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

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Chart Patterns: After the Buy
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Busted
Patterns
Candles Chart
Patterns
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Patterns
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 09/21/2017
22,359 -53.36 -0.2%
9,669 14.62 0.2%
731 -0.83 -0.1%
6,423 -33.35 -0.5%
2,501 -7.64 -0.3%
YTD
13.1%
6.9%
10.8%
19.3%
11.7%
Tom's Targets    Overview: 09/14/2017
22,450 or 21,500 by 10/01/2017
9,750 or 9,200 by 10/01/2017
775 or 730 by 10/01/2017
6,650 or 6,200 by 10/01/2017
2,600 or 2,425 by 10/01/2017

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January 2014 Headlines


Archives


Thursday 1/30/14. Trading Thursday: Nasdaq

The index dropped by -1.1% or -46.53 points. Since 02/05/1971 the index made 148 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.4% on 77 occasions.
     Average loss was -1.3% on 71 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 55/92 or 59.8% of the time.
     The prediction of the index closing lower has been right 23/44 or 52.3% 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 Tuesday's and Wednesday's trading.

A weird looking (unequal shoulders, LS and RS) head-and-shoulders top pattern appears, but it takes most of the session before it confirms. That's not a good sign. At A, when the index closes below the red line, it confirms the chart pattern as a valid one.

The rise to B is a pullback. It's typical for downward breakouts. Unfortunately, from the chart, I don't have a clue as to what will happen tomorrow. The probabilities say to expect a higher close. That would be nice in this environment.

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,939.08    
 Monthly S1  3,995.26  56.17   
 Daily S2  4,015.98  20.72   
 Weekly S2  4,023.67  7.69   
 Daily S1  4,033.70  10.03   
 Weekly S1  4,037.55  3.85   Yes! The Weekly S1 is close to the Daily S1.
 Low  4,044.76  7.21   
 Close  4,051.43  6.67   
 Open  4,060.61  9.18   
 Daily Pivot  4,062.49  1.88   Yes! The Daily Pivot is close to the Open.
 61.8% Down from Intraday High  4,062.53  0.04   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  4,068.01  5.49   
 38.2% Down from Intraday High  4,073.50  5.49   
 Daily R1  4,080.21  6.71   
 High  4,091.27  11.06   
 Daily R2  4,109.00  17.73   
 Monthly Pivot  4,120.90  11.91   
 Weekly Pivot  4,142.05  21.15   
 Weekly R1  4,155.93  13.88   
 Monthly R1  4,177.08  21.15   
 Weekly R2  4,260.43  83.35   
 Monthly R2  4,302.72  42.29   

Tuesday 1/28/14. Trading Tuesday: Dow

The index dropped by -0.3% or -41.23 points. Since 10/01/1928 the index made 976 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 461 occasions.
     Average loss was -0.7% on 515 occasions.
Expect the index to close lower 52.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 64/98 or 65.3% of the time.
     The prediction of the index closing lower has been right 20/33 or 60.6% 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 Friday and Monday's trading.

This is an interesting picture, one I've not mentioned in a long time, if ever. Before I get to that, let me first say that the red chart pattern is a symmetrical triangle, and the blue one is a descending triangle.

What's interesting is when I extended the lower trendline of the symmetrical triangle into the future, the index bumped up against it and found overhead resistance (A). That's a known behavior for triangles. It applies to both trendlines, that they show support or resistance in the future, as does the apex where the two trendlines join. Keep that in mind.

In this example the resistance line worked well at predicting how far the index would rise.

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  15,392.61    
 Weekly S2  15,437.71  45.10   
 Monthly S1  15,615.24  177.54   
 Weekly S1  15,637.79  22.55   
 Daily S2  15,695.51  57.72   
 Daily S1  15,766.70  71.18   
 Low  15,783.55  16.85   
 Close  15,837.88  54.33   
 61.8% Down from Intraday High  15,844.37  6.49   Yes! The 61.8% Down from Intraday High is close to the Close.
 Daily Pivot  15,854.73  10.36   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  15,863.16  8.43   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 Open  15,879.05  15.89   Yes! The Open is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  15,881.95  2.90   Yes! The 38.2% Down from Intraday High is close to the Open.
 Daily R1  15,925.92  43.97   
 High  15,942.77  16.85   
 Daily R2  16,013.95  71.18   
 Weekly Pivot  16,079.20  65.24   
 Monthly Pivot  16,101.75  22.55   
 Weekly R1  16,279.28  177.54   
 Monthly R1  16,324.38  45.10   
 Weekly R2  16,720.69  396.30   
 Monthly R2  16,810.89  90.20   

Monday 1/27/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

Let's talk about the state of the markets. The past week, traders got nervous and stocks took a dive. Is this the start of a bear market? Maybe, but probably not.

Why? Because I think economic conditions are improving and although certain areas of the world will experience a slowdown, I think that the recovery will continue, albeit slowly.

I show a chart of the Dow industrials. The big black candles from the last week overshadow the rest of the chart. I show two lines. The red one is where I expect the Dow to be on February 15. If I'm wrong, then the index could drop to the blue line. That's a support line, but the Dow could drift below it somewhat before rebounding. I expect the Dow to move slightly lower next week before beginning a recovery. Depending on how fast that recovery is, it'll reach the red line or perhaps fall short. But I DO expect a recovery.

I ran my normal Tuesday/Thursday prediction and this is what it said.

The index dropped by -2.0% or -318.24 points. Since 10/01/1928 the index made 79 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 38 occasions.
     Average loss was -1.7% on 41 occasions.
Expect the index to close lower 51.9% of the time.

Thus, look for the index to close lower on Monday. It's too soon to buy the dip but I'm certainly shopping at this point.

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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 44.12 points.
Wednesday: Down 41.1 points.
Thursday: Down 175.99 points.
Friday: Down 318.24 points.
Saturday: Holiday or other weird event!

For the Week...

The Dow industrials were down 579.45 points or 3.5%.
The Nasdaq composite was down 69.41 points or 1.7%.
The S&P 500 index was down 48.41 points or 2.6%.

Year to Date...

Dow Industrials
     4.2% down from the high of 16,573.07 on 01/02/2014.
     0.0% up from the low of 15,879.11 on 01/24/2014.
Nasdaq
     2.8% down from the high of 4,246.55 on 01/22/2014.
     0.7% up from the low of 4,097.99 on 01/13/2014.
S&P 500
     3.3% down from the high of 1,850.84 on 01/15/2014.
     0.0% up from the low of 1,790.29 on 01/24/2014.

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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
New home sales10:00 MC+Shows sales of single-family homes.
Durable goods orders8:30 TBMeasures orders, shipments of goods with lifespans >3 years.
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Rate decision2:00 W?The Federal Reserves reports on interest rate changes.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Gross domestic product8:30 ThBMeasures economic activity; GDP deflator measures inflation.
Personal income & consumption8:30 FC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 FC+Covers durables, non-durables, and services.
Chicago purchasing managers index9:45 FBMonitors regional manufacturing activity.
Michigan sentiment9:55 FB-Consumer sentiment: Measures strength of consumer spending.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 01/24/2014, the CPI had:

84 bearish patterns,
4 bullish patterns,
174 patterns waiting for breakout.
The CPI signal is 4.5%, 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  15,663  15,771  15,987  16,095  16,311 
Weekly  15,451  15,665  16,093  16,307  16,734 
Monthly  15,406  15,643  16,115  16,352  16,825 
S&P 500 (^GSPC): Daily  1,766  1,778  1,803  1,815  1,839 
Weekly  1,751  1,771  1,810  1,830  1,869 
Monthly  1,750  1,770  1,810  1,831  1,871 
Nasdaq (^IXIC): Daily  4,082  4,105  4,151  4,175  4,221 
Weekly  4,049  4,089  4,168  4,207  4,286 
Monthly  3,965  4,046  4,146  4,228  4,328 
  • 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 down 19.9%   Expect a reversal soon. 
 S & P 500 (^GSPC) 2 weeks down 16.2%   Expect a reversal soon. 
 1 month down 20.9%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week down 31.2%   The trend may continue. 
 1 month down 25.6%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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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
12Triangle, symmetrical
9Rectangle top
6Triangle, descending
6Double Top, Adam and Adam
6Double Top, Eve and Eve
6Head-and-shoulders top
5Rising wedge
5Channel
5Double Top, Adam and Eve
5Triangle, ascending

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

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

 

 

 

 

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

This WeekLast Week
1. Biotechnology1. Biotechnology
2. Internet2. Internet
3. Air Transport3. Drug
4. Drug4. Information Services
5. Computer Software and Svcs5. Aerospace/Defense
50. Retail (Special Lines)50. Electric Utility (Central)
51. Apparel51. Electric Utility (East)
52. Food Processing52. Electric Utility (West)
53. Electric Utility (West)53. Toiletries/Cosmetics
54. Toiletries/Cosmetics54. Short ETFs

-- Thomas Bulkowski

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Saturday 1/25/14. Saturday Supplement

Picture of my books

  1. Trading Basics
  2. Fundamental Analysis and Position Trading
  3. Swing and Day Trading
  4. Visual Guide to Chart Patterns

Recently, I've been asked how I was able to retire at 36. The process was easy. I worked and saved my disposable income. With those savings, I bought stocks and held them until they ripened enough to be sold. It's a process almost anyone can follow. For details, read my Trading Basics book, chapter 1. It explains the process.

In fact, the three books of the Evolution of a Trader series I wrote describe my journey from buy-and-hold investor to day trader and back, sharing my discoveries along the way. Those are the top three books in the picture.

The Visual Guide to Chart Patterns, the bottom book of the four, will help those new to chart patterns to identify them. It has quizzes which are fun to take, both on the content of each chapter, but also by presenting a blank chart and telling you to find x type of patterns.

If you DO decide to buy any of the books, then please do so through this website. How? By clicking on a picture of one of the books (not the image above, but from those on the far left of the page). Those will take you to Amazon.com. I receive a referral fee if you buy anything while there. That doesn't increase your cost at all but it does help me subsidize this website and keep it free.

Thanks -- Thomas Bulkowski

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Thursday 1/23/14. Trading Thursday: Nasdaq

The index climbed by 0.4% or 17.24 points. Since 02/05/1971 the index made 524 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 335 occasions.
     Average loss was -0.8% on 189 occasions.
Expect the index to close higher 63.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 55/91 or 60.4% of the time.
     The prediction of the index closing lower has been right 23/44 or 52.3% 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 the last two trading days.

The index has formed a double top at A and B. This confirms as a valid chart pattern when the index closes below the red line C. Unfortunately that hasn't happened yet.

If the above probabilities are correct, the double top will remain unconfirmed and the index will close higher on Thursday. If the double top confirms, then look for a lower close.

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

-- Thomas Bulkowski

Top

© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,907.60    
 Weekly S2  4,065.47  157.87   
 Monthly S1  4,075.30  9.83   
 Monthly Pivot  4,147.29  71.99   
 Weekly S1  4,154.23  6.94   
 Weekly Pivot  4,186.76  32.52   
 Daily S2  4,217.33  30.57   
 Low  4,225.52  8.19   
 Daily S1  4,230.16  4.64   
 61.8% Down from Intraday High  4,233.55  3.39   
 Open  4,234.58  1.03   Yes! The Open is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  4,236.04  1.46   Yes! The 50% Down from Intraday High is close to the Open.
 Daily Pivot  4,238.36  2.32   
 38.2% Down from Intraday High  4,238.52  0.16   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  4,243.00  4.48   
 High  4,246.55  3.55   
 Daily R1  4,251.19  4.64   
 Daily R2  4,259.39  8.19   
 Weekly R1  4,275.52  16.14   
 Weekly R2  4,308.05  32.52   
 Monthly R1  4,314.99  6.94   
 Monthly R2  4,386.98  71.99   

Tuesday 1/21/14. The Week Ahead

My Prediction

Picture of the cpi update on the daily scale.

I show a picture of the chart pattern indicator. The full view is here.

The red vertical bar on the far right, A, is bearish.

Look at the divergence shown between the two blue lines. One is at the top right of the chart and the other is the down-sloping line, both marked B on the chart. That's bearish divergence.

Does this mean trouble ahead? Maybe. Look at the two peaks in November. I show that market with a thick red line at C. The CPI slopes downward even as the index rises. A decline comes, but it takes about a week and the drop isn't much. Still, it was a good warning.

Thus, expect the index to drop here, going into earnings season. Some stocks will get clobbered. The retailers (speciality) have already been hard hit since the holiday season wasn't up to expectations. Other stocks that excel may not rise much but hold their own instead of tanking by 20%.

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 179.11 points.
Tuesday: Up 115.92 points.
Wednesday: Up 108.08 points.
Thursday: Down 64.93 points.
Friday: Up 41.55 points.

For the Week...

The Dow industrials were up 21.51 points or 0.1%.
The Nasdaq composite was up 22.92 points or 0.5%.
The S&P 500 index was down 3.67 points or 0.2%.

Year to Date...

Dow Industrials
     0.7% down from the high of 16,573.07 on 01/02/2014.
     1.3% up from the low of 16,240.60 on 01/13/2014.
Nasdaq
     0.5% down from the high of 4,219.28 on 01/16/2014.
     2.4% up from the low of 4,097.99 on 01/13/2014.
S&P 500
     0.7% down from the high of 1,850.84 on 01/15/2014.
     1.3% up from the low of 1,815.52 on 01/13/2014.

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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
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Existing home sales10:00 ThCCounts sales of used homes.
Leading indicators10:00 ThD-Summary of already known reports.
Crude inventories11:00 Th?My guess: Measures oil inventory.

Options Expiration

VIX expired on Wednesday.

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Swing and Position Traders: Chart Pattern Indicator

As of 01/17/2014, the CPI had:

32 bearish patterns,
9 bullish patterns,
381 patterns waiting for breakout.
The CPI signal is 22.0%, which is bearish (<= 35%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,328  16,393  16,444  16,510  16,561 
Weekly  16,137  16,298  16,401  16,562  16,666 
Monthly  15,385  15,922  16,255  16,792  17,125 
S&P 500 (^GSPC): Daily  1,829  1,834  1,840  1,845  1,851 
Weekly  1,800  1,819  1,835  1,855  1,870 
Monthly  1,736  1,788  1,819  1,870  1,902 
Nasdaq (^IXIC): Daily  4,171  4,184  4,201  4,214  4,231 
Weekly  4,050  4,124  4,172  4,245  4,293 
Monthly  3,892  4,045  4,132  4,285  4,372 
  • 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 43.2%   Expect a random direction. 
 1 month down 19.9%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week down 28.4%   The trend may continue. 
 1 month down 20.9%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 2 weeks up 29.3%   The trend may continue. 
 5 months up 14.6%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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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
12Triangle, symmetrical
9Rectangle top
6Broadening top
6Head-and-shoulders bottom
6Broadening top, right-angled and descending
5Rising wedge
5Channel
4Triangle, descending
4Rectangle bottom
4Pipe top

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

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

 

 

 

 

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

This WeekLast Week
1. Biotechnology1. Biotechnology
2. Internet2. Shoe
3. Drug3. Air Transport
4. Information Services4. Human Resources
5. Aerospace/Defense5. Computer Software and Svcs
50. Electric Utility (Central)50. Electric Utility (Central)
51. Electric Utility (East)51. Electric Utility (East)
52. Electric Utility (West)52. Electric Utility (West)
53. Toiletries/Cosmetics53. Toiletries/Cosmetics
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Thursday 1/16/14. Trading Thursday: Nasdaq

The index climbed by 0.8% or 31.86 points. Since 02/05/1971 the index made 356 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 236 occasions.
     Average loss was -0.9% on 120 occasions.
Expect the index to close higher 66.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 54/90 or 60.0% of the time.
     The prediction of the index closing lower has been right 23/44 or 52.3% 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.

The chart shows two days but it could have been one day since trading remained above yesterday's. A symmetrical triangle appears late in the session shown here outlined in red. The breakout from this one was upward, setting the stage for an uphill run. It was an uphill slog, all right, since the index didn't go as far as promised (the measure rule: the height of the triangle added to the breakout price). Perhaps we will see the index continue higher tomorrow, completing the measure rule.

The probabilities suggest a higher close on Thursday.

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,922.59    
 Monthly S1  4,068.73  146.15   
 Weekly S2  4,088.13  19.40   
 Monthly Pivot  4,125.74  37.60   
 Weekly S1  4,151.51  25.77   
 Weekly Pivot  4,167.12  15.62   
 Daily S2  4,187.07  19.95   
 Low  4,195.98  8.91   
 Open  4,196.53  0.55   Yes! The Open is close to the Low.
 Daily S1  4,200.98  4.45   
 61.8% Down from Intraday High  4,204.69  3.72   
 50% Down from Intraday High  4,207.38  2.69   
 Daily Pivot  4,209.88  2.50   
 38.2% Down from Intraday High  4,210.08  0.19   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  4,214.88  4.80   
 High  4,218.79  3.91   
 Daily R1  4,223.79  5.00   
 Weekly R1  4,230.50  6.71   
 Daily R2  4,232.69  2.20   Yes! The Daily R2 is close to the Weekly R1.
 Weekly R2  4,246.11  13.42   
 Monthly R1  4,271.88  25.77   
 Monthly R2  4,328.89  57.00   

Tuesday 1/14/14. Trading Tuesday: Dow

The index dropped by -1.1% or -179.11 points. Since 10/01/1928 the index made 292 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 137 occasions.
     Average loss was -1.0% on 155 occasions.
Expect the index to close lower 53.1% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 64/98 or 65.3% of the time.
     The prediction of the index closing lower has been right 19/31 or 61.3% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

This chart shows the last two trading days. The index began forming a head-and-shoulders top chart pattern on Friday and completed it around noon today (Monday). It confirmed as a valid chart pattern when the index closed below the horizontal red neckline at C.

Then look what happened. The index tumbled. Wow. It certainly made for a nice short play.

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  15,298.87    
 Monthly S1  15,778.40  479.54   
 Daily S2  16,104.69  326.29   
 Daily S1  16,181.32  76.62   
 Monthly Pivot  16,183.33  2.01   Yes! The Monthly Pivot is close to the Daily S1.
 Weekly S2  16,215.91  32.59   
 Weekly S1  16,236.93  21.01   Yes! The Weekly S1 is close to the Weekly S2.
 Low  16,240.60  3.67   Yes! The Low is close to the Weekly S1.
 Close  16,257.94  17.34   Yes! The Close is close to the Low.
 Daily Pivot  16,317.22  59.28   
 61.8% Down from Intraday High  16,321.79  4.56   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  16,346.87  25.08   
 38.2% Down from Intraday High  16,371.94  25.08   
 Daily R1  16,393.85  21.90   
 Weekly Pivot  16,399.62  5.78   Yes! The Weekly Pivot is close to the Daily R1.
 Weekly R1  16,420.64  21.01   Yes! The Weekly R1 is close to the Weekly Pivot.
 Open  16,434.03  13.39   Yes! The Open is close to the Weekly R1.
 High  16,453.13  19.10   Yes! The High is close to the Open.
 Daily R2  16,529.75  76.62   
 Weekly R2  16,583.33  53.58   
 Monthly R1  16,662.86  79.53   
 Monthly R2  17,067.79  404.92   

Monday 1/13/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

I show the Dow utilities on the daily chart.

This index is interesting because it makes a head-and-shoulders bottom chart pattern. The left shoulder (LS), head, and right shoulder (RS) are shown on the chart.

The chart pattern confirms as a valid pattern at A in a strong push upward when the index closes above the horizontal red line.

The utility index was the worst performing index last year. Will it outperform the others this year? We'll have to wait and see.

This chart pattern, if you measure the vertical distance from the head low to the red neckline directly above, gives the height. Add that height to the price where the index crosses the red line and that will give you a target. That should put it near the top of the chart, so we still have a bit to go.

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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 44.89 points.
Tuesday: Up 105.84 points.
Wednesday: Down 68.2 points.
Thursday: Down 17.98 points.
Friday: Down 7.71 points.

For the Week...

The Dow industrials were down 32.94 points or 0.2%.
The Nasdaq composite was up 42.75 points or 1.0%.
The S&P 500 index was up 11 points or 0.6%.

Year to Date...

Dow Industrials
     0.8% down from the high of 16,573.07 on 01/02/2014.
     0.4% up from the low of 16,378.61 on 01/09/2014.
Nasdaq
     0.2% down from the high of 4,182.74 on 01/09/2014.
     1.7% up from the low of 4,103.75 on 01/06/2014.
S&P 500
     0.2% down from the high of 1,845.86 on 01/02/2014.
     1.0% up from the low of 1,823.73 on 01/06/2014.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Treasury budget2:00 MDTracks budget deficit. Important in April (tax filing).
Retail sales8:30 TA-Reports total retail sales (not services). Are people spending?
International trade8:30 TC+Import/export prices, trade balance. US economy vs others.
Business inventories10:00 TC-Reports manufacturing, wholesale, retail inventories.
Producer price index8:30 WB-Measures wholesale goods cost. An indication of future inflation.
Crude inventories10:30 W?My guess: Measures oil inventory.
FEDs Beige book2:00 W?Reports on economic conditions.
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 FB-Number of homes beginning construction.
Building permits8:30 FB-Measures building permits for new construction.
Industrial production9:15 FB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 FB-Gauges economic activity, hints of inflation.

Options Expiration

The following is courtesy of the Options Industry Council.

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

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

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Swing and Position Traders: Chart Pattern Indicator

As of 01/10/2014, the CPI had:

4 bearish patterns,
13 bullish patterns,
169 patterns waiting for breakout.
The CPI signal is 76.5%, 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  16,326  16,381  16,435  16,490  16,543 
Weekly  16,276  16,356  16,459  16,540  16,643 
Monthly  15,359  15,898  16,243  16,782  17,127 
S&P 500 (^GSPC): Daily  1,829  1,835  1,839  1,846  1,850 
Weekly  1,817  1,830  1,836  1,849  1,856 
Monthly  1,738  1,790  1,820  1,872  1,901 
Nasdaq (^IXIC): Daily  4,131  4,153  4,164  4,185  4,196 
Weekly  4,075  4,125  4,154  4,204  4,233 
Monthly  3,909  4,042  4,112  4,245  4,315 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 2 weeks down 17.6%   Expect a reversal soon. 
 1 month down 19.9%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week up 43.1%   Expect a random direction. 
 1 month down 20.9%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week up 43.1%   Expect a random direction. 
 1 month down 25.6%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 3 days.

 Found Chart Pattern Name
13Triangle, symmetrical
11Pipe bottom
9Rectangle top
8Broadening top
6Triangle, ascending
5Channel
5Triangle, descending
4Rectangle bottom
4Rising wedge
4Double Bottom, Adam and Adam

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

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

 

 

 

 

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

This WeekLast Week
1. Biotechnology1. Shoe
2. Shoe2. Human Resources
3. Air Transport3. Air Transport
4. Human Resources4. Information Services
5. Computer Software and Svcs5. Internet
50. Electric Utility (Central)50. Electric Utility (East)
51. Electric Utility (East)51. Medical Supplies
52. Electric Utility (West)52. Electric Utility (West)
53. Toiletries/Cosmetics53. Toiletries/Cosmetics
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Thursday 1/9/14. Trading Thursday: Nasdaq

The index climbed by 0.3% or 12.43 points. Since 02/05/1971 the index made 571 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 315 occasions.
     Average loss was -0.7% on 256 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 54/89 or 60.7% of the time.
     The prediction of the index closing lower has been right 23/44 or 52.3% 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.

This chart encompasses two trading days. A double top appears at AB. This confirms as a valid chart pattern at C when the index closes below the horizontal red line.

Another pattern is a head-and-shoulders top shown here in blue by LS, H, and RS, the left and right shoulders and head.

Notice how the drop from the double top stops at the support line shown by the blue line D. This chart makes a good example of how support works intraday.

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,909.50    
 Monthly S1  4,037.56  128.05   
 Weekly S2  4,103.33  65.77   
 Monthly Pivot  4,107.64  4.31   
 Daily S2  4,134.04  26.39   
 Weekly S1  4,134.47  0.43   Yes! The Weekly S1 is close to the Daily S2.
 Low  4,145.00  10.53   
 Daily S1  4,149.82  4.82   
 Open  4,154.28  4.46   
 61.8% Down from Intraday High  4,155.22  0.94   Yes! The 61.8% Down from Intraday High is close to the Open.
 Weekly Pivot  4,156.10  0.88   Yes! The Weekly Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  4,158.38  2.27   Yes! The 50% Down from Intraday High is close to the Weekly Pivot.
 Daily Pivot  4,160.79  2.41   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  4,161.53  0.75   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  4,165.61  4.08   
 High  4,171.75  6.14   
 Daily R1  4,176.57  4.82   
 Weekly R1  4,187.24  10.67   
 Daily R2  4,187.54  0.30   Yes! The Daily R2 is close to the Weekly R1.
 Weekly R2  4,208.87  21.33   
 Monthly R1  4,235.70  26.83   
 Monthly R2  4,305.78  70.09   

Tuesday 1/7/13. No Blog for A Few Days

This is just a reminder. Hopefully, the new desk I bought will be delivered this afternoon. And that means it'll take me at least a day to build it (according to user reports) plus I'll have to make room for it in my office (rearrange things...like removing a tall bookcase) plus installing a new computer. You know what a hassle that is.

So, expect me to be off the air for a few days. Maybe I'll be back for Wednesday's blog post or maybe Thursday, depending on how things go.

$ $ $

Since I haven't posted this in a while, maybe it's time again.

Visit the home page or click at the links at the top of the page for access to my tutorials and trading research. There's lots of other things, too. I recently reviewed the Hudgin Golden Triangle setup.

Picture of my books

I have four new books available, pictured. They are:

  1. Trading Basics
  2. Fundamental Analysis and Position Trading
  3. Swing and Day Trading
  4. Visual Guide to Chart Patterns

The three books in the Evolution of a Trader series (the top three) were written for people unfamiliar with the inner workings of the stock market, but will curl the toes of professionals, too.

Research is used to prove the ideas discussed, but is presented in an easy to understand and light-hearted manner. You will find the books to be as entertaining as they are informative and packed with moneymaking tips and ideas. Use the ideas presented to hone your trading style and improve your success.

Whether you are a novice who has never purchased a stock but wants to, or a professional money manager who trades daily, these books are a necessary addition to any market enthusiast's bookshelf.

The Visual Guide to Chart Patterns (bottom picture) is a concise and accessible visual guide to identifying, understanding, and using chart patterns to predict the direction and extent of price moves. Packed with visual learning enhancements and exercises, this innovative book helps savvy investors and professionals alike master the essential skills of chart pattern recognition.

The books are available now at your favorite e-tailer. Clicking on the block of pictures above will display a page of more information about each book. From there, you can click to Amazon.com for purchase, or just click on the associated book picture on the far LEFT of this page. You may have to scroll down a bit to find the book you're interested in.

If you click the picture, it'll take you to Amazon.com and should you buy anything while there, I receive a small referral fee (which does not increase your cost) and that helps support this free website.

-- Thomas Bulkowski

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Monday 1/6/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

In 2013, the utility index was the worst performing. Does that mean it could be the best performing this year? Not by the way it has acted these past few days.

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

I expected the index to rise but when it hit overhead resistance setup by the prior peak at A, the index reversed. I expect it to reach B before rebounding.

The B line is support. Hopefully, that will be strong enough to force the index to bounce off it and move higher.

$ $ $

My office desk didn't arrive as expected on Thursday. It's supposed to be here on Monday. That means I won't be blogging for a few days after that. I'll be constructing the desk and moving things around to change my setup from an L-shape to a U one. Hope everything fits...

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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 25.88 points.
Tuesday: Up 72.37 points.
Thursday: Down 135.31 points.
Friday: Up 28.64 points.
Saturday: Holiday or other weird event!

For the Week...

The Dow industrials were down 8.42 points or 0.1%.
The Nasdaq composite was down 24.68 points or 0.6%.
The S&P 500 index was down 10.03 points or 0.5%.

Year to Date...

Dow Industrials
     0.6% down from the high of 16,573.07 on 01/02/2014.
     0.3% up from the low of 16,416.49 on 01/02/2014.
Nasdaq
     0.7% down from the high of 4,160.96 on 01/02/2014.
     0.2% up from the low of 4,124.96 on 01/03/2014.
S&P 500
     0.8% down from the high of 1,845.86 on 01/02/2014.
     0.2% up from the low of 1,827.74 on 01/02/2014.

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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
Factory orders10:00 MD+Durable/non-durable goods orders w/factory inventories.
Trade balance8:30 TC+Signals balance of exports & imports.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Minutes2:00 W?Minutes of the prior Federal Reserve meeting.
Consumer credit3:00 WD-Measures auto, credit card and other debt.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Wholesale inventories10:00 FD-Wholesale sales and inventory statistics.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 01/03/2014, the CPI had:

11 bearish patterns,
11 bullish patterns,
343 patterns waiting for breakout.
The CPI signal is 50.0%, 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  16,397  16,433  16,476  16,513  16,555 
Weekly  16,320  16,395  16,492  16,567  16,663 
Monthly  15,370  15,920  16,254  16,804  17,138 
S&P 500 (^GSPC): Daily  1,824  1,828  1,833  1,837  1,842 
Weekly  1,814  1,823  1,836  1,845  1,858 
Monthly  1,735  1,783  1,816  1,865  1,898 
Nasdaq (^IXIC): Daily  4,109  4,120  4,137  4,148  4,165 
Weekly  4,092  4,112  4,145  4,165  4,198 
Monthly  3,898  4,015  4,096  4,213  4,295 
  • 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 30.6%   The trend may continue. 
 1 month down 19.9%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week down 28.5%   The trend may continue. 
 1 month down 20.9%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week down 31.4%   The trend may continue. 
 1 month down 25.6%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 10 days.

 Found Chart Pattern Name
18Triangle, symmetrical
12Head-and-shoulders top
9Pipe bottom
7Rectangle top
5Triangle, ascending
5Channel
5Broadening top
4Rectangle bottom
4Rising wedge
4Double Bottom, Adam and Adam

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

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

 

 

 

 

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

This WeekLast Week
1. Shoe1. Human Resources
2. Human Resources2. Shoe
3. Air Transport3. Internet
4. Information Services4. Air Transport
5. Internet5. Biotechnology
50. Electric Utility (East)50. Medical Supplies
51. Medical Supplies51. Electric Utility (East)
52. Electric Utility (West)52. Electric Utility (West)
53. Toiletries/Cosmetics53. Toiletries/Cosmetics
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Thursday 1/2/14. 2014 Forecast

The index climbed by 0.5% or 22.39 points. Since 02/05/1971 the index made 499 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 350 occasions.
     Average loss was -0.8% on 149 occasions.
Expect the index to close higher 70.1% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 54/88 or 61.4% of the time.
     The prediction of the index closing lower has been right 23/44 or 52.3% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

This is a forecast for the Dow industrials using the weekly scale. You can read how I created it here.

As you can see, the 2013 forecast was wrong going into March, but then it did quite well. The scales are not equivalent (obviously since the two lines don't start from the same price). Don't make any estimates based on price using the left scale. It doesn't apply to what you see on the right.

Having said that, the chart shows a vertical green line (A). That's where 2014 begins. I drew the red line B to show that according to this prediction, the index will end the year flat (about where it began). In between the two peaks at the start and end of the year, the index makes a bowl shape -- down in the first half and up in the second. But it's a bumpy ride, too.

$ $ $

I won't be blogging for several days. I'll be working on my home office (building and rearranging furniture) that will knock me off the air for several days. I hope to be back online on Tuesday.

Addendum

I forgot to mention my trading results for 2013.

IndexRise
Dow transports39.5%
Nasdaq composite38.3%
Me37.2%
S&P 50029.6%
Dow industrials26.5%
Dow utilities8.3%

The table shows the comparison, but it's not fair. The indices listed are not shown with dividends reinvested but my results DO include dividends and interest. And yes, I adjusted my total for the money I removed from my account (a net drain). I grew my trading account by 37% in 2013. The returns were held down, I think, but utility stocks.

My win/loss ratio was 92%. Winners made an average of 48%. Losers lost 13%. For every dollar lost, I made $55.96. Nice.

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,914.74    
 Monthly S1  4,045.66  130.93   
 Monthly Pivot  4,110.52  64.85   
 Weekly S2  4,112.24  1.73   
 Weekly S1  4,144.42  32.17   
 Daily S2  4,154.74  10.32   
 Weekly Pivot  4,159.89  5.16   
 Low  4,160.77  0.88   Yes! The Low is close to the Weekly Pivot.
 Open  4,161.51  0.74   Yes! The Open is close to the Low.
 Daily S1  4,165.66  4.15   
 61.8% Down from Intraday High  4,167.25  1.58   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  4,169.25  2.00   
 38.2% Down from Intraday High  4,171.25  2.00   
 Daily Pivot  4,171.70  0.45   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  4,176.59  4.89   
 High  4,177.73  1.14   Yes! The High is close to the Close.
 Daily R1  4,182.62  4.89   
 Daily R2  4,188.66  6.03   
 Weekly R1  4,192.07  3.41   
 Weekly R2  4,207.54  15.48   
 Monthly R1  4,241.44  33.90   
 Monthly R2  4,306.30  64.85   

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