuesday 8/27/13. Trading Tuesday: Dow

The index dropped by -0.4% or -64.05 points. Since 10/01/1928 the index made 856 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 433 occasions.
     Average loss was -0.6% on 423 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 56/83 or 67.5% of the time.
     The prediction of the index closing lower has been right 16/27 or 59.3% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

The only startling thing about this picture is how fast the Dow sank in the last hour.

Before that, a triple top (ACB) confirms when the index closes below the red line. The height of this wasn't very tall so it was easy for the index to fulfill the measure rule prediction (the height subtracted from the breakout price gives a target).

The swift drop near the close makes me worried about tomorrow's (Tuesday's) activity. Fasten your seatbelt.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,383.73    
 Monthly S1  14,665.10  281.36   
 Weekly S2  14,751.76  86.66   
 Weekly S1  14,849.11  97.35   
 Daily S2  14,875.82  26.71   
 Daily S1  14,911.14  35.32   
 Low  14,945.24  34.10   
 Close  14,946.46  1.22   Yes! The Close is close to the Low.
 Weekly Pivot  14,977.75  31.29   
 Daily Pivot  14,980.56  2.81   Yes! The Daily Pivot is close to the Weekly Pivot.
 61.8% Down from Intraday High  14,985.25  4.69   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  14,997.61  12.36   
 38.2% Down from Intraday High  15,009.97  12.36   
 Open  15,014.58  4.61   Yes! The Open is close to the 38.2% Down from Intraday High.
 Daily R1  15,015.88  1.30   Yes! The Daily R1 is close to the Open.
 High  15,049.98  34.10   
 Weekly R1  15,075.10  25.12   
 Daily R2  15,085.30  10.20   Yes! The Daily R2 is close to the Weekly R1.
 Monthly Pivot  15,161.76  76.46   
 Weekly R2  15,203.74  41.98   
 Monthly R1  15,443.13  239.39   
 Monthly R2  15,939.79  496.67   

Monday 8/26/13. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

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

The red line shows the turn in the index. I used that as well as a feeling that the market had bottomed to add to existing positions and buy a utility stock that I've had my eye on for several months. I bought a day too soon, but I think I called the turn as a lasting one. I hope.

I swapped most of the index targets from bearish to bullish (see Tom's Targets, top of this page) and the chart pattern indicator has turned bullish as well. Of course, anything can derail this fragile market, so time will tell if this is a lasting turn of just a speed bump on the ride lower.

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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 70.73 points.
Tuesday: Down 7.75 points.
Wednesday: Down 105.44 points.
Thursday: Up 66.19 points.
Friday: Up 46.77 points.

For the Week...

The Dow industrials were down 70.96 points or 0.5%.
The Nasdaq composite was up 55.01 points or 1.5%.
The S&P 500 index was up 7.67 points or 0.5%.

Year to Date...

Dow Industrials
     4.1% down from the high of 15,658.43 on 08/02/2013.
     14.5% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     1.0% down from the high of 3,694.19 on 08/05/2013.
     18.9% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     2.7% down from the high of 1,709.67 on 08/02/2013.
     16.6% up from the low of 1,426.19 on 01/02/2013.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Durable goods orders8:30 MBMeasures orders, shipments of goods with lifespans >3 years.
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Gross domestic product8:30 ThBMeasures economic activity; GDP deflator measures inflation.
Personal income & consumption8:30 FC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 FC+Covers durables, non-durables, and services.
Chicago purchasing managers index9:45 FBMonitors regional manufacturing activity.
Michigan sentiment9:55 FB-Consumer sentiment: Measures strength of consumer spending.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 08/23/2013, the CPI had:

6 bearish patterns,
8 bullish patterns,
298 patterns waiting for breakout.
The CPI signal is 57.1%, which is neutral (between 35% and 65%).

The chart pattern indicator is bullish 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  14,895  14,953  14,989  15,047  15,083 
Weekly  14,773  14,892  14,999  15,118  15,225 
Monthly  14,405  14,708  15,183  15,486  15,961 
S&P 500 (^GSPC): Daily  1,651  1,657  1,661  1,667  1,671 
Weekly  1,631  1,647  1,656  1,672  1,681 
Monthly  1,601  1,632  1,671  1,702  1,741 
Nasdaq (^IXIC): Daily  3,637  3,648  3,654  3,664  3,671 
Weekly  3,564  3,611  3,636  3,683  3,707 
Monthly  3,521  3,589  3,642  3,710  3,762 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 3 weeks down 12.8%   Expect a reversal soon. 
 1 month down 20.1%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week up 43.7%   Expect a random direction. 
 1 month down 21.1%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week up 42.8%   Expect a random direction. 
 2 months up 40.6%   Expect a random direction. 

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
22Head-and-shoulders top
12Triangle, symmetrical
11Channel
10Dead-cat bounce
9Pipe top
9Double Top, Adam and Adam
7Double Top, Eve and Adam
7Broadening top
7Double Top, Eve and Eve
6Flag

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

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

 

 

 

 

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

This WeekLast Week
1. Retail (Special Lines)1. Retail (Special Lines)
2. Insurance (Life)2. Aerospace/Defense
3. Aerospace/Defense3. Insurance (Life)
4. Shoe4. Information Services
5. Biotechnology5. Shoe
50. Metals and Mining (Div.)50. Building Materials
51. Investment Co. (Foreign)51. Medical Supplies
52. Medical Supplies52. Metals and Mining (Div.)
53. Homebuilding53. Short ETFs
54. Short ETFs54. Homebuilding

-- Thomas Bulkowski

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Thursday 8/22/13. Trading Thursday: Nasdaq

The index dropped by -0.4% or -13.8 points. Since 02/05/1971 the index made 382 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 187 occasions.
     Average loss was -1.1% on 195 occasions.
Expect the index to close lower 51.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 45/74 or 60.8% of the time.
     The prediction of the index closing lower has been right 21/39 or 53.8% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

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

This chart looks a lot like the one on Tuesday from the Dow. Shown at AB is a double top. It confirms as a valid pattern when the index closes below C. The height of the pattern applied to the breakout price gives a target which the index meets.

Can you guess what the two patterns in the blue circles are? They are hard to trade, that's for sure. One is a v-bottom and the other is a v-top. Read those links for ideas on how to trade them. A lot of it has to do with praying...

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

-- Thomas Bulkowski

Top

© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,501.84    
 Weekly S2  3,537.42  35.58   
 Monthly S1  3,550.82  13.39   
 Daily S2  3,565.14  14.32   
 Weekly S1  3,568.61  3.47   Yes! The Weekly S1 is close to the Daily S2.
 Daily S1  3,582.46  13.86   
 Low  3,589.02  6.56   
 Close  3,599.79  10.77   
 Open  3,603.68  3.89   Yes! The Open is close to the Close.
 61.8% Down from Intraday High  3,604.76  1.08   Yes! The 61.8% Down from Intraday High is close to the Open.
 Daily Pivot  3,606.35  1.58   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  3,609.63  3.28   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  3,614.49  4.86   
 Monthly Pivot  3,622.50  8.02   
 Daily R1  3,623.67  1.17   Yes! The Daily R1 is close to the Monthly Pivot.
 Weekly Pivot  3,629.83  6.16   
 High  3,630.23  0.40   Yes! The High is close to the Weekly Pivot.
 Daily R2  3,647.56  17.33   
 Weekly R1  3,661.02  13.46   
 Monthly R1  3,671.48  10.46   
 Weekly R2  3,722.24  50.77   
 Monthly R2  3,743.16  20.92   

Tuesday 8/20/13. Trading Tuesday: Dow

The index dropped by -0.5% or -70.73 points. Since 10/01/1928 the index made 716 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 354 occasions.
     Average loss was -0.8% on 362 occasions.
Expect the index to close lower 50.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 56/83 or 67.5% of the time.
     The prediction of the index closing lower has been right 15/26 or 57.7% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

A double top (AB) appeared early in the session which is unusual. It predicted a bearish session. The pattern confirmed as a valid one when the index closed below the red line at C.

After confirmation, the index didn't drop far but moved horizontally instead. When traders came back from lunch, at 1:00, they started selling, forcing the index lower in a stair-step decline.

Does the length of today's decline predict a lower close tomorrow? I have no idea but the probabilities say to expect a lower close.

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

-- Thomas Bulkowski

Top

© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,637.13    
 Weekly S2  14,739.99  102.86   
 Monthly S1  14,823.94  83.94   
 Weekly S1  14,875.37  51.43   
 Daily S2  14,939.88  64.51   
 Daily S1  14,975.31  35.43   
 Low  15,005.42  30.11   
 Close  15,010.74  5.32   Yes! The Close is close to the Low.
 Daily Pivot  15,040.85  30.11   
 61.8% Down from Intraday High  15,043.99  3.14   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  15,055.91  11.92   
 38.2% Down from Intraday High  15,067.82  11.91   
 Daily R1  15,076.28  8.46   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Open  15,076.79  0.51   Yes! The Open is close to the Daily R1.
 High  15,106.39  29.60   
 Daily R2  15,141.82  35.43   
 Weekly Pivot  15,189.75  47.93   
 Monthly Pivot  15,241.18  51.43   
 Weekly R1  15,325.13  83.94   
 Monthly R1  15,427.99  102.86   
 Weekly R2  15,639.51  211.53   
 Monthly R2  15,845.23  205.72   

Monday 8/19/13. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

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

Marked with two horizontal red lines are areas of support. The top red line is where the index currently resides. Below that, a knot of congestion I show circled in blue. Below that is the second red line. The line connects the bottom of the circled congestion area, and the top of the April peak.

My belief is that the circled area is the more important of the two (peak and circled area). I expect that the index will turn somewhere within that circled blue area. However, I could be wrong just as easily as I could be right, so keep that in mind.

Even so, I think the power of this downturn is too rapid. It's an overreaction, I think. This might be the right armpit of a head-and-shoulders top. The left shoulder is the peak in May with the head in July. That means the index should climb to form a right shoulder.

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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 5.83 points.
Tuesday: Up 31.33 points.
Wednesday: Down 113.35 points.
Thursday: Down 225.47 points.
Friday: Down 30.72 points.

For the Week...

The Dow industrials were down 344.04 points or 2.2%.
The Nasdaq composite was down 57.33 points or 1.6%.
The S&P 500 index was down 35.59 points or 2.1%.

Year to Date...

Dow Industrials
     3.7% down from the high of 15,658.43 on 08/02/2013.
     15.1% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     2.5% down from the high of 3,694.19 on 08/05/2013.
     17.1% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     3.1% down from the high of 1,709.67 on 08/02/2013.
     16.1% up from the low of 1,426.19 on 01/02/2013.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Existing home sales10:00 WCCounts sales of used homes.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Minutes2:00 W?Minutes of the prior Federal Reserve meeting.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Leading indicators10:00 ThD-Summary of already known reports.
New home sales10:00 FC+Shows sales of single-family homes.

Options Expiration

VIX expires on Wednesday.

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Swing and Position Traders: Chart Pattern Indicator

As of 08/16/2013, the CPI had:

38 bearish patterns,
3 bullish patterns,
254 patterns waiting for breakout.
The CPI signal is 7.3%, which is bearish (<= 35%).

The chart pattern indicator is bearish 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  15,006  15,044  15,092  15,129  15,177 
Weekly  14,764  14,923  15,213  15,372  15,663 
Monthly  14,661  14,871  15,265  15,475  15,869 
S&P 500 (^GSPC): Daily  1,646  1,651  1,657  1,662  1,668 
Weekly  1,624  1,640  1,668  1,684  1,713 
Monthly  1,616  1,636  1,673  1,693  1,730 
Nasdaq (^IXIC): Daily  3,585  3,594  3,608  3,617  3,630 
Weekly  3,538  3,571  3,631  3,663  3,723 
Monthly  3,503  3,553  3,624  3,673  3,744 
  • 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) 2 weeks down 16.6%   Expect a reversal soon. 
 1 month down 20.1%   Expect a reversal soon. 
 S & P 500 (^GSPC) 2 weeks down 16.0%   Expect a reversal soon. 
 1 month down 21.1%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 2 weeks down 18.7%   Expect a reversal soon. 
 1 month down 26.3%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
16Head-and-shoulders top
11Triangle, symmetrical
11Channel
10Flag
9Dead-cat bounce
8Double Top, Eve and Eve
7Double Top, Adam and Adam
7Broadening top
7Double Top, Eve and Adam
6Pipe 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, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

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

This WeekLast Week
1. Retail (Special Lines)1. Retail (Special Lines)
2. Aerospace/Defense2. Insurance (Life)
3. Insurance (Life)3. Aerospace/Defense
4. Information Services4. Shoe
5. Shoe5. Biotechnology
50. Building Materials50. Investment Co. (Foreign)
51. Medical Supplies51. Medical Supplies
52. Metals and Mining (Div.)52. Metals and Mining (Div.)
53. Short ETFs53. Homebuilding
54. Homebuilding54. Short ETFs

-- Thomas Bulkowski

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Thursday 8/15/13. Trading Thursday: Nasdaq

The index dropped by -0.4% or -15.17 points. Since 02/05/1971 the index made 380 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 186 occasions.
     Average loss was -1.1% on 194 occasions.
Expect the index to close lower 51.1% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 45/74 or 60.8% of the time.
     The prediction of the index closing lower has been right 20/38 or 52.6% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

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

A large descending triangle appears on the index and it spanned most of the day. It was so large that there was no hope to use it as a day trade.

Does that mean we will see a breakout tomorrow? Clearly there will be a breakout but it's been my experience that a pattern one day doesn't translate well into the next day. The opening gap in an individual stock usually takes care of any leftover influence. Not always, of course.

However, this pattern does point to weakness in the index.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,349.34    
 Monthly S1  3,509.30  159.97   
 Monthly Pivot  3,601.75  92.44   
 Weekly S2  3,605.08  3.34   
 Weekly S1  3,637.18  32.09   
 Daily S2  3,657.04  19.87   
 Daily S1  3,663.16  6.11   
 Weekly Pivot  3,665.68  2.53   
 Low  3,668.74  3.06   
 Close  3,669.27  0.53   Yes! The Close is close to the Low.
 Daily Pivot  3,674.85  5.58   
 61.8% Down from Intraday High  3,675.54  0.69   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  3,677.65  2.10   
 38.2% Down from Intraday High  3,679.75  2.10   
 Daily R1  3,680.97  1.22   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Open  3,683.97  3.00   
 High  3,686.55  2.58   
 Daily R2  3,692.66  6.11   
 Weekly R1  3,697.78  5.11   
 Weekly R2  3,726.28  28.51   
 Monthly R1  3,761.71  35.43   
 Monthly R2  3,854.16  92.44   

Tuesday 8/13/13. Trading Tuesday: Dow

The index dropped by 0.0% or -5.83 points. Since 10/01/1928 the index made 1185 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 626 occasions.
     Average loss was -0.7% on 559 occasions.
Expect the index to close higher 52.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 55/82 or 67.1% of the time.
     The prediction of the index closing lower has been right 15/26 or 57.7% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

A double top appears at AB, confirmed with the index closed below the line at C. This might be better categorized as an ugly double top, a pattern with unequal tops (the second is lower than the first).

The second pattern is a head-and-shoulders bottom. It confirms when the index closes above the red neckline at D. Both patterns met their price targets by the close. That means the index moves far enough to more than equal the pattern's height from the breakout price.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,662.54    
 Monthly S1  15,041.11  378.57   
 Weekly S2  15,165.29  124.18   
 Weekly S1  15,292.48  127.20   
 Daily S2  15,325.30  32.82   
 Monthly Pivot  15,349.77  24.47   
 Low  15,359.93  10.16   
 Daily S1  15,372.49  12.56   
 61.8% Down from Intraday High  15,391.19  18.70   
 50% Down from Intraday High  15,400.84  9.65   
 Daily Pivot  15,407.12  6.28   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  15,410.50  3.38   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Open  15,415.22  4.72   Yes! The Open is close to the 38.2% Down from Intraday High.
 Close  15,419.68  4.46   Yes! The Close is close to the Open.
 High  15,441.75  22.07   
 Daily R1  15,454.31  12.56   
 Weekly Pivot  15,473.85  19.54   
 Daily R2  15,488.94  15.09   
 Weekly R1  15,601.04  112.10   
 Monthly R1  15,728.34  127.30   
 Weekly R2  15,782.41  54.07   
 Monthly R2  16,037.00  254.59   

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

My Prediction

Picture of the Dow utilities on the daily scale.

I show a picture of the Dow utilities index on the daily scale.

Two patterns are highlighted. The first is a head-and-shoulders bottom (LS = left shoulder, head, RS = right shoulder). It marks the bottom of the drop and acts as a bullish reversal.

The second one, the more recent of the two, is a diamond top. The first half looks like a broadening pattern and the second half is a symmetrical triangle. Both halves are not well formed as individual patterns, but for diamonds, it's typical.

The diamond breaks out downward 69% of the time, according to the statistics in my book, Encyclopedia of Chart Patterns, 2nd edition.

However, I am still hopeful that the general market will push through earnings season and march to new highs.

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A Brief Look Back

Picture of a lizard 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 46.23 points.
Tuesday: Down 93.39 points.
Wednesday: Down 48.07 points.
Thursday: Up 27.65 points.
Friday: Down 72.81 points.

For the Week...

The Dow industrials were down 232.85 points or 1.5%.
The Nasdaq composite was down 29.48 points or 0.8%.
The S&P 500 index was down 18.25 points or 1.1%.

Year to Date...

Dow Industrials
     1.5% down from the high of 15,658.43 on 08/02/2013.
     17.7% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     0.9% down from the high of 3,694.19 on 08/05/2013.
     19.0% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     1.1% down from the high of 1,709.67 on 08/02/2013.
     18.6% up from the low of 1,426.19 on 01/02/2013.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Treasury budget2:00 MDTracks budget deficit. Important in April (tax filing).
Retail sales8:30 TA-Reports total retail sales (not services). Are people spending?
International trade8:30 TC+Import/export prices, trade balance. US economy vs others.
Business inventories10:00 TC-Reports manufacturing, wholesale, retail inventories.
Producer price index8:30 WB-Measures wholesale goods cost. An indication of future inflation.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Consumer price index8:30 ThB+Inflation report. Measures cost of goods and services.
Industrial production9:15 ThB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 ThB-Gauges economic activity, hints of inflation.
Housing starts8:30 FB-Number of homes beginning construction.
Building permits8:30 FB-Measures building permits for new construction.
Productivity & costs8:30 FD+Cost of producing a unit of output.

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 08/09/2013, the CPI had:

34 bearish patterns,
16 bullish patterns,
370 patterns waiting for breakout.
The CPI signal is 32.0%, which is bearish (<= 35%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  15,266  15,346  15,427  15,507  15,588 
Weekly  15,167  15,296  15,476  15,605  15,784 
Monthly  14,664  15,045  15,352  15,732  16,039 
S&P 500 (^GSPC): Daily  1,679  1,685  1,692  1,699  1,706 
Weekly  1,671  1,681  1,695  1,705  1,720 
Monthly  1,577  1,634  1,672  1,729  1,767 
Nasdaq (^IXIC): Daily  3,634  3,647  3,663  3,675  3,691 
Weekly  3,602  3,631  3,663  3,692  3,723 
Monthly  3,346  3,503  3,599  3,756  3,851 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week down 28.9%   The trend may continue. 
 1 month down 20.1%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week down 27.6%   The trend may continue. 
 2 months up 40.6%   Expect a random direction. 
 Nasdaq composite (^IXIC) 1 week down 31.0%   The trend may continue. 
 2 months up 40.6%   Expect a random direction. 

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
11Channel
10Flag
10Triangle, symmetrical
8Pipe top
7Dead-cat bounce
5Rising wedge
5Broadening top
4Pennant
4Rectangle top
3Head-and-shoulders bottom

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

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

 

 

 

 

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

This WeekLast Week
1. Retail (Special Lines)1. Retail (Special Lines)
2. Insurance (Life)2. Insurance (Life)
3. Aerospace/Defense3. Aerospace/Defense
4. Shoe4. Shoe
5. Biotechnology5. Biotechnology
50. Investment Co. (Foreign)50. Medical Supplies
51. Medical Supplies51. Investment Co. (Foreign)
52. Metals and Mining (Div.)52. Homebuilding
53. Homebuilding53. Metals and Mining (Div.)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Thursday 8/8/13. Trading Thursday: Nasdaq

The index dropped by -0.3% or -11.76 points. Since 02/05/1971 the index made 441 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 230 occasions.
     Average loss was -0.9% on 211 occasions.
Expect the index to close higher 52.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 44/72 or 61.1% of the time.
     The prediction of the index closing lower has been right 20/38 or 52.6% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

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

The chart shows a chart pattern that I feel is both important and not well known. It's an ugly double bottom.

In that pattern on the daily chart (not shown), the second bottom (B) is at least 5% above the low at A. The pattern confirms when the index closes above the peak between the two bottoms (at C).

When it becomes a valid chart pattern, I believe it confirms a trend change from down to up. In this example, the height of the pattern helped predict how far price was going to rise. Despite being a tall pattern, the index reached the target before the close.

Since the chart uses the intraday scale, you can't use the 5% minimum, so you just have to look for uneven bottoms and let that be your guide.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,311.92    
 Monthly S1  3,482.96  171.05   
 Weekly S2  3,548.68  65.71   
 Monthly Pivot  3,586.28  37.60   
 Weekly S1  3,601.34  15.07   
 Daily S2  3,620.66  19.31   
 Low  3,633.59  12.93   
 Daily S1  3,637.33  3.74   
 61.8% Down from Intraday High  3,644.90  7.57   
 Weekly Pivot  3,645.47  0.57   Yes! The Weekly Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  3,648.40  2.93   Yes! The 50% Down from Intraday High is close to the Weekly Pivot.
 Daily Pivot  3,650.27  1.87   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  3,651.89  1.62   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  3,654.01  2.12   Yes! The Close is close to the 38.2% Down from Intraday High.
 Open  3,659.53  5.52   
 High  3,663.20  3.67   
 Daily R1  3,666.94  3.74   
 Daily R2  3,679.88  12.93   
 Weekly R1  3,698.13  18.26   
 Weekly R2  3,742.26  44.12   
 Monthly R1  3,757.32  15.07   
 Monthly R2  3,860.64  103.31   

Tuesday 8/6/13. Trading Tuesday: Dow

The index dropped by -0.3% or -46.23 points. Since 10/01/1928 the index made 968 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 459 occasions.
     Average loss was -0.7% on 509 occasions.
Expect the index to close lower 52.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 55/82 or 67.1% of the time.
     The prediction of the index closing lower has been right 14/25 or 56.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

A head-and-shoulders bottom appears in the afternoon, suggesting a bullish turn.

That's what happened when the index closed above the red neckline at A. That confirmed the chart pattern as a valid one. The height of this pattern was tall enough that the index didn't quite rise up far enough to meet the predicted target (the height of the pattern at the head added to the breakout price at A).

Still, a trader seeing the pattern could have captured a portion of the rise or at least have been on the bullish side of the market.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,577.00    
 Monthly S1  15,094.56  517.57   
 Monthly Pivot  15,376.50  281.93   
 Weekly S2  15,403.93  27.43   
 Weekly S1  15,508.03  104.10   
 Daily S2  15,547.01  38.98   
 Daily S1  15,579.57  32.56   
 Weekly Pivot  15,583.23  3.66   Yes! The Weekly Pivot is close to the Daily S1.
 Low  15,584.83  1.60   Yes! The Low is close to the Weekly Pivot.
 61.8% Down from Intraday High  15,611.71  26.88   
 Close  15,612.13  0.42   Yes! The Close is close to the 61.8% Down from Intraday High.
 Daily Pivot  15,617.39  5.26   Yes! The Daily Pivot is close to the Close.
 50% Down from Intraday High  15,620.02  2.63   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  15,628.33  8.31   
 Daily R1  15,649.95  21.63   
 Open  15,651.98  2.03   Yes! The Open is close to the Daily R1.
 High  15,655.21  3.23   Yes! The High is close to the Open.
 Weekly R1  15,687.33  32.12   
 Daily R2  15,687.77  0.44   Yes! The Daily R2 is close to the Weekly R1.
 Weekly R2  15,762.53  74.76   
 Monthly R1  15,894.06  131.53   
 Monthly R2  16,176.00  281.93   

Monday 8/5/13. 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.

Price has busted the twin peak pattern formed in May and July. This busting of a potential double top can lead to a strong upward move. Maybe we are seeing signs of that in the index (and other indices, for that matter).

My belief is that the up move is real, that price is on a new wave higher. Of course, I could be wrong.

If I'm right, then look for a measured move up pattern. We have completed the first leg (the move from the June low) to the corrective phase (the retrace from the July high). The second leg has started now.

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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 36.86 points.
Tuesday: Down 1.38 points.
Wednesday: Down 21.05 points.
Thursday: Up 128.48 points.
Friday: Up 30.34 points.

For the Week...

The Dow industrials were up 99.53 points or 0.6%.
The Nasdaq composite was up 76.43 points or 2.1%.
The S&P 500 index was up 18.02 points or 1.1%.

Year to Date...

Dow Industrials
     0.0% down from the high of 15,658.43 on 08/02/2013.
     19.5% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     0.0% down from the high of 3,689.59 on 08/02/2013.
     19.9% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     0.0% down from the high of 1,709.67 on 08/02/2013.
     19.9% up from the low of 1,426.19 on 01/02/2013.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Trade balance8:30 TC+Signals balance of exports & imports.
Crude inventories10:30 W?My guess: Measures oil inventory.
Consumer credit3:00 WD-Measures auto, credit card and other debt.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Wholesale inventories10:00 FD-Wholesale sales and inventory statistics.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 08/02/2013, the CPI had:

6 bearish patterns,
24 bullish patterns,
257 patterns waiting for breakout.
The CPI signal is 80.0%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  15,525  15,592  15,625  15,692  15,725 
Weekly  15,419  15,539  15,599  15,718  15,778 
Monthly  14,592  15,125  15,392  15,925  16,191 
S&P 500 (^GSPC): Daily  1,698  1,704  1,707  1,713  1,716 
Weekly  1,673  1,691  1,700  1,719  1,728 
Monthly  1,570  1,640  1,675  1,745  1,780 
Nasdaq (^IXIC): Daily  3,655  3,672  3,681  3,698  3,707 
Weekly  3,561  3,625  3,657  3,722  3,754 
Monthly  3,324  3,507  3,598  3,781  3,872 
  • 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 5.6%   Expect a reversal soon. 
 2 months up 37.7%   The trend may continue. 
 S & P 500 (^GSPC) 1 week up 43.9%   Expect a random direction. 
 2 months up 40.6%   Expect a random direction. 
 Nasdaq composite (^IXIC) 2 weeks up 28.9%   The trend may continue. 
 2 months up 40.6%   Expect a random direction. 

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
25Head-and-shoulders bottom
11Broadening wedge, descending
11Double Bottom, Adam and Adam
9Flag
8Triangle, symmetrical
8Broadening top
6Pipe top
5Triangle, ascending
4Dead-cat bounce
4Pennant

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

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

 

 

 

 

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

This WeekLast Week
1. Retail (Special Lines)1. Retail (Special Lines)
2. Insurance (Life)2. Insurance (Life)
3. Aerospace/Defense3. Biotechnology
4. Shoe4. Shoe
5. Biotechnology5. Aerospace/Defense
50. Medical Supplies50. Investment Co. (Foreign)
51. Investment Co. (Foreign)51. Medical Supplies
52. Homebuilding52. Metals and Mining (Div.)
53. Metals and Mining (Div.)53. Homebuilding
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Thursday 8/1/13. Trading Thursday: Nasdaq

The index climbed by 0.3% or 9.9 points. Since 02/05/1971 the index made 566 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 313 occasions.
     Average loss was -0.7% on 253 occasions.
Expect the index to close higher 55.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 43/71 or 60.6% of the time.
     The prediction of the index closing lower has been right 20/38 or 52.6% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

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

An Eve & Adam double bottom, at AB, appears late in the session and this is a tall one, taking up a significant amount of the day's trading range. That's a performance clue.

Why?

Because the pattern is too tall to reach its predicted price target. That target, from the lowest bottom (B) to the peak between the two bottoms added to the same peak becomes the target price. With such a tall pattern, having the index make such a move intraday is wishful thinking (this one comes close, though). I haven't come up with an accurate percentage of how tall a pattern should be when compared to the 1-month average trading range, but I'm thinking about 33% would work best. If a pattern is taller than a third the average daily price movement, then don't depend on it reaching the measure rule price target.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,185.70    
 Monthly S1  3,406.03  220.34   
 Monthly Pivot  3,515.29  109.25   
 Weekly S2  3,564.61  49.32   
 Weekly S1  3,595.49  30.88   
 Weekly Pivot  3,604.41  8.92   
 Daily S2  3,608.92  4.51   
 Daily S1  3,617.64  8.73   
 Low  3,624.77  7.13   
 Close  3,626.37  1.60   Yes! The Close is close to the Low.
 Open  3,627.66  1.29   Yes! The Open is close to the Close.
 Daily Pivot  3,633.50  5.84   
 61.8% Down from Intraday High  3,634.16  0.66   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 Weekly R1  3,635.29  1.13   Yes! The Weekly R1 is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  3,637.06  1.77   Yes! The 50% Down from Intraday High is close to the Weekly R1.
 38.2% Down from Intraday High  3,639.96  2.90   
 Daily R1  3,642.22  2.26   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Weekly R2  3,644.21  1.99   Yes! The Weekly R2 is close to the Daily R1.
 High  3,649.35  5.14   
 Daily R2  3,658.08  8.73   
 Monthly R1  3,735.62  77.55   
 Monthly R2  3,844.88  109.25   

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