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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 12/11/2017
24,386 56.87 0.2%
10,371 -31.68 -0.3%
763 4.90 0.6%
6,875 35.00 0.5%
2,660 8.49 0.3%
YTD
23.4%
14.7%
15.6%
27.7%
18.8%
Tom's Targets    Overview: 11/30/2017
24,600 or 23,500 by 12/15/2017
9,900 or 10,500 by 12/15/2017
800 or 750 by 12/15/2017
7,100 or 6,700 by 12/15/2017
2,725 or 2,575 by 12/15/2017

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July 2014 Headlines


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Thursday 7/31/14. Trading Thursday: Nasdaq

The index climbed by 0.5% or 20.2 points. Since 02/05/1971 the index made 505 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 353 occasions.
     Average loss was -0.8% on 152 occasions.
Expect the index to close higher 69.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 65/113 or 57.5% of the time.
     The prediction of the index closing lower has been right 25/50 or 50.0% of the time.

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.

Picture of the Nasdaq composite on the 5 minute scale.

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

The index bounced around a lot today. Mid session, the index formed a non-symmetrical head-and-shoulders bottom which I show as LS, Head, and RS for the left and right shoulders.

The pattern confirmed as a valid one at A when it closed above the red neckline. That was the buy signal which lead to a good move. Going into 3:00, the index threw back to the breakout price (B) and then recovered.

The probabilities suggest the index is going to move higher and I agree with that.

$ $ $

Earnings season has made me nervous, so I'm selling selective positions. That is unusual for me. Often I just ride out the bumps along the road but not this time. I don't like the bearish trips some of my stocks are making. I also flipped the targets at the top of this page to bearish. It looks as if the indices are headed lower, too, except for the Nasdaq which is lagging behind the other indices.

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  4,282.89    
 Weekly S2  4,369.98  87.09   
 Monthly S1  4,372.90  2.92   Yes! The Monthly S1 is close to the Weekly S2.
 Weekly S1  4,416.44  43.54   
 Monthly Pivot  4,429.41  12.97   
 Daily S2  4,429.61  0.19   Yes! The Daily S2 is close to the Monthly Pivot.
 Low  4,444.51  14.90   
 Daily S1  4,446.25  1.74   Yes! The Daily S1 is close to the Low.
 Weekly Pivot  4,450.97  4.72   
 61.8% Down from Intraday High  4,456.56  5.59   
 50% Down from Intraday High  4,460.29  3.72   
 Daily Pivot  4,461.16  0.87   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  4,462.90  1.74   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  4,464.01  1.11   Yes! The 38.2% Down from Intraday High is close to the Close.
 Open  4,468.44  4.43   
 High  4,476.06  7.62   
 Daily R1  4,477.80  1.74   Yes! The Daily R1 is close to the High.
 Daily R2  4,492.71  14.90   
 Weekly R1  4,497.43  4.72   
 Monthly R1  4,519.42  21.99   
 Weekly R2  4,531.96  12.54   
 Monthly R2  4,575.93  43.97   

Tuesday 7/29/14. Trading Tuesday: Dow

The index climbed by 0.1% or 22.02 points. Since 10/01/1928 the index made 1246 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 641 occasions.
     Average loss was -0.7% on 605 occasions.
Expect the index to close higher 51.4% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 78/119 or 65.5% of the time.
     The prediction of the index closing lower has been right 21/39 or 53.8% of the time.

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.

Picture of the Dow industrials on the 5 minute scale.

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

On Friday, the index moved horizontally at A, forming a rectangle bottom.

Here is an interesting take on today's (Monday's) action. The index is making an Elliott wave, motive wave higher. This comes in five pieces, four of which occurred today.

The big question is, will tomorrow (Tuesday) show a completion of wave 5? Will we then enter an ABC correction, sending the index lower?

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

-- Thomas Bulkowski

Top

© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  16,554.61    
 Monthly S1  16,768.60  213.99   
 Weekly S2  16,792.78  24.18   
 Daily S2  16,830.24  37.46   
 Low  16,877.72  47.48   
 Weekly S1  16,887.68  9.96   Yes! The Weekly S1 is close to the Low.
 Daily S1  16,906.41  18.73   
 61.8% Down from Intraday High  16,924.96  18.54   
 50% Down from Intraday High  16,939.55  14.59   
 Daily Pivot  16,953.90  14.35   
 38.2% Down from Intraday High  16,954.14  0.25   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Open  16,956.91  2.77   Yes! The Open is close to the 38.2% Down from Intraday High.
 Monthly Pivot  16,960.08  3.17   Yes! The Monthly Pivot is close to the Open.
 Close  16,982.59  22.51   
 High  17,001.38  18.79   
 Weekly Pivot  17,010.56  9.18   Yes! The Weekly Pivot is close to the High.
 Daily R1  17,030.07  19.52   
 Daily R2  17,077.56  47.48   
 Weekly R1  17,105.46  27.91   
 Monthly R1  17,174.07  68.61   
 Weekly R2  17,228.34  54.27   
 Monthly R2  17,365.55  137.21   

Monday 7/28/14. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq composite on the daily scale.

I show a picture of the Nasdaq composite on the daily scale.

What happened to my portfolio this week has me worried. A few stocks got hit because of poor earnings. That happens from time to time but it hasn't happened to me in years. One or two got hit and another dropped because it's buying another company.

And yet when I look at the charts of the 600 or so securities I follow, many are moving up, struggling to do so, but still holding their own. Those with earnings problems are taking a hit. Nothing new there. The chart pattern indicator is still bearish. It's not convinced either that the market is sound right now.

Let's look at the chart of the Nasdaq. Peaks A and B have the potential to form a double top chart pattern. That hasn't happened yet because the index needs to close below the red line at C. Until it does, you're just looking at squiggles on the price chart.

Let's say the index closes above the taller of the two peaks instead of below the red line. What Then? That would bust the double top and I'll bet the index moves up smartly. That's a guess and it usually applies to valid double tops, not those that do not confirm.

Top

A Brief Look Back

Picture of a flower from my garden.

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Down 48.45 points.
Tuesday: Up 61.81 points.
Wednesday: Down 26.91 points.
Thursday: Down 2.83 points.
Friday: Down 123.23 points.

For the Week...

The Dow industrials were down 139.61 points or 0.8%.
The Nasdaq composite was up 17.41 points or 0.4%.
The S&P 500 index was up 0.12 points or 0.0%.

Year to Date...

Dow Industrials
     1.1% down from the high of 17,151.56 on 07/17/2014.
     10.6% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     0.8% down from the high of 4,485.93 on 07/03/2014.
     12.8% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     0.7% down from the high of 1,991.39 on 07/24/2014.
     13.8% up from the low of 1,737.92 on 02/05/2014.

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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
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Gross domestic product8:30 WBMeasures economic activity; GDP deflator measures inflation.
Crude inventories10:30 W?My guess: Measures oil inventory.
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.
Chicago purchasing managers index9:45 ThBMonitors regional manufacturing activity.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Personal income & consumption8:30 FC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 FC+Covers durables, non-durables, and services.
Michigan sentiment9:55 FB-Consumer sentiment: Measures strength of consumer spending.
Construction spending10:00 FDCovers residential/non-residential/public spending on new construction.
Auto & truck sales2:00 FC-Monthly sales of domestically produced vehicles.

Options Expiration

No options expire this week.

Top

Swing and Position Traders: Chart Pattern Indicator

As of 07/25/2014, the CPI had:

66 bearish patterns,
7 bullish patterns,
326 patterns waiting for breakout.
The CPI signal is 9.6%, 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  16,820  16,890  16,986  17,057  17,153 
Weekly  16,785  16,873  17,003  17,091  17,221 
Monthly  16,547  16,754  16,953  17,159  17,358 
S&P500 (^GSPC): Daily  1,969  1,974  1,979  1,984  1,989 
Weekly  1,953  1,966  1,979  1,991  2,004 
Monthly  1,925  1,952  1,971  1,998  2,018 
Nasdaq (^IXIC): Daily  4,418  4,434  4,446  4,462  4,474 
Weekly  4,366  4,408  4,447  4,489  4,528 
Monthly  4,278  4,364  4,425  4,511  4,571 
  • 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 29.7%   The trend may continue. 
 6 months up 7.2%   Expect a reversal soon. 
 S & P 500 (^GSPC) 2 weeks up 29.5%   The trend may continue. 
 6 months up 16.9%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 2 weeks up 30.1%   The trend may continue. 
 3 months up 31.3%   The trend may continue. 

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

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

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

Buy-and-Hold: 12-Month SMA

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

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
17Triangle, symmetrical
13Head-and-shoulders top
11Double Top, Adam and Adam
8Broadening top
7Rectangle top
7Triangle, ascending
7Channel
6Double Top, Eve and Eve
6Rising wedge
5Double Top, Eve 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. Petroleum (Producing)1. Petroleum (Producing)
2. Shoe2. Natural Gas (Distributor)
3. Natural Gas (Distributor)3. Semiconductor Cap Equip.
4. Petroleum (Integrated)4. Natural Gas (Diversified)
5. Cement and Aggregates5. Cement and Aggregates
50. Toiletries/Cosmetics50. Building Materials
51. E-Commerce51. E-Commerce
52. Homebuilding52. Toiletries/Cosmetics
53. Retail Building Supply53. Retail Building Supply
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 7/26/14. A Book Value Setup.

I was flipping through my book, Fundamental Analysis and Position Trading, when I came across this gem on page 35.

Pick stocks with the following attributes.

  • Select stocks priced below $16.
  • Book value per share should be below 1.0.
  • Book value per share this year should be lower than last year.
  • Select small cap stocks (less than $1 billion in market value).
  • Return on equity should be rising.

If you want more information, buy the book and read the chapter on book value. It might make you a lot of money. Or not.

-- Thomas Bulkowski


Thursday 7/24/14. Trading Thursday: Nasdaq

The index climbed by 0.4% or 17.68 points. Since 02/05/1971 the index made 531 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 339 occasions.
     Average loss was -0.8% on 192 occasions.
Expect the index to close higher 63.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 65/112 or 58.0% of the time.
     The prediction of the index closing lower has been right 25/50 or 50.0% of the time.

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.

Picture of the Nasdaq composite on the 5 minute scale.

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

Triple top ABC confirms (the index closes below the horizontal red line) and suggests the index is going to tumble. That it does.

The height of the triple top from highest peak to lowest valley between the three peaks subtracted from the breakout price (the red line) gives a target which the index hits easily enough. Then, about an hour later, a pullback occurs just before 2:00. After a pullback completes, there is a 47% chance that a stock will continue lower. However, that's on the daily charts and for stocks, not the index. But it gives a clue to direction for Thursday. Of course, other events will shape the opening.

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  4,228.96    
 Weekly S2  4,326.27  97.31   
 Monthly S1  4,351.33  25.06   
 Weekly S1  4,399.99  48.66   
 Monthly Pivot  4,418.63  18.64   
 Weekly Pivot  4,425.95  7.32   
 Daily S2  4,448.00  22.05   
 Low  4,457.94  9.94   
 Daily S1  4,460.85  2.91   
 61.8% Down from Intraday High  4,466.65  5.80   
 Open  4,468.16  1.51   Yes! The Open is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  4,469.33  1.17   Yes! The 50% Down from Intraday High is close to the Open.
 Daily Pivot  4,470.79  1.46   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  4,472.02  1.23   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  4,473.70  1.68   Yes! The Close is close to the 38.2% Down from Intraday High.
 High  4,480.73  7.03   
 Daily R1  4,483.64  2.91   
 Daily R2  4,493.58  9.94   
 Weekly R1  4,499.67  6.09   
 Weekly R2  4,525.63  25.97   
 Monthly R1  4,541.00  15.37   
 Monthly R2  4,608.30  67.30   

Tuesday 7/22/14. Trading Tuesday: Dow

The index dropped by -0.3% or -48.45 points. Since 10/01/1928 the index made 981 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 465 occasions.
     Average loss was -0.7% on 516 occasions.
Expect the index to close lower 52.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 78/119 or 65.5% of the time.
     The prediction of the index closing lower has been right 21/38 or 55.3% of the time.

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.

Picture of the Dow industrials on the 5 minute scale.

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

On Friday, the index formed a nice-looking head-and-shoulders top. LS is the left shoulder, H is the head and you can guess what RS means.

The chart pattern confirmed as valid on Monday morning when the index plummeted in the opening minutes.

More recently, the index has formed a down-sloping channel. The index is still confined to bounce between the red lines, but expect a breakout soon. Which direction will that be?

I have no idea. However, the above probabilities say the index will close lower on Tuesday.

If you'd like more information on channels, then buy a copy of my book, Swing and Day Trading, pictured on the left.

You'll find "Trading Using Channels" starting on page 15.

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

-- Thomas Bulkowski

Top

© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  16,546.68    
 Monthly S1  16,799.21  252.52   
 Weekly S2  16,850.78  51.57   
 Daily S2  16,919.62  68.85   
 Weekly S1  16,951.25  31.63   
 Low  16,974.34  23.09   
 Monthly Pivot  16,975.38  1.04   Yes! The Monthly Pivot is close to the Low.
 Daily S1  16,985.68  10.29   Yes! The Daily S1 is close to the Monthly Pivot.
 61.8% Down from Intraday High  17,020.47  34.80   
 50% Down from Intraday High  17,034.72  14.25   
 Daily Pivot  17,040.39  5.67   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  17,048.98  8.58   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Weekly Pivot  17,051.41  2.43   Yes! The Weekly Pivot is close to the 38.2% Down from Intraday High.
 Close  17,051.73  0.32   Yes! The Close is close to the Weekly Pivot.
 Open  17,095.11  43.38   
 High  17,095.11  0.00   Yes! The High is close to the Open.
 Daily R1  17,106.45  11.34   Yes! The Daily R1 is close to the High.
 Weekly R1  17,151.88  45.44   
 Daily R2  17,161.16  9.28   Yes! The Daily R2 is close to the Weekly R1.
 Monthly R1  17,227.91  66.74   
 Weekly R2  17,252.04  24.13   
 Monthly R2  17,404.08  152.05   

Monday 7/21/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

I show the Dow industrials on a daily scale.

The two red lines outline a channel that shows the index climbing.

Channels don't prevent the index from going outside of the borders but they highlight the probable trend. Notice how the index has bounced from side to side.

Although I believe the index will move higher in the coming weeks, it won't be a straight-line run. The index is likely to continue to bounce between the two red lines of the channel.

Perhaps something on the world scene will cause a downward breakout from the channel. Perhaps good economic news will power it higher.

Top

A Brief Look Back

Picture of a flower from my garden.

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Up 111.61 points.
Tuesday: Up 5.26 points.
Wednesday: Up 77.52 points.
Thursday: Down 161.39 points.
Friday: Up 123.37 points.

For the Week...

The Dow industrials were up 156.37 points or 0.9%.
The Nasdaq composite was up 16.66 points or 0.4%.
The S&P 500 index was up 10.65 points or 0.5%.

Year to Date...

Dow Industrials
     0.3% down from the high of 17,151.56 on 07/17/2014.
     11.5% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     1.2% down from the high of 4,485.93 on 07/03/2014.
     12.3% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     0.4% down from the high of 1,985.59 on 07/03/2014.
     13.8% up from the low of 1,737.92 on 02/05/2014.

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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
Consumer price index8:30 TB+Inflation report. Measures cost of goods and services.
Existing home sales10:00 TCCounts sales of used homes.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
New home sales10:00 ThC+Shows sales of single-family homes.
Durable goods orders8:30 FBMeasures orders, shipments of goods with lifespans >3 years.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

On 07/18/2014, the CPI had:

2 bearish patterns,
15 bullish patterns,
233 patterns waiting for breakout.
The CPI signal is 88.2%, which is bullish (>= 65%).

The chart pattern indicator is bullish 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  16,928  17,014  17,064  17,150  17,200 
Weekly  16,867  16,984  17,068  17,184  17,268 
Monthly  16,563  16,832  16,992  17,260  17,420 
S&P500 (^GSPC): Daily  1,954  1,966  1,973  1,985  1,992 
Weekly  1,944  1,961  1,973  1,990  2,001 
Monthly  1,910  1,944  1,965  1,999  2,020 
Nasdaq (^IXIC): Daily  4,359  4,395  4,415  4,452  4,471 
Weekly  4,312  4,372  4,412  4,472  4,512 
Monthly  4,215  4,324  4,405  4,513  4,594 
  • 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 43.4%   Expect a random direction. 
 6 months up 7.2%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week up 42.3%   Expect a random direction. 
 6 months up 16.9%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week up 43.6%   Expect a random direction. 
 3 months up 31.3%   The trend may continue. 

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
16Double Top, Adam and Adam
12Head-and-shoulders top
10Triangle, symmetrical
9Rising wedge
8Triangle, ascending
6Rectangle top
6Double Top, Eve and Eve
5Channel
5Broadening top, right-angled and ascending
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. Petroleum (Producing)1. Natural Gas (Distributor)
2. Natural Gas (Distributor)2. Petroleum (Producing)
3. Semiconductor Cap Equip.3. Semiconductor Cap Equip.
4. Natural Gas (Diversified)4. Natural Gas (Diversified)
5. Cement and Aggregates5. Cement and Aggregates
50. Building Materials50. Retail (Special Lines)
51. E-Commerce51. E-Commerce
52. Toiletries/Cosmetics52. Toiletries/Cosmetics
53. Retail Building Supply53. Retail Building Supply
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 7/19/10. The Pre-Throwback Setup

My book, Visual Guide to Chart Patterns has trading setups that will be of interest to investors and traders.

The pre-throwback setup is one that I discuss starting on page 220.

I tested the setup using 1,001 rectangles and found that it works 77% of the time and makes 2.5%. The average win is 3.11% and the average loss was 0.6%.

The setup is basic. Place a buy stop a penny above the top of the rectangle and exit if price rises 5%. Otherwise, hold the stock for three price bars and then exit.

For more details, buy the book. You'll find a chapter titled, "The Throwback Buy Setup."

-- Thomas Bulkowski

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Thursday 7/17/14. Trading Thursday: Nasdaq

The index climbed by 0.2% or 9.58 points. Since 02/05/1971 the index made 606 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 357 occasions.
     Average loss was -0.8% on 249 occasions.
Expect the index to close higher 58.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 65/111 or 58.6% of the time.
     The prediction of the index closing lower has been right 25/50 or 50.0% of the time.

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.

Picture of the Nasdaq composite on the 5 minute scale.

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

The chart shows a head-and-shoulders bottom pattern as LS, Head, and RS (left shoulder, head, and right shoulder). The thick red line is the neckline joining the two armpits. A close above this line is the buy signal. If you bought the index and held it overnight, it would have proven to be a profitable maneuver, albeit dangerous. The index could have just as easily gone down.

At AB, the index has made a double top which confirms as a valid pattern when the index closes below the red line near C. It looks to me that the index might find support near where it closed today.

Are you having trouble with double tops? Then buy a copy of my book, Getting Started in Chart Patterns, Second Edition. Start reading from page 133. Head-and-shoulders bottoms begin on page 106 and the performance statistics are the latest I have.

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  4,197.41    
 Weekly S2  4,291.36  93.95   
 Monthly S1  4,311.69  20.33   
 Weekly S1  4,358.67  46.98   
 Monthly Pivot  4,398.81  40.14   
 Daily S2  4,402.36  3.55   
 Daily S1  4,414.16  11.81   
 Weekly Pivot  4,418.34  4.18   
 Low  4,419.71  1.37   Yes! The Low is close to the Weekly Pivot.
 Close  4,425.97  6.26   
 61.8% Down from Intraday High  4,430.85  4.88   
 Daily Pivot  4,431.52  0.67   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  4,434.29  2.77   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  4,437.73  3.44   
 Daily R1  4,443.32  5.59   
 Open  4,446.17  2.85   Yes! The Open is close to the Daily R1.
 High  4,448.87  2.70   Yes! The High is close to the Open.
 Daily R2  4,460.68  11.81   
 Weekly R1  4,485.65  24.97   
 Monthly R1  4,513.09  27.44   
 Weekly R2  4,545.32  32.23   
 Monthly R2  4,600.21  54.89   

Tuesday 7/15/14. Trading Tuesday: Dow

The index climbed by 0.7% or 111.61 points. Since 10/01/1928 the index made 631 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 347 occasions.
     Average loss was -0.7% on 284 occasions.
Expect the index to close higher 55.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 77/118 or 65.3% of the time.
     The prediction of the index closing lower has been right 21/38 or 55.3% of the time.

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.

Picture of the Dow industrials on the 5 minute scale.

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

On Friday, the index formed a symmetrical triangle at A. This one broke out upward as they do 54% of the time, according to interpolation of the statistics in my book, Encyclopedia of Chart Patterns, Second Edition.

Notice that today (Monday) the index didn't really move much after a big gain at the open. This behavior is typical for securities. After a big move, a stock will trend sideways and rest. The length of that rest is often proportional to the extent of the upward move.

In this case, I would expect the index to make another strong move upward. But we have a problem. A significant one.

It's possible the index will collapse. Why do I write that? Because this advance was a narrow one, according to my portfolio. After such a large point gain in the Dow, I would expect to see my portfolio value jump up but it didn't. It was flat. My guess is the general market didn't participate in this gain, so caution is advised. This could be a fake rally that leads to a drop. Take caution playing this move.

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  16,573.69    
 Weekly S2  16,716.43  142.74   
 Monthly S1  16,814.55  98.13   
 Weekly S1  16,885.92  71.37   
 Daily S2  16,894.09  8.17   Yes! The Daily S2 is close to the Weekly S1.
 Monthly Pivot  16,944.60  50.50   
 Low  16,950.93  6.33   Yes! The Low is close to the Monthly Pivot.
 Open  16,950.93  0.00   Yes! The Open is close to the Low.
 Daily S1  16,974.76  23.83   
 Weekly Pivot  16,974.88  0.12   Yes! The Weekly Pivot is close to the Daily S1.
 61.8% Down from Intraday High  17,003.46  28.58   
 50% Down from Intraday High  17,019.68  16.22   
 Daily Pivot  17,031.59  11.91   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  17,035.90  4.31   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  17,055.42  19.52   
 High  17,088.43  33.01   
 Daily R1  17,112.26  23.83   
 Weekly R1  17,144.37  32.12   
 Daily R2  17,169.09  24.72   
 Monthly R1  17,185.46  16.37   
 Weekly R2  17,233.33  47.86   
 Monthly R2  17,315.51  82.18   

Monday 7/14/14. Market Monday: The Week Ahead

My Prediction

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

I show the S&P 500 index on the daily scale, but it's not a log scale. It's arithmetic.

That's because of the retrace lines my program drew. Let me explain.

After such a strong move up from the May low, where the green circle is, I expect that the index will retrace some of those gains. The chart pattern indicator agrees by turning bearish.

How far will the index drop?

The three red lines are a 38%, 50% and 62% Fibonacci retrace of the move up from the lower green circle in May to the peak in July (another green circle).

I don't know if the index will actually decline to hit any of those red lines, but it's a possibility. I am confident that the index will retrace, though.

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A Brief Look Back

Picture of my dog.

This picture is in loving memory: Bumper ~2000 to July 10, 2014. She died too young.

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Down 44.05 points.
Tuesday: Down 117.59 points.
Wednesday: Up 78.99 points.
Thursday: Down 70.54 points.
Friday: Up 28.74 points.

For the Week...

The Dow industrials were down 124.45 points or 0.7%.
The Nasdaq composite was down 70.44 points or 1.6%.
The S&P 500 index was down 17.87 points or 0.9%.

Year to Date...

Dow Industrials
     0.8% down from the high of 17,074.64 on 07/03/2014.
     10.5% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     1.6% down from the high of 4,485.93 on 07/03/2014.
     11.9% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     0.9% down from the high of 1,985.59 on 07/03/2014.
     13.2% up from the low of 1,737.92 on 02/05/2014.

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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
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.
Industrial production9:15 WB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 WB-Gauges economic activity, hints of inflation.
Crude inventories10:30 W?My guess: Measures oil inventory.
FEDs Beige book2:00 W?Reports on economic conditions.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Housing starts8:30 ThB-Number of homes beginning construction.
Building permits8:30 ThB-Measures building permits for new construction.
Leading indicators10:00 FD-Summary of already known reports.

Options Expiration

The following is courtesy of the Options Industry Council.

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

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

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Swing and Position Traders: Chart Pattern Indicator

As of 07/11/2014, the CPI had:

31 bearish patterns,
6 bullish patterns,
317 patterns waiting for breakout.
The CPI signal is 16.2%, which is bearish (<= 35%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,829  16,886  16,918  16,975  17,007 
Weekly  16,679  16,812  16,938  17,070  17,196 
Monthly  16,536  16,740  16,907  17,111  17,278 
S&P500 (^GSPC): Daily  1,956  1,962  1,965  1,971  1,974 
Weekly  1,937  1,952  1,968  1,984  2,000 
Monthly  1,900  1,934  1,960  1,994  2,019 
Nasdaq (^IXIC): Daily  4,379  4,397  4,407  4,425  4,435 
Weekly  4,288  4,352  4,415  4,479  4,542 
Monthly  4,194  4,305  4,395  4,506  4,597 
  • 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 29.8%   The trend may continue. 
 6 months up 7.2%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week down 28.0%   The trend may continue. 
 6 months up 16.9%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week down 30.7%   The trend may continue. 
 3 months up 31.3%   The trend may continue. 

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 2 days.

 Found Chart Pattern Name
15Double Top, Adam and Adam
12Triangle, symmetrical
10Triangle, ascending
9Head-and-shoulders top
7Rectangle top
7Rising wedge
5Double Bottom, Adam and Adam
5Double Bottom, Eve and Adam
5Double Top, Eve and Eve
5Rectangle bottom

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

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

 

 

 

 

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

This WeekLast Week
1. Natural Gas (Distributor)1. Petroleum (Producing)
2. Petroleum (Producing)2. Natural Gas (Distributor)
3. Semiconductor Cap Equip.3. Biotechnology
4. Natural Gas (Diversified)4. Cement and Aggregates
5. Cement and Aggregates5. Semiconductor Cap Equip.
50. Retail (Special Lines)50. Household Products
51. E-Commerce51. Retail Building Supply
52. Toiletries/Cosmetics52. Retail (Special Lines)
53. Retail Building Supply53. Toiletries/Cosmetics
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 7/12/14. A Valuable Book.

My first book, Encyclopedia of Chart Patterns, pictured, is the one that made my name. Why? Because I did what no one had done before, and perhaps, since. I cataloged thousands of chart patterns and then gathered statistics. The book is now in its second edition. Let me tell you about it.

Table x.2 (where x is a chapter number) shows general statistics such as the average rise or decline, how the chart pattern acts (reversal or continuation), and the time it takes to reach its ultimate destination.

Table x.3 lists failure rates. It answers the question, how far does price move before it reverses?.

Table x.4 shows breakout and post-breakout statistics. Key in this table is the number of throwbacks or pullbacks.

Table x.5 lists the percentage of chart patterns that reach their ultimate destination by time. For example, did you know that just 5% of complex head-and-shoulders bottoms reach the ultimate high in the first week after a breakout.

Table x.6 discusses size statistics, which is so indicative of how well a pattern will perform. Yes, size matters.

Table x.7 talks about volume.

And so on. Other tables follow and the statistics list performance in both bull and bear markets.

Over the years, the publisher has raised the price of this book, but even so, given that it's over 1,000 pages long, it's actually less expensive per page than many other, shorter books. And it certainly carries more value for a serious trader of chart patterns.

If you don't own a copy, please buy one.

-- Thomas Bulkowski


Thursday 7/10/14. Trading Thursday: Nasdaq

The index climbed by 0.6% or 27.57 points. Since 02/05/1971 the index made 452 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 280 occasions.
     Average loss was -0.9% on 172 occasions.
Expect the index to close higher 61.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 65/110 or 59.1% of the time.
     The prediction of the index closing lower has been right 25/50 or 50.0% of the time.

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.

Picture of the Nasdaq composite on the 5 minute scale.

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

The index moved horizontally during the last hour, forming a rectangle top chart pattern. I show that here in red.

The breakout is usually upward (53% of the time) according to my book, Encyclopedia of Chart Patterns, Second Edition. I show a picture of that book on the right.

I think an upward breakout is likely and it agrees with the above probabilities. Some of this belief begins with the sharp decline the occurs just before the start of the rectangle (2:00 pm). The index has been trending upward since just after 10:00 and I believe it will continue higher. After such a strong drop yesterday, an extended recovery is due. However, I've been wrong before.

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  4,092.54    
 Monthly S1  4,255.78  163.25   
 Weekly S2  4,344.51  88.73   
 Monthly Pivot  4,370.86  26.35   
 Daily S2  4,375.74  4.88   
 Weekly S1  4,381.77  6.03   
 Low  4,388.01  6.24   
 Daily S1  4,397.38  9.37   
 61.8% Down from Intraday High  4,400.97  3.58   
 Open  4,403.04  2.07   Yes! The Open is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  4,404.97  1.93   Yes! The 50% Down from Intraday High is close to the Open.
 38.2% Down from Intraday High  4,408.97  4.00   
 Daily Pivot  4,409.66  0.68   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  4,419.03  9.37   
 High  4,421.93  2.90   Yes! The High is close to the Close.
 Daily R1  4,431.30  9.37   
 Weekly Pivot  4,433.85  2.55   Yes! The Weekly Pivot is close to the Daily R1.
 Daily R2  4,443.58  9.73   
 Weekly R1  4,471.11  27.53   
 Weekly R2  4,523.19  52.08   
 Monthly R1  4,534.10  10.91   
 Monthly R2  4,649.18  115.07   

Tuesday 7/8/14. Trading Tuesday: Dow

The index dropped by -0.3% or -44.05 points. Since 10/01/1928 the index made 980 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 465 occasions.
     Average loss was -0.7% on 515 occasions.
Expect the index to close lower 52.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 77/118 or 65.3% of the time.
     The prediction of the index closing lower has been right 20/37 or 54.1% of the time.

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.

Picture of the Dow industrials on the 5 minute scale.

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

The chart shows the holiday-shortened trading session plus trading from Monday. On Monday, the index formed a descending triangle at A. The triangle broke out upward.

At B, the index completed a throwback. Analysis of throwbacks suggests that 65% of the time, a stock will recover. I expect the index to move higher on Tuesday and hopefully close higher as well.

For a complete look at throwbacks, buy a copy of my book, Swing and Day Trading. Look at page 77, Table 3.3 and read the discussion. The table shows how the throwback rate has changed since 1988.

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  16,490.11    
 Weekly S2  16,694.23  204.12   
 Monthly S1  16,757.16  62.93   
 Weekly S1  16,859.22  102.06   
 Monthly Pivot  16,915.90  56.68   
 Daily S2  16,955.45  39.55   
 Weekly Pivot  16,966.93  11.48   
 Daily S1  16,989.83  22.90   
 Low  16,992.45  2.62   Yes! The Low is close to the Daily S1.
 61.8% Down from Intraday High  17,019.72  27.27   
 Close  17,024.21  4.49   Yes! The Close is close to the 61.8% Down from Intraday High.
 Daily Pivot  17,026.83  2.62   Yes! The Daily Pivot is close to the Close.
 50% Down from Intraday High  17,028.14  1.31   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  17,036.56  8.42   
 Daily R1  17,061.21  24.65   
 Open  17,063.83  2.62   Yes! The Open is close to the Daily R1.
 High  17,063.83  0.00   Yes! The High is close to the Open.
 Daily R2  17,098.21  34.38   
 Weekly R1  17,131.92  33.71   
 Monthly R1  17,182.95  51.03   
 Weekly R2  17,239.63  56.68   
 Monthly R2  17,341.69  102.06   

Monday 7/7/14. 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 Dow has broken out upward from an ascending triangle. According to my book, Encyclopedia of Chart Patterns, Second Edition, page 719, it says that ascending triangles break out upward 70% of the time. That's not explicitly stated. You have to interpolate the data in the table to find it. But it's easy enough to do.

It sure did take the index long enough to break out. Unfortunately, it happened on a holiday shortened trading day. That means it's suspect. Volume is often low in many stocks, so it's easier to push the index around.

My guess, and it's only a guess, is that this upward move is fake. The index will collapse back to the triangle and do more work there. But with good employment numbers out today, this upward move could be real, too. Who knows?

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A Brief Look Back

Picture of a flower from my garden.

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Down 25.24 points.
Tuesday: Up 129.47 points.
Wednesday: Up 20.17 points.
Thursday: Up 92.02 points.
Friday: Holiday or other weird event!

For the Week...

The Dow industrials were up 216.42 points or 1.3%.
The Nasdaq composite was up 88 points or 2.0%.
The S&P 500 index was up 24.48 points or 1.2%.

Year to Date...

Dow Industrials
     0.0% down from the high of 17,074.64 on 07/03/2014.
     11.3% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     0.0% down from the high of 4,485.93 on 07/03/2014.
     13.7% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     0.0% down from the high of 1,985.59 on 07/03/2014.
     14.2% up from the low of 1,737.92 on 02/05/2014.

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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
Consumer credit3:00 TD-Measures auto, credit card and other debt.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Wholesale inventories10:00 ThD-Wholesale sales and inventory statistics.
Treasury budget2:00 FDTracks budget deficit. Important in April (tax filing).

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 07/03/2014, the CPI had:

2 bearish patterns,
48 bullish patterns,
338 patterns waiting for breakout.
The CPI signal is 96.0%, 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  16,945  17,007  17,041  17,102  17,136 
Weekly  16,709  16,889  16,982  17,161  17,254 
Monthly  16,505  16,787  16,931  17,212  17,356 
S&P500 (^GSPC): Daily  1,973  1,979  1,982  1,989  1,992 
Weekly  1,949  1,967  1,976  1,995  2,004 
Monthly  1,893  1,939  1,962  2,009  2,032 
Nasdaq (^IXIC): Daily  4,456  4,471  4,479  4,493  4,501 
Weekly  4,367  4,426  4,456  4,516  4,545 
Monthly  4,115  4,300  4,393  4,579  4,671 
  • 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 43.5%   Expect a random direction. 
 6 months up 7.2%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week up 42.4%   Expect a random direction. 
 6 months up 16.9%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 3 weeks up 22.6%   Expect a reversal soon. 
 3 months up 31.3%   The trend may continue. 

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 9 days.

 Found Chart Pattern Name
22Triangle, symmetrical
10Rising wedge
8Triangle, ascending
7Double Top, Adam and Adam
7Double Bottom, Adam and Adam
5Double Bottom, Eve and Adam
4Head-and-shoulders top
4Channel
3Falling wedge
3Rectangle bottom

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

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

 

 

 

 

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

This WeekLast Week
1. Petroleum (Producing)1. Cement and Aggregates
2. Natural Gas (Distributor)2. Petroleum (Producing)
3. Biotechnology3. Natural Gas (Distributor)
4. Cement and Aggregates4. Natural Gas (Diversified)
5. Semiconductor Cap Equip.5. Biotechnology
50. Household Products50. Household Products
51. Retail Building Supply51. Retail Building Supply
52. Retail (Special Lines)52. Retail (Special Lines)
53. Toiletries/Cosmetics53. Toiletries/Cosmetics
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Friday 7/4/14. How Many Stocks Should You Own?

In my book, Trading Basics I discuss how many stocks you should have in your portfolio.

I read an article by Mark Vakkur in Stocks & Commodities magazine (September 1997) that said you get 85% diversification by holding 7 or 8 stocks.

Back then and in the 80s, I held maybe 4 or 5. As my portfolio grew in size, I increased that to 10 stocks. I found that with 10, I got good rotation. That means when one needed to be sold another was ready to be added to the portfolio.

The recent bear market taught me a lesson. I now own 25 securities. The largest holding represents 10% of the entire portfolio, with many stocks allocated to 3% or 4% of the portfolio.

But here's another way to think about diversification: Diversify by trading style.

Buy and hold/investors: own 8 to dozens of securities.
Position traders: Own a core portfolio plus up to a dozen securities
Swing traders: core portfolio plus 6 to 12 stocks.
Day traders: core portfolio plus 4 stock (two that are bullish and 2 that are bearish).

The "core portfolio" should consist of securities from the next higher level. For example, if you're a day trader, than own a core portfolio of swing trades. A position trader will own a core portfolio of buy and hold positions.

The idea behind diversifying by trading style is to limit losses when your trading style goes out of fashion or you hit a slump. Read pages 15 to 18 in my Trading Basics book for more details about diversifying by trading style.

-- Thomas Bulkowski

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Thursday 7/3/14. Trading Thursday: Nasdaq

The index dropped by 0.0% or -0.92 points. Since 02/05/1971 the index made 587 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 327 occasions.
     Average loss was -1.0% on 260 occasions.
Expect the index to close higher 55.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 64/109 or 58.7% of the time.
     The prediction of the index closing lower has been right 25/50 or 50.0% of the time.

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.

Picture of the Nasdaq composite on the 5 minute scale.

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

Not much happened today in the Nasdaq.

A channel took shape before the close yesterday (Tuesday) and it became recognizable today when more trendline touches appeared (red lines). This one broke out downward just after 11:00 and it took until 3:00 to fall far enough to reach the target. The target is the height of the pattern applied (subtracted from the breakout price, in this case) to the breakout price.

$ $ $

Want something to read over he coming holiday? Try my low-cost book, Visual Guide to Chart Patterns, Second Edition. I show a copy of that book here.

It has updated statistics and tactics. Maybe you need something that will burn in the fireplace this winter? Look no further and buy a copy of the book. Read it, burn it, and buy another copy to make my publisher happy. And if you do buy a copy, be sure to post a 5-star customer review of the book on your favorite e-tailer. -- Thanks.

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  4,083.73    
 Monthly S1  4,270.73  187.00   
 Monthly Pivot  4,335.30  64.57   
 Weekly S2  4,338.54  3.24   
 Weekly S1  4,398.14  59.59   
 Weekly Pivot  4,399.00  0.87   Yes! The Weekly Pivot is close to the Weekly S1.
 Daily S2  4,442.46  43.45   
 Daily S1  4,450.09  7.64   
 Low  4,450.87  0.78   Yes! The Low is close to the Daily S1.
 61.8% Down from Intraday High  4,457.00  6.13   
 Close  4,457.73  0.73   Yes! The Close is close to the 61.8% Down from Intraday High.
 Open  4,457.86  0.13   Yes! The Open is close to the Close.
 Daily Pivot  4,458.51  0.65   Yes! The Daily Pivot is close to the Open.
 Weekly R1  4,458.60  0.09   Yes! The Weekly R1 is close to the Daily Pivot.
 50% Down from Intraday High  4,458.90  0.30   Yes! The 50% Down from Intraday High is close to the Weekly R1.
 Weekly R2  4,459.46  0.57   Yes! The Weekly R2 is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  4,460.79  1.33   Yes! The 38.2% Down from Intraday High is close to the Weekly R2.
 Daily R1  4,466.14  5.35   
 High  4,466.92  0.78   Yes! The High is close to the Daily R1.
 Daily R2  4,474.56  7.64   
 Monthly R1  4,522.30  47.74   
 Monthly R2  4,586.87  64.57   

Tuesday 7/1/14. Trading Tuesday: Dow

The index dropped by -0.1% or -25.24 points. Since 10/01/1928 the index made 1238 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 643 occasions.
     Average loss was -0.8% on 595 occasions.
Expect the index to close higher 51.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 76/117 or 65.0% of the time.
     The prediction of the index closing lower has been right 20/37 or 54.1% of the time.

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.

Picture of the Dow industrials on the 5 minute scale.

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

The chart pattern that comes to mind is a head-and-shoulders top that I have marked as 1, 2, 3. It confirms as a valid chart pattern at A. That was late in the session, which did not give the index much time to drop. But drop it did.

There was another chart pattern, a rectangle from 12:00 to 2:00. It broke out upward, but the rise didn't amount to much.

I don't see anything much of interest that would indicate how tomorrow's trading might fare. You can draw a down-sloping channel starting from the peak directly above A to the market close. That would indicate tomorrow will be another down day (a continuation of the down-channel).

If you want to know more about trading channels, see my book, Swing and Day Trading. Start on page 15.

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  16,349.51    
 Monthly S1  16,588.05  238.55   
 Weekly S2  16,623.85  35.80   
 Weekly S1  16,725.23  101.37   
 Daily S2  16,763.94  38.71   
 Monthly Pivot  16,783.04  19.10   
 Daily S1  16,795.27  12.23   
 Low  16,801.94  6.67   Yes! The Low is close to the Daily S1.
 Close  16,826.60  24.66   
 61.8% Down from Intraday High  16,828.42  1.82   Yes! The 61.8% Down from Intraday High is close to the Close.
 Daily Pivot  16,833.27  4.85   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  16,836.61  3.34   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  16,844.79  8.18   
 Weekly Pivot  16,847.46  2.68   Yes! The Weekly Pivot is close to the 38.2% Down from Intraday High.
 Open  16,852.49  5.03   Yes! The Open is close to the Weekly Pivot.
 Daily R1  16,864.60  12.11   
 High  16,871.27  6.67   Yes! The High is close to the Daily R1.
 Daily R2  16,902.60  31.33   
 Weekly R1  16,948.84  46.24   
 Monthly R1  17,021.58  72.75   
 Weekly R2  17,071.07  49.49   
 Monthly R2  17,216.57  145.49   

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