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

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Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
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

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

December 2012 Headlines


Archives


Monday 12/31/12. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

I haven't talked about the Dow utility index for a while so I present a picture of it.

The year has not been kind to utility stocks despite my belief that they can be a wonderful place to park your money for a five percent return. I had to exit my last two utility stock picks because they were lemons. One had too much debt and the other had too much high cost electricity (setup by nuclear power when natural gas is cheaper). And yet I have too much cash and too few stocks to buy. So, I plan to add to existing holdings by buying utility stocks.

The index is coming down on worries that the dividend treatment for taxes will change once the fiscal cliff is solved. There are stricter air pollution requirements coming, too, that utilities have to deal with (global warming).

The index could drop to the red line on the chart. That would form a double bottom. After that, once we go over the cliff and bounce off the bottom, I expect that the index will rise. 2013 may not be a banner year for utilities because of the green house gas emission problem, but they should do fine, I think.

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 51.76 points.
Tuesday: Holiday or other weird event!
Wednesday: Down 24.49 points.
Thursday: Down 18.28 points.
Friday: Down 158.2 points.

For the Week...

The Dow industrials were down 252.73 points or 1.9%.
The Nasdaq composite was down 60.69 points or 2.0%.
The S&P 500 index was down 27.72 points or 1.9%.

Year to Date...

Dow Industrials
     5.3% down from the high of 13,661.87 on 10/05/2012.
     7.5% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     7.4% down from the high of 3,196.93 on 09/21/2012.
     12.7% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     4.9% down from the high of 1,474.51 on 09/14/2012.
     11.4% 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
Construction spending10:00 WDCovers residential/non-residential/public spending on new construction.
Auto & truck sales2:00 WC-Monthly sales of domestically produced vehicles.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Crude inventories11:00 Th??My guess: Measures oil inventory.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Factory orders10:00 FD+Durable/non-durable goods orders w/factory inventories.

Options Expiration

No options expire this week.

Top

Swing and Position Traders: Chart Pattern Indicator

As of 12/28/2012, the CPI had:

36 bearish patterns,
3 bullish patterns,
341 patterns waiting for breakout.
The CPI signal is 7.7%, which is bearish (<= 35%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  12,818  12,878  12,987  13,047  13,155 
Weekly  12,755  12,847  13,018  13,110  13,282 
Monthly  12,423  12,680  13,023  13,281  13,624 
S&P 500 (^GSPC): Daily  1,391  1,397  1,407  1,413  1,424 
Weekly  1,383  1,393  1,411  1,421  1,440 
Monthly  1,349  1,376  1,412  1,438  1,475 
Nasdaq (^IXIC): Daily  2,942  2,951  2,968  2,977  2,994 
Weekly  2,909  2,935  2,977  3,002  3,044 
Monthly  2,860  2,910  2,986  3,036  3,112 
  • 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 30.7%  The trend may continue.
 3 months down 7.1%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week down 30.7%  The trend may continue.
 1 month down 21.8%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 1 week down 34.5%  The trend may continue.
 1 month down 27.6%  The trend may continue.

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

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

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

Buy-and-Hold: 12-Month SMA

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

Top

Earnings, Chart Patterns & Industries

Earnings season is over.

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

 Found Chart Pattern Name
13Triangle, symmetrical
12Target price
11Rising wedge
10Head-and-shoulders bottom
7Triangle, ascending
6Pipe top
5Head-and-shoulders top
4Flag
4Rectangle bottom
4Broadening 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. Cement and Aggregates1. Cement and Aggregates
2. Homebuilding2. Homebuilding
3. Furn/Home Furnishings3. Furn/Home Furnishings
4. Human Resources4. Securities Brokerage
5. Securities Brokerage5. Chemical (Specialty)
48. Electric Utility (Central)48. Semiconductor
49. Household Products49. Electric Utility (West)
50. Computers and Peripherals50. Household Products
51. Trucking/Transp. Leasing51. Computers and Peripherals
52. Electric Utility (West)52. Trucking/Transp. Leasing
53. Electric Utility (East)53. Electric Utility (East)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

Top


Thursday 12/27/12. Trading Thursday: Nasdaq

The index dropped by -0.7% or -22.44 points. Since 02/05/1971 the index made 241 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 110 occasions.
     Average loss was -1.2% on 131 occasions.
Expect the index to close lower 54.4% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 29/49 or 59.2% of the time.
     The prediction of the index closing lower has been right 16/31 or 51.6% 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 the above probabilities and let you take it from there.

$ $ $

Christmas, like all holidays, is just another day to me. I'm single. I don't have a girlfriend to buy for. Nor do I have a job that requires me to show up at the office. I do whatever I want whenever I want. I live the trader's dream.

That's why this afternoon's (Wednesday) gift was so special. My sister-in-law sent me this T-shirt. On the back is the word "Bulkowski." The front is as pictured. You can figure it out.

When I saw this I burst out laughing. "Wonderful. Fantastic. What a surprising gift!" were some of the words I used to describe this gift. I guess small things excite me and this hit the spot. Thanks, Liz.

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

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,801.84    
 Monthly S1  2,896.00  94.16   
 Weekly S2  2,920.23  24.23   
 Weekly S1  2,955.19  34.97   
 Daily S2  2,962.09  6.89   
 Daily S1  2,976.12  14.04   
 Monthly Pivot  2,978.91  2.79   Yes! The Monthly Pivot is close to the Daily S1.
 Low  2,983.35  4.44   
 Close  2,990.16  6.81   
 61.8% Down from Intraday High  2,996.83  6.67   
 Daily Pivot  2,997.39  0.55   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  3,001.00  3.61   
 38.2% Down from Intraday High  3,005.17  4.17   
 Weekly Pivot  3,008.51  3.34   Yes! The Weekly Pivot is close to the 38.2% Down from Intraday High.
 Daily R1  3,011.42  2.92   Yes! The Daily R1 is close to the Weekly Pivot.
 Open  3,013.13  1.71   Yes! The Open is close to the Daily R1.
 High  3,018.65  5.52   
 Daily R2  3,032.69  14.04   
 Weekly R1  3,043.47  10.79   
 Monthly R1  3,073.07  29.60   
 Weekly R2  3,096.79  23.72   
 Monthly R2  3,155.98  59.19   

Tuesday 11/25/12. Another Book Arrives

The pictured book, Fundamental Analysis and Position Trading: Evolution of a Trader is now available on Amazon.com. Below is a brief table of contents. If you do purchase the book and like what you read, then please post a review of it at your favorite e-tailer, such as Amazon.com or bn.com. For a detailed table of contents, you can find it on the My Books page.

Table of contents, by chapter titles

Introduction to buy and hold
Stock selection
Book value
Capital spending
Cash flow
Dividends
Long-term debt
Price-to-earnings ratio
Price-to-sales ratio
Return on shareholders' equity
Shares outstanding
Fundamental Analysis summary
How to double your money
Finding 10-baggers
Trading 10-baggers
Selling buy and hold
Fundamentals: what I use
Introduction to Position trading
Getting started in position trading
Ten factors make chart patterns work
Three winning trades and a funeral
What not to do: three botched trades
What we learned
Visual index to chart patterns

$ $ $

I released information on the cat's ears chart pattern. If you think of a double top in a downward price trend, then you know what it looks like.

-- Thomas Bulkowski

Top


Monday 12/24/12. 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 horizontal red lines are support areas that might stop a drop in the index. Most of the lines form from a congestion area, based on a valley.

Looking forward, I hope that this short week will be a quiet one, but low volume tends to show high volatility. I have not proven this, so it's just a feeling.

I think that the index will recover. I expect the index to bounce off the top red line and move higher. It might not. It might dip to a lower red line before rising or it could just drop instead.

 

 

Top

A Brief Look Back

Picture of a flower from my garden.

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

Monday: Up 100.38 points.
Tuesday: Up 115.57 points.
Wednesday: Down 98.99 points.
Thursday: Up 59.75 points.
Friday: Down 120.88 points.

For the Week...

The Dow industrials were up 55.83 points or 0.4%.
The Nasdaq composite was up 49.67 points or 1.7%.
The S&P 500 index was up 16.57 points or 1.2%.

Year to Date...

Dow Industrials
     3.4% down from the high of 13,661.87 on 10/05/2012.
     9.6% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     5.5% down from the high of 3,196.93 on 09/21/2012.
     15.0% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     3.0% down from the high of 1,474.51 on 09/14/2012.
     13.6% 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
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
New home sales10:00 ThC+Shows sales of single-family homes.
Consumer confidence10:00 ThB-Surveys 5,000 households for trends.
Chicago purchasing managers index9:45 FBMonitors regional manufacturing activity.
Crude inventories11:00 F?My guess: Measures oil inventory.

Options Expiration

No options expire this week.

Top

Swing and Position Traders: Chart Pattern Indicator

As of 12/21/2012, the CPI had:

16 bearish patterns,
10 bullish patterns,
235 patterns waiting for breakout.
The CPI signal is 38.5%, which is neutral (between 35% and 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  13,020  13,106  13,208  13,293  13,395 
Weekly  12,983  13,087  13,226  13,330  13,470 
Monthly  12,273  12,732  13,049  13,508  13,825 
S&P 500 (^GSPC): Daily  1,411  1,421  1,432  1,442  1,453 
Weekly  1,396  1,413  1,431  1,448  1,465 
Monthly  1,325  1,377  1,413  1,465  1,501 
Nasdaq (^IXIC): Daily  2,986  3,003  3,013  3,030  3,040 
Weekly  2,931  2,976  3,019  3,064  3,107 
Monthly  2,812  2,917  2,989  3,094  3,166 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

Top

Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week up 43.3%  Expect a random direction.
 1 month up 52.2%  Expect a random direction.
 S & P 500 (^GSPC) 1 week up 42.2%  Expect a random direction.
 2 months up 40.1%  Expect a random direction.
 Nasdaq composite (^IXIC) 1 week up 40.8%  Expect a random direction.
 2 months up 39.4%  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: bearish.
Dow Utilities: bearish.

Top

Earnings, Chart Patterns & Industries

Earnings season is over.

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

 Found Chart Pattern Name
16Head-and-shoulders bottom
12Target price
10Triangle, symmetrical
9Rising wedge
7Triangle, ascending
5Double Bottom, Adam and Adam
4Rectangle bottom
4Broadening top, right-angled and descending
3Rectangle top
3Flag

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. Cement and Aggregates1. Cement and Aggregates
2. Homebuilding2. Homebuilding
3. Furn/Home Furnishings3. Chemical (Specialty)
4. Securities Brokerage4. Furn/Home Furnishings
5. Chemical (Specialty)5. Chemical (Basic)
48. Semiconductor48. Electric Utility (Central)
49. Electric Utility (West)49. Shoe
50. Household Products50. Electric Utility (West)
51. Computers and Peripherals51. Computers and Peripherals
52. Trucking/Transp. Leasing52. Electric Utility (East)
53. Electric Utility (East)53. Trucking/Transp. Leasing
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

Top


Picture of a green snake.

Sunday 12/23/12. Too Beautiful? You're Fired

This morning's news reported on a woman fired as a dental assistant because she was too beautiful (she was too much of a temptation for the married dentist).

Imagine that you're her replacement. "Well, you're certainly qualified and you're ugly. You're hired.

Ouch.

Years ago when I was a software manager, I worked for a boss that told me never to hire a beautiful secretary. Why? Because a beautiful one would leave the job quickly (get pregnant or whatever).

-- Thomas Bulkowski

Top


Thursday 12/20/12. Trading Thursday: Nasdaq

The index dropped by -0.3% or -10.17 points. Since 02/05/1971 the index made 433 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 225 occasions.
     Average loss was -0.9% on 208 occasions.
Expect the index to close higher 52.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 28/48 or 58.3% of the time.
     The prediction of the index closing lower has been right 16/31 or 51.6% 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.

Depending on how drunk you are, the ABC pattern can be a weird looking head-and-shoulders top or a double top (peaks A and B join to form one peak). The patterns become valid when the index closes below the red line.

The height of the patterns can be used to set a target, which worked in this case. Apply the height to the value of the red line to get a target.

Judging by the daily chart, it looks to me like the index will have enough strength to close higher tomorrow. That agrees with the above probabilities, too.

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

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,739.06    
 Monthly S1  2,891.71  152.65   
 Weekly S2  2,943.06  51.35   
 Monthly Pivot  2,963.45  20.39   
 Weekly S1  2,993.71  30.26   
 Weekly Pivot  3,014.45  20.74   
 Daily S2  3,032.72  18.27   
 Daily S1  3,038.54  5.82   
 Close  3,044.36  5.82   
 Low  3,044.36  0.00   Yes! The Low is close to the Close.
 Daily Pivot  3,050.18  5.82   
 61.8% Down from Intraday High  3,051.03  0.85   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  3,053.09  2.06   
 38.2% Down from Intraday High  3,055.15  2.06   
 Daily R1  3,056.00  0.85   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Open  3,059.03  3.03   
 High  3,061.82  2.79   
 Weekly R1  3,065.10  3.28   
 Daily R2  3,067.64  2.54   
 Weekly R2  3,085.84  18.20   
 Monthly R1  3,116.10  30.26   
 Monthly R2  3,187.84  71.74   

Tuesday 12/18/12. Trading Tuesday: Dow

The index climbed by 0.8% or 100.38 points. Since 10/01/1928 the index made 542 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 299 occasions.
     Average loss was -0.7% on 243 occasions.
Expect the index to close higher 55.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 34/56 or 60.7% of the time.
     The prediction of the index closing lower has been right 13/19 or 68.4% 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 AD bottoms form a double bottom. That confirmed as a valid chart pattern when the index closed above the blue line. That left enough time for the index to climb to a target calculated by taking the height of the chart pattern and adding it to the top of the pattern.

The AB bottom is another larger double bottom that confirmed at C, which was too late to be of use. You could include bottom D to form a triple bottom pattern.

Judging by the daily charts, it appears the indices are moving up instead of down. This is perhaps due to the fiscal cliff turning into a speed bump rather than the Grand Canyon. I expect a higher close tomorrow and that agrees with the above probabilities.

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.

$ $ $

Yes, I had to work on my toilet again. It was dripping faster than I expected (about once a minute). More Teflon tape and tighter plastic nuts and it stopped the leaks. Thank goodness. Did the thing flush properly? Nope. It still plugged up. See Sunday's post for more details.

-- 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  12,154.16    
 Monthly S1  12,694.77  540.62   
 Monthly Pivot  13,012.11  317.33   
 Weekly S2  13,016.78  4.68   Yes! The Weekly S2 is close to the Monthly Pivot.
 Daily S2  13,095.08  78.30   
 Weekly S1  13,126.09  31.00   
 Low  13,134.63  8.54   Yes! The Low is close to the Weekly S1.
 Open  13,135.17  0.54   Yes! The Open is close to the Low.
 Daily S1  13,165.24  30.07   
 61.8% Down from Intraday High  13,176.54  11.30   
 50% Down from Intraday High  13,189.48  12.95   
 38.2% Down from Intraday High  13,202.42  12.94   
 Daily Pivot  13,204.78  2.36   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Weekly Pivot  13,227.76  22.98   
 Close  13,235.39  7.63   Yes! The Close is close to the Weekly Pivot.
 High  13,244.33  8.94   Yes! The High is close to the Close.
 Daily R1  13,274.94  30.61   
 Daily R2  13,314.48  39.55   
 Weekly R1  13,337.07  22.58   
 Weekly R2  13,438.74  101.68   
 Monthly R1  13,552.72  113.98   
 Monthly R2  13,870.06  317.33   

Monday 12/17/12. 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, but it could be almost any of the major indices.

The index peaked and has back tracked for the last two days. I expect this trend to continue in the coming days. The decline should not be a steep one. As congress heads home for the holiday, the only thing the market can do is worry. That worrying will suppress up moves, I think.

Once congress builds a bridge across the fiscal cliff, then the markets will move up and probably at a good clip, providing capital gains treatment remains untouched. If congress deletes or tinkers with cap gains treatment, expect the markets to plunge.

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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 14.75 points.
Tuesday: Up 78.56 points.
Wednesday: Down 2.99 points.
Thursday: Down 74.73 points.
Friday: Down 35.71 points.

For the Week...

The Dow industrials were down 20.12 points or 0.2%.
The Nasdaq composite was down 6.71 points or 0.2%.
The S&P 500 index was down 4.49 points or 0.3%.

Year to Date...

Dow Industrials
     3.9% down from the high of 13,661.87 on 10/05/2012.
     9.1% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     7.1% down from the high of 3,196.93 on 09/21/2012.
     13.1% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     4.1% down from the high of 1,474.51 on 09/14/2012.
     12.3% 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
Housing starts8:30 WB-Number of homes beginning construction.
Building permits8:30 WB-Measures building permits for new construction.
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.
Existing home sales10:00 ThCCounts sales of used homes.
Leading indicators10:00 ThD-Summary of already known reports.
Personal income & consumption8:30 FC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 FC+Covers durables, non-durables, and services.
Durable goods orders8:30 FBMeasures orders, shipments of goods with lifespans >3 years.
Michigan sentiment9:55 FB-Consumer sentiment: Measures strength of consumer spending.

Options Expiration

The following is courtesy of the Options Industry Council.

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

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

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Swing and Position Traders: Chart Pattern Indicator

As of 12/14/2012, the CPI had:

18 bearish patterns,
19 bullish patterns,
331 patterns waiting for breakout.
The CPI signal is 51.4%, 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  13,076  13,106  13,148  13,177  13,220 
Weekly  12,983  13,059  13,194  13,270  13,405 
Monthly  12,121  12,628  12,979  13,486  13,837 
S&P 500 (^GSPC): Daily  1,407  1,410  1,415  1,418  1,423 
Weekly  1,395  1,404  1,421  1,431  1,448 
Monthly  1,303  1,358  1,399  1,454  1,494 
Nasdaq (^IXIC): Daily  2,952  2,962  2,973  2,983  2,995 
Weekly  2,919  2,945  2,990  3,016  3,061 
Monthly  2,715  2,843  2,939  3,067  3,163 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week down 30.8%  The trend may continue.
 1 month up 52.2%  Expect a random direction.
 S & P 500 (^GSPC) 1 week down 30.8%  The trend may continue.
 1 month down 21.8%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 2 weeks down 23.1%  Expect a reversal soon.
 1 month down 27.6%  The trend may continue.

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

 Found Chart Pattern Name
19Pipe bottom
12Head-and-shoulders bottom
12Target price
9Triangle, symmetrical
6Broadening top, right-angled and descending
5Triangle, ascending
5Rectangle top
5Flag
4Double Bottom, Adam and Adam
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. Cement and Aggregates1. Cement and Aggregates
2. Homebuilding2. Homebuilding
3. Chemical (Specialty)3. Furn/Home Furnishings
4. Furn/Home Furnishings4. Chemical (Specialty)
5. Chemical (Basic)5. Building Materials
48. Electric Utility (Central)48. Electric Utility (West)
49. Shoe49. Semiconductor
50. Electric Utility (West)50. Computers and Peripherals
51. Computers and Peripherals51. Shoe
52. Electric Utility (East)52. Trucking/Transp. Leasing
53. Trucking/Transp. Leasing53. Electric Utility (East)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Sunday 12/16/12. Toilet Sunday

I've been having trouble with my 1.6 gallon toilet. It keeps getting plugged. Admittedly, I'm full of it, but come on! I cleaned the jets under the rim. They were unplugged anyway. I checked the jet at the bottom of the commode. It's a finger sized hole that shoots water to help the suction begin working. It was clean. I took my six foot snake and sent it through the toilet. No problem. And yet the thing kept backing up.

Ten years ago when I swapped out my 5 gallon toilet, I remember looking at the pipe that the toilet sits on and noticing the calcium build up nearly closing the pipe. That's what I thought was happening today (it had closed down or nearly so).

I thought I'd leave pulling off the toilet and checking the pipe for Christmas (it seemed fitting for some reason) but knew that if I got into trouble and needed parts, Home Depot would be closed.

So, I decided to operate on it today. I figured it would take about an hour.

The first problem came when trying to shut off the water. I turned it off at the house AND at the base of the toilet. I still got a trickle. I used a flower pot saucer to catch the water and scoop it into a bucket every few minutes while I hustled to pull off the toilet.

The toilet came off easily enough. Guess what? The pipe was clean. Not crystal clean, but it wasn't closed down like I thought. So I left it as is and started putting the toilet back on.

Picture of a flower.

I wanted to replace the plastic water feed into the toilet with a metal one. They still leak but are more durable (think steel banded rubber). I bought the wrong one, with a flange too small. So I went to home depot and bought a foot long pipe with a wider flange. Got home and it still wouldn't fit. The flange needed to be a flared one. Sigh. The rubber gasket that the tank sits on was also too thick to work. So I brought that back to HD and spoke to a plumber.

Turns out the gasket was fine, according to him, and I bought a new hose. That took another trip since I brought my wallet but didn't have my credit card in it since I walked there the first time and just threw the card into the dresser. Sigh.

Anyway, I installed the new pipe and it leaked. So I wrapped Teflon tape around one end and it didn't work. Then I figured out that the valve was leaking. When I opened the valve, it stopped leaking, oddly. Then I have a leak at the top end of the hose.

To make a long story short, I appear to have two leaks that are dripping water maybe one drop every ten minutes or so. If time doesn't heal it, I'll Teflon tape the top end and be forced to disassemble the valve on the bottom. That would be bad news.

It took about 3 hours to remove the toilet, reinstall it, and now have two leaks and a toilet that still won't flush properly. In other words, I have a situation that's worse than when I started. So much for Sunday...

-- Thomas Bulkowski

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Picture of my dog.

Saturday 12/15/12. Saturday Supplement

Yesterday I received a box of chocolates from Stocks & Commodities magazine. That was an unexpected and delightful surprise. I write for the magazine, mostly to share with readers some new research.

If you don't receive the magazine, consider buying a subscription. The full title is Technical Analysis of Stocks & Commodities and you can find more details at their website www.traders.com. It's worth the price.

And the chocolates were vodka stuffed cherries covered with chocolate. I didn't taste the vodka until I bit into the cherry. Yum. It's party time at my house.

I used to write for two other magazines, but all I got from them was a hassle.

$ $ $

My dad owned two rifles and I think I earned a Boy Scout merit badge for marksmanship. However, I wish the US would outlaw guns of all types to prevent thousands of dying each year by their use. Since the arcane interpretation of the US constitution allows guns, then let's do this. You can own a gun, but not the ammunition. Let's outlaw the ammo. That might cure the problem and be legal, too.

-- Thomas Bulkowski

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Thursday 12/13/12. Trading Thursday: Nasdaq

The index dropped by -0.3% or -8.49 points. Since 02/05/1971 the index made 432 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 225 occasions.
     Average loss was -0.9% on 207 occasions.
Expect the index to close higher 52.1% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 28/47 or 59.6% of the time.
     The prediction of the index closing lower has been right 16/31 or 51.6% 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.

Two chart patterns jumped out at me. A double bottom at A and B appears. The height of the pattern added to the value of the red line represents a target which was easily met today.

Point C does not invalidate the double bottom since the close is above the lower of the two bottoms.

A three falling peaks pattern appears at DEF. This confirms as a valid chart pattern when the index closes below the blue line. That line is drawn below the lowest price between the three peaks. Again, the height of the pattern subtracted from the blue line gives a target. The index met that target, too.

$ $ $

I searched my database looking for stocks to buy and found a few. The list is here. These are not top qualify picks. Rather, they are for long term holdings based on patterns shown on the weekly scale.

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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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,732.15    
 Monthly S1  2,872.98  140.83   
 Weekly S2  2,928.76  55.78   
 Monthly Pivot  2,951.63  22.87   
 Weekly S1  2,971.29  19.66   
 Daily S2  2,992.46  21.18   
 Weekly Pivot  3,000.78  8.32   
 Daily S1  3,003.14  2.35   Yes! The Daily S1 is close to the Weekly Pivot.
 Low  3,008.49  5.35   
 Close  3,013.81  5.32   
 61.8% Down from Intraday High  3,018.69  4.88   
 Daily Pivot  3,019.16  0.47   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  3,021.84  2.68   
 38.2% Down from Intraday High  3,024.99  3.15   
 Daily R1  3,029.84  4.85   
 Open  3,033.93  4.09   
 High  3,035.19  1.26   Yes! The High is close to the Open.
 Weekly R1  3,043.31  8.12   
 Daily R2  3,045.86  2.56   Yes! The Daily R2 is close to the Weekly R1.
 Weekly R2  3,072.80  26.94   
 Monthly R1  3,092.46  19.66   
 Monthly R2  3,171.11  78.65   

Tuesday 12/11/12. Trading Tuesday: Dow

The index climbed by 0.1% or 14.75 points. Since 10/01/1928 the index made 1215 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 621 occasions.
     Average loss was -0.7% on 594 occasions.
Expect the index to close higher 51.1% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 33/55 or 60.0% of the time.
     The prediction of the index closing lower has been right 13/19 or 68.4% 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 rectangle top appears mid-session. The breakout (a close outside one of the red lines) from this rectangle indicated whether a trader should go short or long. In this case, that meant shorting the index with a target setup by the height of the rectangle subtracted from the bottom red trendline.

That worked well in this case with the index easily reaching and exceeding the target.

Looking to Tuesday's close, the probabilities expect a higher close and I agree with that assessment. The index is on a straight line trend (daily chart), having recently broken out upward from a congestion area.

$ $ $

I finished my review of my romance novel, at least pass 16. I'm not kidding. I wrote the book 15 years ago and it's still screwed up. Sigh.

That frees up some time that I am dedicating to my website. I'll review the 550+ pages one at a time, and make improvements that no one but me will recognize. I plan to add new chart patterns to the mix, too, but first I want to finish the review. I've already added new charts to the three peaks and domed house page. That pattern was popular when it looked like the Dow was forming one.

As for the two crying DJs in Australia, I don't care how many tears they shed. A life was lost and they should lose their jobs, not just be suspended.

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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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  12,158.11    
 Monthly S1  12,664.00  505.88   
 Weekly S2  12,849.69  185.70   
 Monthly Pivot  12,977.37  127.68   
 Weekly S1  13,009.79  32.41   
 Weekly Pivot  13,083.53  73.75   
 Daily S2  13,111.83  28.30   
 Low  13,139.08  27.25   
 Daily S1  13,140.86  1.78   Yes! The Daily S1 is close to the Low.
 Open  13,154.89  14.03   
 61.8% Down from Intraday High  13,160.58  5.69   
 50% Down from Intraday High  13,167.21  6.64   
 Daily Pivot  13,168.10  0.89   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  13,169.88  1.78   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  13,173.85  3.97   Yes! The 38.2% Down from Intraday High is close to the Close.
 High  13,195.35  21.50   
 Daily R1  13,197.13  1.78   Yes! The Daily R1 is close to the High.
 Daily R2  13,224.37  27.25   
 Weekly R1  13,243.63  19.25   
 Weekly R2  13,317.37  73.75   
 Monthly R1  13,483.26  165.88   
 Monthly R2  13,796.63  313.38   

Monday 12/10/12. Market Monday: The Week Ahead

My Prediction

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

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

To the right of the vertical blue line is a mirror of the left part. Look at A and B. Those two consolidation regions seem to mirror themselves around the plunge in November.

So, I copied the prior movement and reflected it across the line. This technique works a surprising amount of time. At the very least, it gives you an idea of what the index might do.

I think the index will continue to move higher, perhaps following the path outlined in the chart. It won't be exact and the candle colors are incorrect, but who knows?

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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 59.98 points.
Tuesday: Down 13.82 points.
Wednesday: Up 82.71 points.
Thursday: Up 39.55 points.
Friday: Up 81.09 points.

For the Week...

The Dow industrials were up 129.55 points or 1.0%.
The Nasdaq composite was down 32.2 points or 1.1%.
The S&P 500 index was up 1.89 points or 0.1%.

Year to Date...

Dow Industrials
     3.7% down from the high of 13,661.87 on 10/05/2012.
     9.3% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     6.8% down from the high of 3,196.93 on 09/21/2012.
     13.4% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     3.8% down from the high of 1,474.51 on 09/14/2012.
     12.6% 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
Trade balance8:30 TC+Signals balance of exports & imports.
Wholesale inventories10:00 TD-Wholesale sales and inventory statistics.
International trade8:30 WC+Import/export prices, trade balance. US economy vs others.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Rate decision12:30 W?The Federal Reserves reports on interest rate changes.
Treasury budget2:00 WDTracks budget deficit. Important in April (tax filing).
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Retail sales8:30 ThA-Reports total retail sales (not services). Are people spending?
Producer price index8:30 ThB-Measures wholesale goods cost. An indication of future inflation.
Business inventories10:00 ThC-Reports manufacturing, wholesale, retail inventories.
Consumer price index8:30 FB+Inflation report. Measures cost of goods and services.
Industrial production9:15 FB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 FB-Gauges economic activity, hints of inflation.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 12/07/2012, the CPI had:

4 bearish patterns,
31 bullish patterns,
331 patterns waiting for breakout.
The CPI signal is 88.6%, 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  13,044  13,100  13,128  13,184  13,213 
Weekly  12,845  13,000  13,079  13,234  13,312 
Monthly  12,153  12,654  12,972  13,473  13,792 
S&P 500 (^GSPC): Daily  1,407  1,413  1,416  1,422  1,426 
Weekly  1,388  1,403  1,413  1,428  1,439 
Monthly  1,308  1,363  1,398  1,453  1,488 
Nasdaq (^IXIC): Daily  2,949  2,963  2,983  2,998  3,018 
Weekly  2,917  2,947  2,989  3,019  3,061 
Monthly  2,720  2,849  2,940  3,069  3,159 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 3 weeks up 21.7%  Expect a reversal soon.
 1 month up 52.2%  Expect a random direction.
 S & P 500 (^GSPC) 3 weeks up 21.0%  Expect a reversal soon.
 2 months up 40.1%  Expect a random direction.
 Nasdaq composite (^IXIC) 1 week down 34.3%  The trend may continue.
 1 month down 27.6%  The trend may continue.

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

 Found Chart Pattern Name
19Pipe bottom
7Head-and-shoulders bottom
7Rectangle top
7Channel
6Triangle, symmetrical
5Double Bottom, Adam and Adam
5Broadening top, right-angled and descending
5Flag
5Target price
3Head-and-shoulders 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. Do to a production problem (my mistake) last week's portion is incorrect and I'm too lazy to fix it.

This WeekLast Week
1. Cement and Aggregates1. Cement and Aggregates
2. Homebuilding2. Homebuilding
3. Furn/Home Furnishings3. Furn/Home Furnishings
4. Chemical (Specialty)4. Chemical (Specialty)
5. Building Materials5. Building Materials
48. Electric Utility (West)48. Electric Utility (West)
49. Semiconductor49. Semiconductor
50. Computers and Peripherals50. Computers and Peripherals
51. Shoe51. Shoe
52. Trucking/Transp. Leasing52. Trucking/Transp. Leasing
53. Electric Utility (East)53. Electric Utility (East)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 12/8/12. Saturday Supplement

According to published reports (http://www.bbc.co.uk/news/uk-20645838), Jacintha Saldanha committed suicide. The reason for her suicide is unknown, but she was one of the nurses involved in receiving a prank phone call from radio station DJs in Australia. She did not disclose medical information, she only answered the call and transferred it to another nurse.

The two DJs "will not return to their show until further notice out of respect for Mrs Saldanha."

I think the DJs should be fired by the radio station, and I'm surprised that they weren't. An apology, in my view, does not atone for causing or contributing to the death of another.

-- Thomas Bulkowski


Thursday 12/6/12. Trading Thursday: Nasdaq

The index dropped by -0.8% or -22.99 points. Since 02/05/1971 the index made 222 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 107 occasions.
     Average loss was -1.4% on 115 occasions.
Expect the index to close lower 51.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 28/47 or 59.6% of the time.
     The prediction of the index closing lower has been right 16/30 or 53.3% 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 head-and-shoulders top appears midway through the session. This confirms when the index closes below the neckline, which is shown as a red line connecting the two armpits.

The pattern performed well, meaning that the measure rule predicted a target and the index hit it. The measure rule uses the height of the pattern from the head measured vertically to the neckline directly below. Apply that value to the breakout price (where price closes below the neckline).

Looking to Thursday's close, the index has bounced off overhead resistance and is now heading lower. However, I think that much of today's drop is because of a big drop in Apple. If that stock recovers tomorrow, then the index should follow and close higher. However, the probabilities say the index should close lower.

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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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,716.40    
 Monthly S1  2,845.05  128.65   
 Weekly S2  2,894.29  49.24   
 Weekly S1  2,933.99  39.71   
 Daily S2  2,939.09  5.10   
 Monthly Pivot  2,939.45  0.36   Yes! The Monthly Pivot is close to the Daily S2.
 Daily S1  2,956.40  16.95   
 Low  2,958.26  1.86   Yes! The Low is close to the Daily S1.
 61.8% Down from Intraday High  2,972.19  13.93   
 Close  2,973.70  1.51   Yes! The Close is close to the 61.8% Down from Intraday High.
 Daily Pivot  2,975.56  1.86   Yes! The Daily Pivot is close to the Close.
 Weekly Pivot  2,975.59  0.02   Yes! The Weekly Pivot is close to the Daily Pivot.
 50% Down from Intraday High  2,976.50  0.91   Yes! The 50% Down from Intraday High is close to the Weekly Pivot.
 38.2% Down from Intraday High  2,980.80  4.30   
 Daily R1  2,992.87  12.07   
 Open  2,993.20  0.33   Yes! The Open is close to the Daily R1.
 High  2,994.73  1.53   Yes! The High is close to the Open.
 Daily R2  3,012.03  17.30   
 Weekly R1  3,015.29  3.26   Yes! The Weekly R1 is close to the Daily R2.
 Weekly R2  3,056.89  41.59   
 Monthly R1  3,068.10  11.21   
 Monthly R2  3,162.50  94.40   

Tuesday 12/4/12. Trading Tuesday: Dow

The index dropped by -0.5% or -59.98 points. Since 10/01/1928 the index made 712 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 358 occasions.
Expect the index to close lower 50.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 33/55 or 60.0% of the time.
     The prediction of the index closing lower has been right 12/18 or 66.7% 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.

The picture doesn't show any useful patterns to trade. That's the first time it's happened since I started reporting on the Dow in these pages.

On the 10-day, 5 minute scale, the index is resting on support but I don't give the intraday scales much credence when looking for support and resistance levels. The daily charts are much better.

The daily chart shows the index bumping up against overhead resistance at 13,100. Thus, I expect the index to close lower on Tuesday. That agrees with the probabilities.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the 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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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  12,090.02    
 Monthly S1  12,527.81  437.79   
 Weekly S2  12,633.92  106.11   
 Weekly S1  12,799.76  165.84   
 Daily S2  12,876.21  76.45   
 Monthly Pivot  12,909.28  33.07   
 Daily S1  12,920.91  11.63   Yes! The Daily S1 is close to the Monthly Pivot.
 Weekly Pivot  12,931.16  10.25   Yes! The Weekly Pivot is close to the Daily S1.
 Low  12,959.42  28.26   
 Close  12,965.60  6.18   Yes! The Close is close to the Low.
 Daily Pivot  13,004.11  38.51   
 61.8% Down from Intraday High  13,008.28  4.16   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  13,023.37  15.09   
 Open  13,027.73  4.36   Yes! The Open is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  13,038.46  10.73   Yes! The 38.2% Down from Intraday High is close to the Open.
 Daily R1  13,048.81  10.34   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 High  13,087.32  38.51   
 Weekly R1  13,097.00  9.68   Yes! The Weekly R1 is close to the High.
 Daily R2  13,132.01  35.01   
 Weekly R2  13,228.40  96.39   
 Monthly R1  13,347.07  118.67   
 Monthly R2  13,728.54  381.47   

Monday 12/3/12. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq composite on the daily scale.

So much in technical analysis and probabilities is not black and white, yes and no. It is shades of gray. I'm not talking about a book or a movie.

Look at the chart. I show a series of horizontal red lines. Those lines are resistance areas, or what I believe is overhead resistance. As the index rises, it may or may not stop at one of those lines.

It may choose to stop between the lines. We won't know where the index will stop until after it does.

The idea of support and resistance is that the more touches near the same line, the more powerful it becomes. I tested that and proved it was true. The bottom red line has four touches. It should be stronger than a resistance area that has only two touches. But we won't know for sure until after it happens.

In the coming days or even weeks, I expect resistance at one of the lines but I could be wrong.

The circled area is another congestion region that should show support or resistance. The top of that area touches the bottom red line. Will the index turn there? Maybe. Maybe not. We'll see.

$ $ $

On Saturday, I met with my writing group (I'm the president) and I asked them to critique a chapter from my romance novel. One talented and published romance author grabbed onto a word choice like a Pit Bull. In a 100,000 word manuscript, she objects to the use of one word ('Inimical'). Sigh. Yes, it's an unusual word choice but I did it for a reason. I want you to remember that "Mr. Inimical Eyes" is the guy that tried choked the heroine in chapter 1. I could have said "Mr. Evil Eyes" but that's more pedestrian (common). Would you remember that I'm referring to the guy in ch 1? Maybe. Maybe not.

I lost two hours of sleep worrying about this. Can you believe that? I can gain or lose big bucks on some days (usually when the Dow drops 400 points or something big like that) and that doesn't bother me. But a word choice? Yup. The things my mind chooses to worry about...Go figure.

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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 42.31 points.
Tuesday: Down 89.24 points.
Wednesday: Up 106.98 points.
Thursday: Up 36.71 points.
Friday: Up 3.76 points.

For the Week...

The Dow industrials were up 15.9 points or 0.1%.
The Nasdaq composite was up 43.39 points or 1.5%.
The S&P 500 index was up 7.03 points or 0.5%.

Year to Date...

Dow Industrials
     4.7% down from the high of 13,661.87 on 10/05/2012.
     8.2% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     5.8% down from the high of 3,196.93 on 09/21/2012.
     14.6% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     4.0% down from the high of 1,474.51 on 09/14/2012.
     12.5% 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
Construction spending10:00 MDCovers residential/non-residential/public spending on new construction.
Auto & truck sales2:00 MC-Monthly sales of domestically produced vehicles.
Productivity & costs8:30 WD+Cost of producing a unit of output.
Factory orders10:00 WD+Durable/non-durable goods orders w/factory inventories.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Consumer credit3:00 FD-Measures auto, credit card and other debt.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 11/30/2012, the CPI had:

3 bearish patterns,
32 bullish patterns,
249 patterns waiting for breakout.
The CPI signal is 91.4%, 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  12,958  12,992  13,023  13,057  13,088 
Weekly  12,654  12,840  12,951  13,137  13,248 
Monthly  12,110  12,568  12,929  13,387  13,749 
S&P 500 (^GSPC): Daily  1,408  1,412  1,416  1,419  1,423 
Weekly  1,373  1,395  1,407  1,429  1,441 
Monthly  1,307  1,362  1,398  1,453  1,489 
Nasdaq (^IXIC): Daily  2,994  3,002  3,008  3,016  3,023 
Weekly  2,906  2,958  2,988  3,040  3,069 
Monthly  2,729  2,869  2,952  3,092  3,175 
  • 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 up 29.6%  The trend may continue.
 2 months down 11.9%  Expect a reversal soon.
 S & P 500 (^GSPC) 2 weeks up 28.9%  The trend may continue.
 1 month up 53.7%  Expect a random direction.
 Nasdaq composite (^IXIC) 2 weeks up 27.0%  The trend may continue.
 1 month up 47.9%  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 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: bearish.
Dow Utilities: bearish.

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Earnings, Chart Patterns & Industries

Earnings season is over.

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

 Found Chart Pattern Name
15Pipe top
15Pipe bottom
13Head-and-shoulders top
7Head-and-shoulders bottom
7Rectangle top
6Channel
6Triple top
5Target price
5Triangle, symmetrical
4Broadening top, right-angled and descending

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

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

 

 

 

 

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

This WeekLast Week
1. Cement and Aggregates1. Cement and Aggregates
2. Homebuilding2. Homebuilding
3. Building Materials3. Chemical (Specialty)
4. Chemical (Specialty)4. Building Materials
5. Petroleum (Integrated)5. Chemical (Basic)
48. Electric Utility (East)48. Semiconductor
49. Trucking/Transp. Leasing49. Electric Utility (East)
50. Shoe50. Shoe
51. Short ETFs51. Short ETFs

-- Thomas Bulkowski

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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.