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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
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 11/21/2017
23,591 160.50 0.7%
9,615 92.77 1.0%
758 2.01 0.3%
6,862 71.77 1.1%
2,599 16.89 0.7%
YTD
19.4%
6.3%
14.9%
27.5%
16.1%
Tom's Targets    Overview: 11/14/2017
23,700 or 22,800 by 12/01/2017
9,300 or 9,800 by 12/01/2017
800 or 750 by 12/01/2017
7,000 or 6,500 by 12/01/2017
2,625 or 2,540 by 12/01/2017

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January 2012 Headlines


Archives


Tuesday 1/31/12. Trading Tuesday: Dow

The index dropped by -0.1% or -6.74 points. Since 10/01/1928 the index made 1194 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 617 occasions.
     Average loss was -0.8% on 577 occasions.
Expect the index to close higher 51.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 18/27 or 66.7% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

Early in the session, the index formed a V-bottom chart pattern (blue lines). How do you trade those? I have no idea.

Later in the session, a double bottom appeared with bottoms at A and B. This was not a reversal commonly associated with double bottoms, but it acted as a continuation pattern. I don't much care for those, but when price closed above the top line and confirmed it, money could be made. Take a position and sell at the measure rule target (briefly, measure the height, add it to the top of the pattern for a target).

For tomorrow (Tuesday), I think the index will close lower. Why? If you look from Thursday on, you'll see a measured move down chart pattern. When price finishes those, it often retraces to the corrective phase, which the index has. Thus, I look for the downward move to resume. The numbers above say I'm wrong, that the index will close higher tomorrow. It's been right two out of three times, so keep that in mind.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,843.50    
 Monthly S1  12,248.61  405.11   
 Weekly S2  12,430.10  181.49   
 Daily S2  12,484.24  54.14   
 Low  12,529.41  45.17   
 Weekly S1  12,541.91  12.50   Yes! The Weekly S1 is close to the Low.
 Monthly Pivot  12,545.28  3.37   Yes! The Monthly Pivot is close to the Weekly S1.
 Daily S1  12,568.98  23.70   
 61.8% Down from Intraday High  12,579.04  10.05   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  12,594.37  15.33   
 38.2% Down from Intraday High  12,609.69  15.33   
 Daily Pivot  12,614.15  4.46   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  12,653.72  39.57   
 Open  12,659.17  5.45   Yes! The Open is close to the Close.
 High  12,659.32  0.15   Yes! The High is close to the Open.
 Weekly Pivot  12,691.93  32.61   
 Daily R1  12,698.89  6.96   Yes! The Daily R1 is close to the Weekly Pivot.
 Daily R2  12,744.06  45.17   
 Weekly R1  12,803.74  59.68   
 Monthly R1  12,950.39  146.65   
 Weekly R2  12,953.76  3.37   Yes! The Weekly R2 is close to the Monthly R1.
 Monthly R2  13,247.06  293.30   

Monday 1/30/12. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq composite on the weekly scale.

I am still looking for the indices to turn down. The chart shows the Nasdaq composite on the weekly scale.

I drew two horizontal red lines connecting peaks and continuing to the right. They represent overhead resistance.

I expect that when the composite rises to meet those lines, it will turn down. It could sail right through them, of course or it could pause for a few weeks and then resume the uphill run. That is a distinct possibility.

I drew a green line down from the prior peak around this time and you can see how the index dropped for several weeks. I expect that to happen this time, too.

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 11.66 points.
Tuesday: Down 33.07 points.
Wednesday: Up 81.21 points.
Thursday: Down 22.33 points.
Friday: Down 74.17 points.

For the Week...

The Dow industrials were down 60.02 points or 0.5%.
The Nasdaq composite was up 29.85 points or 1.1%.
The S&P 500 index was up 0.95 points or 0.1%.

Year to Date...

Dow Industrials
     1.4% down from the high of 12,841.95 on 01/26/2012.
     3.6% up from the low of 12,221.19 on 01/03/2012.
Nasdaq
     0.6% down from the high of 2,834.30 on 01/26/2012.
     7.2% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     1.3% down from the high of 1,333.47 on 01/26/2012.
     4.6% 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
Personal income & consumption8:30 MC+Measures sources of income to predict future demand.
Chicago purchasing managers index9:45 TBMonitors regional manufacturing activity.
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Construction spending10:00 WDCovers residential/non-residential/public spending on new construction.
Crude inventories10:30 W?My guess: Measures oil inventory.
Auto & truck sales2:00 WC-Monthly sales of domestically produced vehicles.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Productivity & costs8:30 ThD+Cost of producing a unit of output.
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 01/27/2012, the CPI had:

5 bearish patterns,
36 bullish patterns,
233 patterns waiting for breakout.
The CPI signal is 87.8%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  12,572  12,616  12,675  12,719  12,778 
Weekly  12,432  12,546  12,694  12,808  12,956 
Monthly  11,846  12,253  12,548  12,955  13,249 
S&P 500 (^GSPC): Daily  1,308  1,312  1,316  1,320  1,324 
Weekly  1,291  1,304  1,319  1,331  1,346 
Monthly  1,215  1,265  1,299  1,350  1,384 
Nasdaq (^IXIC): Daily  2,787  2,802  2,812  2,826  2,836 
Weekly  2,738  2,777  2,806  2,845  2,874 
Monthly  2,498  2,658  2,746  2,905  2,993 
  • 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 30.6%  The trend may continue.
 4 months up 15.6%  Expect a reversal soon.
 S & P 500 (^GSPC) 4 weeks up 14.4%  Expect a reversal soon.
 2 months up 38.9%  The trend may continue.
 Nasdaq composite (^IXIC) 4 weeks up 12.4%  Expect a reversal soon.
 1 month up 47.2%  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: bearish.
S&P 500 Index: bearish.
Dow Transports: bearish.
Dow Utilities: bullish.

Top

Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
43Triangle, symmetrical
18Triangle, ascending
15Rising wedge
10Triangle, descending
10Head-and-shoulders bottom
10Flag, high and tight
9Pipe bottom
4Dead-cat bounce
3Triple bottom
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. Retail Building Supply1. Retail Building Supply
2. Semiconductor Cap Equip.2. Semiconductor Cap Equip.
3. Homebuilding3. Chemical (Specialty)
4. Chemical (Specialty)4. Aerospace/Defense
5. Chemical (Basic)5. Homebuilding
48. Oilfield Svcs/Equipment48. Precision Instrument
49. Securities Brokerage49. Securities Brokerage
50. Natural Gas (Diversified)50. Oilfield Svcs/Equipment
51. Short ETFs51. Natural Gas (Diversified)
52. Coal52. Coal

-- Thomas Bulkowski

Top


Thursday 1/26/12. Trading Thursday: Nasdaq

The index climbed by 1.1% or 31.67 points. Since 02/05/1971 the index made 154 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 100 occasions.
     Average loss was -1.2% on 54 occasions.
Look for the index to close higher 64.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 12/18 or 66.7% of the time.
     The prediction of the index closing lower has been right 7/14 or 50.0% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

A double bottom (AB) appears early in the session, soon enough to take advantage of. The pattern confirmed when the index closed above the top of the chart pattern (at C, above the horizontal red line). The measure rule, which is often so effective when determining when to take profits in day trades, was too conservative as the index soared.

Looking forward, I expect the index to close higher tomorrow despite my expecting a retrace longer term.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,434.55    
 Monthly S1  2,626.43  191.88   
 Weekly S2  2,705.24  78.81   
 Monthly Pivot  2,709.89  4.65   
 Weekly S1  2,761.78  51.89   
 Daily S2  2,776.18  14.40   
 Weekly Pivot  2,777.56  1.39   Yes! The Weekly Pivot is close to the Daily S2.
 Low  2,788.95  11.39   
 Daily S1  2,797.24  8.29   
 61.8% Down from Intraday High  2,801.88  4.63   
 Open  2,803.23  1.35   Yes! The Open is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  2,805.87  2.64   Yes! The 50% Down from Intraday High is close to the Open.
 38.2% Down from Intraday High  2,809.86  3.99   
 Daily Pivot  2,810.02  0.15   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  2,818.31  8.29   
 High  2,822.79  4.48   
 Daily R1  2,831.08  8.29   
 Weekly R1  2,834.10  3.01   Yes! The Weekly R1 is close to the Daily R1.
 Daily R2  2,843.86  9.76   
 Weekly R2  2,849.88  6.03   
 Monthly R1  2,901.77  51.89   
 Monthly R2  2,985.23  83.46   

Tuesday 1/24/12. Trading Tuesday: Dow

The index dropped by -0.1% or -11.66 points. Since 10/01/1928 the index made 1193 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 617 occasions.
     Average loss was -0.8% on 576 occasions.
Look for the index to close higher 51.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 18/26 or 69.2% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

The chart shows what I call an ugly double bottom, geared to day traders, at AB. That is a double bottom except that the right bottom is higher than the left. For daily price data, I require at least a 5% difference but for intraday data, unequal bottoms is fine.

The pattern confirms when price closes above the top at C. A throwback took price back down further than I expected but it recovered by day's end.

Looking ahead, the numbers above do not provide a rousing endorsement. Looking longer term, I think the indices will retrace their gains so I flipped most of my targets. The Dow, I think, will head down as well. Look for a lower close but recognize the numbers say it will close higher. One of us will be wrong.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,402.87    
 Monthly S1  12,055.85  652.97   
 Weekly S2  12,320.11  264.27   
 Monthly Pivot  12,388.16  68.05   
 Weekly S1  12,514.47  126.30   
 Daily S2  12,614.39  99.92   
 Weekly Pivot  12,617.47  3.09   Yes! The Weekly Pivot is close to the Daily S2.
 Daily S1  12,661.60  44.13   
 Low  12,665.83  4.23   Yes! The Low is close to the Daily S1.
 61.8% Down from Intraday High  12,703.52  37.69   
 Close  12,708.82  5.30   Yes! The Close is close to the 61.8% Down from Intraday High.
 Daily Pivot  12,713.05  4.23   Yes! The Daily Pivot is close to the Close.
 50% Down from Intraday High  12,715.16  2.11   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 Open  12,720.25  5.09   Yes! The Open is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  12,726.80  6.55   Yes! The 38.2% Down from Intraday High is close to the Open.
 Daily R1  12,760.26  33.46   
 High  12,764.49  4.23   Yes! The High is close to the Daily R1.
 Daily R2  12,811.71  47.22   
 Weekly R1  12,811.83  0.12   Yes! The Weekly R1 is close to the Daily R2.
 Weekly R2  12,914.83  103.01   
 Monthly R1  13,041.14  126.30   
 Monthly R2  13,373.45  332.32   

Monday 1/23/12. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

I show the Dow industrials on the daily scale.

The index has made a rising wedge chart pattern (AB), but price has broken out upward from it. Usually, the breakout is downward 69% of the time.

It is one of the worst performing chart patterns, so even if price were to reverse, it would be doubtful that it would hit the measure rule target. In this case, that means the bottom of the chart pattern.

Perhaps that is disingenuous because the rising wedge tends to be tall compared to many other types of chart patterns.

What does this pattern say about the future?

Looking at the longer term chart, the index it bumping up against overhead resistance at 12,800. Since price has been trending for weeks now, my guess is that the index will begin a retrace, perhaps dropping back to 12,200 (support setup by peaks starting in late October, shown as a blue line at C).

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.

Tuesday: Up 60.01 points.
Wednesday: Up 96.88 points.
Thursday: Up 45.03 points.
Friday: Up 96.5 points.
Saturday: Holiday or other weird event!

For the Week...

The Dow industrials were up 298.42 points or 2.4%.
The Nasdaq composite was up 76.03 points or 2.8%.
The S&P 500 index was up 26.29 points or 2.0%.

Year to Date...

Dow Industrials
     0.0% down from the high of 12,720.48 on 01/20/2012.
     4.1% up from the low of 12,221.19 on 01/03/2012.
Nasdaq
     0.2% down from the high of 2,793.35 on 01/19/2012.
     6.1% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     0.0% down from the high of 1,315.49 on 01/19/2012.
     4.5% 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
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Rate decision12:30 W?The Federal Reserves reports on interest rate changes.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Durable goods orders8:30 ThBMeasures orders, shipments of goods with lifespans >3 years.
New home sales10:00 ThC+Shows sales of single-family homes.
Leading indicators10:00 ThD-Summary of already known reports.
Gross domestic product8:30 FBMeasures economic activity; GDP deflator measures inflation.
Michigan sentiment9:55 FB-Consumer sentiment: Measures strength of consumer spending.

Options Expiration

No options expire this week.

Top

Swing and Position Traders: Chart Pattern Indicator

As of 01/20/2012, the CPI had:

1 bearish patterns,
26 bullish patterns,
269 patterns waiting for breakout.
The CPI signal is 96.3%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  12,588  12,654  12,687  12,754  12,787 
Weekly  12,324  12,522  12,621  12,820  12,919 
Monthly  11,407  12,064  12,392  13,049  13,377 
S&P 500 (^GSPC): Daily  1,307  1,311  1,313  1,317  1,320 
Weekly  1,282  1,299  1,307  1,324  1,332 
Monthly  1,165  1,240  1,278  1,353  1,391 
Nasdaq (^IXIC): Daily  2,772  2,779  2,783  2,791  2,795 
Weekly  2,695  2,741  2,767  2,813  2,839 
Monthly  2,424  2,605  2,699  2,881  2,975 
  • 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) 3 weeks up 22.5%  Expect a reversal soon.
 4 months up 15.6%  Expect a reversal soon.
 S & P 500 (^GSPC) 3 weeks up 19.8%  Expect a reversal soon.
 2 months up 38.9%  The trend may continue.
 Nasdaq composite (^IXIC) 3 weeks up 17.7%  Expect a reversal soon.
 1 month up 47.2%  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: bearish.
S&P 500 Index: bearish.
Dow Transports: bearish.
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
44Triangle, symmetrical
18Triangle, ascending
14Rising wedge
12Head-and-shoulders bottom
10Triangle, descending
6Pipe bottom
6Flag, high and tight
3Dead-cat bounce
2Triple bottom
2Flag

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. Retail Building Supply1. Retail Building Supply
2. Semiconductor Cap Equip.2. Electric Utility (Central)
3. Chemical (Specialty)3. Household Products
4. Aerospace/Defense4. Chemical (Basic)
5. Homebuilding5. Homebuilding
48. Precision Instrument48. Short ETFs
49. Securities Brokerage49. Investment Co. (Foreign)
50. Oilfield Svcs/Equipment50. Oilfield Svcs/Equipment
51. Natural Gas (Diversified)51. Securities Brokerage
52. Coal52. Coal

-- Thomas Bulkowski

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Thursday 1/19/12. Trading Thursday: Nasdaq

The index climbed by 1.5% or 41.63 points. Since 02/05/1971 the index made 93 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 57 occasions.
     Average loss was -1.4% on 36 occasions.
Look for the index to close higher 61.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 11/17 or 64.7% of the time.
     The prediction of the index closing lower has been right 7/14 or 50.0% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

A rectangle top (A) appears early enough in the session to be a money maker for those that saw it.

One unique aspect of this rectangle is how the velocity ($/time) leading to the chart pattern is the same or nearly so on the exit (the slope of trendline B versus C). I see this from time to time. In fact, I studied it and found that it is true, even if the trend reverses (from up to down or down to up). Thus, you can look for a steep move into a chart pattern and expect a steep one after.

What will happen tomorrow, Thursday? The slope of the trend is slow enough that I think it has legs, meaning I expect a higher close tomorrow. The longer term trend over the last 10 days also shows the price moving up following a trendline with slope that is just right (not too steep or shallow).

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,462.96    
 Monthly S1  2,616.34  153.37   
 Weekly S2  2,656.23  39.89   
 Monthly Pivot  2,671.38  15.15   
 Weekly S1  2,712.97  41.59   
 Daily S2  2,716.83  3.86   Yes! The Daily S2 is close to the Weekly S1.
 Weekly Pivot  2,719.70  2.87   Yes! The Weekly Pivot is close to the Daily S2.
 Low  2,730.05  10.35   
 Open  2,731.16  1.11   Yes! The Open is close to the Low.
 Daily S1  2,743.27  12.11   
 61.8% Down from Intraday High  2,745.20  1.93   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  2,749.88  4.68   
 38.2% Down from Intraday High  2,754.56  4.68   
 Daily Pivot  2,756.49  1.93   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  2,769.71  13.22   
 High  2,769.71  0.00   Yes! The High is close to the Close.
 Weekly R1  2,776.44  6.73   
 Daily R1  2,782.93  6.49   
 Weekly R2  2,783.17  0.24   Yes! The Weekly R2 is close to the Daily R1.
 Daily R2  2,796.15  12.98   
 Monthly R1  2,824.76  28.61   
 Monthly R2  2,879.80  55.05   

Tuesday 1/17/12. Market Monday on Tuesday: The Week Ahead

My Prediction

Picture of the Nasdaq composite on the daily scale.

I show a symmetrical triangle on the daily chart of the Nasdaq composite.

Notice that the apex of the triangle lines up with Friday's price bar. I show that as a green line that overwrites the bar. Sorry about that.

What is important is that when price aligns with the apex like that shown, there is a 60% chance that the index has hit a minor high. Thus, I expect that the Nasdaq will retrace this week.

How far will it drop? Probably 38% of the rise since the December low, but it could drop further.

 

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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 32.77 points.
Tuesday: Up 69.78 points.
Wednesday: Down 13.02 points.
Thursday: Up 21.57 points.
Friday: Down 48.96 points.

For the Week...

The Dow industrials were up 62.14 points or 0.5%.
The Nasdaq composite was up 36.45 points or 1.4%.
The S&P 500 index was up 11.28 points or 0.9%.

Year to Date...

Dow Industrials
     0.7% down from the high of 12,514.69 on 01/10/2012.
     1.6% up from the low of 12,221.19 on 01/03/2012.
Nasdaq
     0.6% down from the high of 2,726.43 on 01/12/2012.
     3.2% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     0.6% down from the high of 1,296.82 on 01/12/2012.
     2.4% 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
Producer price index8:30 WB-Measures wholesale goods cost. An indication of future inflation.
Industrial production9:15 WB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 WB-Gauges economic activity, hints of inflation.
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.
Housing starts8:30 ThB-Number of homes beginning construction.
Building permits8:30 ThB-Measures building permits for new construction.
Crude inventories11:00 Th?My guess: Measures oil inventory.
Existing home sales10:00 FCCounts sales of used homes.

Options Expiration

The following is courtesy of the Options Industry Council.

OptionDate
VIX expiresWednesday
A.M. settled index options cease trading.Thursday
Expiring equity, P.M. settled index options and treasury/interest rate options classes 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

On 01/13/2012, the chart pattern indicator (CPI) had:

20 bearish patterns,
5 bullish patterns,
260 patterns waiting for breakout.
The CPI signal is 20.0%, which is bearish (<= 35%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  12,243  12,333  12,401  12,491  12,560 
Weekly  12,213  12,318  12,416  12,521  12,619 
Monthly  11,444  11,933  12,224  12,713  13,003 
S&P 500 (^GSPC): Daily  1,270  1,280  1,287  1,297  1,304 
Weekly  1,265  1,277  1,287  1,299  1,309 
Monthly  1,168  1,229  1,263  1,323  1,357 
Nasdaq (^IXIC): Daily  2,681  2,696  2,704  2,719  2,728 
Weekly  2,637  2,674  2,700  2,737  2,763 
Monthly  2,443  2,577  2,652  2,785  2,860 
  • 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 30.5%  The trend may continue.
 4 months up 15.6%  Expect a reversal soon.
 S & P 500 (^GSPC) 2 weeks up 28.4%  The trend may continue.
 2 months up 38.9%  The trend may continue.
 Nasdaq composite (^IXIC) 2 weeks up 25.2%  The trend may continue.
 1 month up 47.2%  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: bearish.
S&P 500 Index: bearish.
Dow Transports: bearish.
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
91Pipe bottom
45Triangle, symmetrical
15Triangle, ascending
13Head-and-shoulders bottom
9Rising wedge
8Triangle, descending
4Double Bottom, Adam and Eve
3Dead-cat bounce
3Double Top, Eve and Eve
2Broadening 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. Retail Building Supply1. Electric Utility (Central)
2. Electric Utility (Central)2. Household Products
3. Household Products3. Electric Utility (West)
4. Chemical (Basic)4. Retail Building Supply
5. Homebuilding5. Electric Utility (East)
48. Short ETFs48. Human Resources
49. Investment Co. (Foreign)49. Precision Instrument
50. Oilfield Svcs/Equipment50. Telecom. Equipment
51. Securities Brokerage51. Securities Brokerage
52. Coal52. Coal

-- Thomas Bulkowski

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Thursday 1/12/12. Trading Thursday: Nasdaq

The index climbed by 0.3% or 8.26 points. Since 02/05/1971 the index made 547 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 303 occasions.
     Average loss was -0.7% on 244 occasions.
Look for the index to close higher 55.4% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 10/16 or 62.5% of the time.
     The prediction of the index closing lower has been right 7/14 or 50.0% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

A symmetrical triangle appears early in the afternoon. At A it closes above the top trendline, staging an upward breakout. At B, the index throws back, which happens about half the time and then the index resumes the upward move.

This triangle would make for a good trade providing you could ride out the throwback and exited when price peaked about 3:20.

The index is trending higher following a trendline, so my guess is this trend will continue. I expect the index to close higher tomorrow. The 9-day trend (upward) seems to confirm this, too.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,472.85    
 Monthly S1  2,591.81  118.95   
 Weekly S2  2,618.48  26.67   
 Monthly Pivot  2,636.96  18.48   
 Weekly S1  2,664.62  27.66   
 Weekly Pivot  2,673.37  8.75   
 Daily S2  2,681.70  8.33   
 Low  2,690.73  9.03   
 Open  2,695.77  5.04   
 Daily S1  2,696.23  0.46   Yes! The Daily S1 is close to the Open.
 61.8% Down from Intraday High  2,699.73  3.50   
 50% Down from Intraday High  2,702.51  2.78   
 Daily Pivot  2,705.26  2.75   
 38.2% Down from Intraday High  2,705.29  0.03   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  2,710.76  5.47   
 High  2,714.29  3.53   
 Weekly R1  2,719.51  5.22   
 Daily R1  2,719.79  0.28   Yes! The Daily R1 is close to the Weekly R1.
 Weekly R2  2,728.26  8.47   
 Daily R2  2,728.82  0.56   Yes! The Daily R2 is close to the Weekly R2.
 Monthly R1  2,755.92  27.10   
 Monthly R2  2,801.07  45.16   

Tuesday 1/10/12. Trading Tuesday: Dow

The index climbed by 0.3% or 32.77 points. Since 10/01/1928 the index made 1000 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 552 occasions.
     Average loss was -0.8% on 448 occasions.
Look for 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 17/25 or 68.0% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

A measured move down chart pattern appeared just before noon (the move from A to B) and this predicted a bounce back to the corrective phase, C, which happened.

One could also argue that a weird looking cup with handle appears spanning A to D with the handle at E. The pattern confirms with a breakout (close) above D, but the index went nowhere except slightly down after that. Does that mean a resumption of the upward move tomorrow?

Maybe.

On the daily scale, we are seeing a shark-32 pattern. Think of this as a double inside day, where the price range is inside yesterday's range which is inside the prior day's range. And that narrowing volatility suggests higher volatility ahead. In other words, a big move is coming.

I'll stick my neck out and say that we will close 200 points higher tomorrow (Tuesday). I doubt that we will, but it's the new year, so why not throw caution to the wind?

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,458.05    
 Monthly S1  11,925.37  467.32   
 Weekly S2  12,106.05  180.68   
 Monthly Pivot  12,202.51  96.46   
 Weekly S1  12,249.37  46.86   
 Daily S2  12,303.31  53.94   
 Low  12,333.85  30.54   
 Daily S1  12,348.00  14.15   
 Open  12,359.31  11.31   
 61.8% Down from Intraday High  12,362.59  3.28   Yes! The 61.8% Down from Intraday High is close to the Open.
 Weekly Pivot  12,364.51  1.92   Yes! The Weekly Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  12,371.46  6.96   Yes! The 50% Down from Intraday High is close to the Weekly Pivot.
 Daily Pivot  12,378.54  7.08   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  12,380.34  1.80   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  12,392.69  12.35   
 High  12,409.08  16.39   
 Daily R1  12,423.23  14.15   
 Daily R2  12,453.77  30.54   
 Weekly R1  12,507.83  54.06   
 Weekly R2  12,622.97  115.14   
 Monthly R1  12,669.83  46.86   
 Monthly R2  12,946.97  277.14   

Monday 1/9/12. Market Monday: The Week Ahead

My Prediction

Picture of the Dow transports on the daily scale.

I show the Dow transports on the daily scale.

This is the only one that shows anything interesting this week. The figure highlights in red a rising wedge chart pattern.

A rising wedge is one in which price makes higher highs and higher lows, following two converging, but up-sloping trendlines. Most often, the breakout is downward 69% of the time.

Do I think that this will breakout downward?

No. I think the economy is improving enough to send the index higher, out the top of the chart pattern.

 

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.

Tuesday: Up 179.82 points.
Wednesday: Up 21.04 points.
Thursday: Down 2.72 points.
Friday: Down 55.78 points.
Saturday: Holiday or other weird event!

For the Week...

The Dow industrials were up 142.36 points or 1.2%.
The Nasdaq composite was up 69.07 points or 2.7%.
The S&P 500 index was up 20.21 points or 1.6%.

Year to Date...

Dow Industrials
     1.0% down from the high of 12,479.65 on 01/03/2012.
     1.1% up from the low of 12,221.19 on 01/03/2012.
Nasdaq
     0.3% down from the high of 2,682.12 on 01/06/2012.
     1.8% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     0.5% down from the high of 1,284.62 on 01/03/2012.
     1.5% up from the low of 1,258.86 on 01/03/2012.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Consumer credit3:00 MD-Measures auto, credit card and other debt.
Wholesale inventories10:00 TD-Wholesale sales and inventory statistics.
Crude inventories10:30 W?My guess: Measures oil inventory.
FEDs Beige book2:00 W?Reports on economic conditions.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Retail sales8:30 ThA-Reports total retail sales (not services). Are people spending?
Business inventories10:00 ThC-Reports manufacturing, wholesale, retail inventories.
Treasury budget2:00 ThDTracks budget deficit. Important in April (tax filing).
Trade balance8:30 FC+Signals balance of exports & imports.
International trade8:30 FC+Import/export prices, trade balance. US economy vs others.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 01/06/2012, the CPI had:

12 bearish patterns,
12 bullish patterns,
190 patterns waiting for breakout.
The CPI signal is 50.0%, which is neutral (between 35% and 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  12,286  12,323  12,369  12,406  12,452 
Weekly  12,095  12,228  12,354  12,486  12,612 
Monthly  11,447  11,904  12,192  12,648  12,936 
S&P 500 (^GSPC): Daily  1,269  1,273  1,278  1,282  1,286 
Weekly  1,248  1,263  1,274  1,289  1,300 
Monthly  1,173  1,225  1,255  1,307  1,337 
Nasdaq (^IXIC): Daily  2,648  2,661  2,672  2,685  2,695 
Weekly  2,606  2,640  2,661  2,695  2,716 
Monthly  2,461  2,567  2,625  2,732  2,789 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week up 43.6%  Expect a random direction.
 4 months up 15.6%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week up 41.5%  Expect a random direction.
 2 months up 38.9%  The trend may continue.
 Nasdaq composite (^IXIC) 1 week up 39.8%  The trend may continue.
 1 month up 47.2%  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: bearish.
S&P 500 Index: bearish.
Dow Transports: bearish.
Dow Utilities: bullish.

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 5 days.

 Found Chart Pattern Name
65Pipe bottom
40Triangle, symmetrical
22Head-and-shoulders bottom
10Triangle, ascending
8Rising wedge
5Triangle, descending
4Double Bottom, Adam and Adam
3Head-and-shoulders complex bottom
3Broadening top, right-angled and descending
2Double Bottom, Adam and Eve

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

The 10 types of most frequently appearing chart patterns in the stocks, 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. Electric Utility (Central)1. Electric Utility (Central)
2. Household Products2. Electric Utility (East)
3. Electric Utility (West)3. Household Products
4. Retail Building Supply4. Electric Utility (West)
5. Electric Utility (East)5. Retail Store
48. Human Resources48. Oilfield Svcs/Equipment
49. Precision Instrument49. Telecom. Equipment
50. Telecom. Equipment50. Precision Instrument
51. Securities Brokerage51. Securities Brokerage
52. Coal52. Coal

-- Thomas Bulkowski

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Thursday 1/5/12. Trading Thursday: Nasdaq

The index dropped by 0.0% or -0.36 points. Since 02/05/1971 the index made 552 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 309 occasions.
     Average loss was -1.1% on 243 occasions.
Look for the index to close higher 56.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 9/15 or 60.0% of the time.
     The prediction of the index closing lower has been right 7/14 or 50.0% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

The index formed a rectangle top from noon to almost 3:00 before it staged an upward breakout at A. The following move did not amount to much, so it was a waste of time, at least so far.

The rectangle does provide price with a modest support area, which should help the index move higher and close higher tomorrow (Thursday).

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

-- Thomas Bulkowski

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,443.39    
 Monthly S1  2,545.88  102.48   
 Weekly S2  2,576.36  30.48   
 Monthly Pivot  2,610.20  33.84   
 Weekly S1  2,612.36  2.16   Yes! The Weekly S1 is close to the Monthly Pivot.
 Daily S2  2,616.97  4.61   
 Weekly Pivot  2,622.85  5.88   
 Low  2,627.23  4.38   
 Daily S1  2,632.67  5.44   
 61.8% Down from Intraday High  2,637.14  4.48   
 Open  2,639.90  2.76   
 50% Down from Intraday High  2,640.21  0.31   Yes! The 50% Down from Intraday High is close to the Open.
 Daily Pivot  2,642.92  2.72   
 38.2% Down from Intraday High  2,643.27  0.34   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  2,648.36  5.09   
 High  2,653.18  4.82   
 Daily R1  2,658.62  5.44   
 Weekly R1  2,658.85  0.23   Yes! The Weekly R1 is close to the Daily R1.
 Daily R2  2,668.87  10.02   
 Weekly R2  2,669.34  0.47   Yes! The Weekly R2 is close to the Daily R2.
 Monthly R1  2,712.69  43.35   
 Monthly R2  2,777.01  64.33   

Tuesday 1/3/12. Market Monday on Tuesday: The Week Ahead

My Prediction

Picture of the Nasdaq composite on the daily scale.

I show the Nasdaq composite on the daily chart. The index is forming a symmetrical triangle. The breakout direction is nearly random, so that is little help in determine what will happen.

Nevertheless, I believe the index will follow the green line. It will show an upward breakout followed by a retrace going into the middle of this month.

 

 

 

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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.

Tuesday: Down 2.65 points.
Wednesday: Down 139.94 points.
Thursday: Up 135.63 points.
Friday: Down 69.48 points.
Saturday: Holiday or other weird event!

For the Week...

The Dow industrials were down 76.44 points or 0.6%.
The Nasdaq composite was down 13.49 points or 0.5%.
The S&P 500 index was down 7.73 points or 0.6%.

Year to Date...

Dow Industrials
     5.1% down from the high of 12,876.00 on 05/02/2011.
     17.4% up from the low of 10,404.49 on 10/04/2011.
Nasdaq
     9.8% down from the high of 2,887.75 on 05/02/2011.
     13.3% up from the low of 2,298.89 on 10/04/2011.
S&P 500
     8.2% down from the high of 1,370.58 on 05/02/2011.
     17.0% up from the low of 1,074.77 on 10/04/2011.

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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 TDCovers residential/non-residential/public spending on new construction.
FOMC Minutes2:00 T?Minutes of the prior Federal Reserve meeting.
Factory orders10:00 WD+Durable/non-durable goods orders w/factory inventories.
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.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 12/30/2011, the CPI had:

6 bearish patterns,
4 bullish patterns,
644 patterns waiting for breakout.
The CPI signal is 40.0%, which is neutral (between 35% and 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  12,164  12,191  12,240  12,267  12,317 
Weekly  12,040  12,129  12,229  12,317  12,417 
Monthly  10,830  11,524  11,926  12,620  13,022 
S&P 500 (^GSPC): Daily  1,253  1,255  1,260  1,262  1,266 
Weekly  1,238  1,248  1,259  1,268  1,279 
Monthly  1,118  1,188  1,229  1,298  1,339 
Nasdaq (^IXIC): Daily  2,597  2,601  2,609  2,613  2,621 
Weekly  2,562  2,584  2,608  2,630  2,655 
Monthly  2,429  2,517  2,596  2,684  2,763 
  • 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 30.7%  The trend may continue.
 3 months up 21.5%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week down 31.9%  The trend may continue.
 1 month up 53.2%  Expect a random direction.
 Nasdaq composite (^IXIC) 1 week down 34.3%  The trend may continue.
 2 months down 16.7%  Expect a reversal soon.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the 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: bearish.
S&P 500 Index: bearish.
Dow Transports: bearish.
Dow Utilities: bullish.

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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
53Pipe top
26Triangle, symmetrical
15Head-and-shoulders bottom
6Triangle, ascending
6Flag, high and tight
5Triangle, descending
5Pipe bottom
5Broadening top
4Double Top, Adam and Eve
4Double Top, Eve and Eve

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

The 10 types of most frequently appearing chart patterns in the stocks, 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. Electric Utility (Central)1. Electric Utility (Central)
2. Electric Utility (East)2. Household Products
3. Household Products3. Electric Utility (East)
4. Electric Utility (West)4. Electric Utility (West)
5. Retail Store5. Internet
48. Oilfield Svcs/Equipment48. Semiconductor
49. Telecom. Equipment49. Telecom. Equipment
50. Precision Instrument50. Precision Instrument
51. Securities Brokerage51. Securities Brokerage
52. Coal52. Coal

-- Thomas Bulkowski

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