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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 07/20/2017
21,612 -28.97 -0.1%
9,483 -92.64 -1.0%
720 5.10 0.7%
6,390 4.96 0.1%
2,473 -0.38 0.0%
YTD
9.4%
4.9%
9.1%
18.7%
10.5%
Tom's Targets    Overview: 07/14/2017
21,850 or 21,000 by 08/01/2017
9,950 or 9,400 by 08/01/2017
725 or 685 by 08/01/2017
6,450 or 6,175 by 08/01/2017
2,525 or 2,400 by 08/01/2017

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June 2011 Headlines


Archives


Thursday 6/30/11. Trading Thursday: Dow

Picture of the Dow industrials on the 5 minute scale.

The index climbed by 0.6% or 72.73 points. Since 10/01/1928 the index made 776 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 428 occasions.
     Average loss was -0.7% on 348 occasions.
Look for the index to close higher.

I show a picture of the Dow industrials on the 5-minute scale from Wednesday's trading, but it was supposed to be the Nasdaq. I wrote all of this and then discovered the chart I used was of the Dow. Sigh.

The picture shows a target rich environment for chart pattern traders.

First, after a straight-line run upward, the index formed a small cup with handle at E and F. This one worked about as well as they do on the daily charts, which is to say, not very well. Price climbed to A and that's it.

After the cup came an Adam & Eve double top. We can argue about whether the Eve top is really an Eve or an Adam, but the double top part is clear. The index tumbled to C, confirming the pattern as valid (which is why the cup with handle is NOT a double top...it never confirmed). Confirmation occurs when price closes below the lowest valley between the two peaks. That happened two price bars after B in the AB top.

At C and D, the index formed an Adam & Eve double bottom. Price confirmed this pattern, too, when it closed above the peak between the two valleys.

The big question for tomorrow (Thursday) is will the index close higher for a fourth day in a row. The probabilities discussed at the opening above favor a higher close. I am not so sure.

I think that the index has hit overhead resistance at the A and B peaks, near 12,285. It now looks like a retrace is going to happen at the open. That should take it down toward C and D, but my guess is the market will be strong enough to keep it from falling that far. Then the index should recover to test the AB level again. If the probabilities are correct, the index will push through that resistance to close higher. I am skeptical that that will happen, but with the odds suggesting a higher close, I am not going to bicker. The index will close higher. For what it's worth, the Nasdaq has an almost 2:1 probability of closing higher on Thursday.

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

-- Thomas Bulkowski

Top 

© 2011 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,500.63    
 Weekly S2  11,775.51  274.88   
 Monthly S1  11,881.02  105.52   
 Weekly S1  12,018.46  137.44   
 Weekly Pivot  12,117.90  99.43   
 Daily S2  12,138.79  20.89   
 Low  12,180.93  42.14   
 Open  12,187.63  6.70   Yes! The Open is close to the Low.
 Daily S1  12,200.10  12.47   
 61.8% Down from Intraday High  12,220.45  20.35   
 50% Down from Intraday High  12,232.66  12.21   
 Daily Pivot  12,242.25  9.59   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Monthly Pivot  12,242.93  0.68   Yes! The Monthly Pivot is close to the Daily Pivot.
 38.2% Down from Intraday High  12,244.87  1.94   Yes! The 38.2% Down from Intraday High is close to the Monthly Pivot.
 Close  12,261.42  16.55   
 High  12,284.39  22.97   
 Daily R1  12,303.56  19.17   
 Daily R2  12,345.71  42.14   
 Weekly R1  12,360.85  15.15   
 Weekly R2  12,460.29  99.43   
 Monthly R1  12,623.32  163.04   
 Monthly R2  12,985.23  361.90   

Tuesday 6/28/11. Trading Tuesday: Dow

Picture of the Dow industrials on the 5 minute scale.

The index climbed by 0.9% or 108.98 points. Since 10/01/1928 the index made 467 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 279 occasions.
     Average loss was -0.7% on 188 occasions.
Look for the index to close higher.

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

The index formed a large rectangle top from 12:00 to 2:00. That should support the index tomorrow (Tuesday).

The index also made a small head-and-shoulders top at A, B, and C. The narrow scale makes it difficult to see the pattern, but I believe it is there. The index has already broken out downward, fulfilling the measure rule for the chart pattern.

Since underlying support is nearby, I expect the index to close higher tomorrow.

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

-- Thomas Bulkowski

Top 

© 2011 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,428.01    
 Weekly S2  11,702.89  274.88   
 Monthly S1  11,735.78  32.90   
 Daily S2  11,860.71  124.93   
 Weekly S1  11,873.22  12.51   Yes! The Weekly S1 is close to the Daily S2.
 Low  11,934.05  60.83   
 Open  11,934.66  0.61   Yes! The Open is close to the Low.
 Daily S1  11,952.14  17.48   
 61.8% Down from Intraday High  11,996.99  44.85   
 50% Down from Intraday High  12,016.43  19.44   
 Daily Pivot  12,025.47  9.04   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  12,035.87  10.40   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  12,043.56  7.69   Yes! The Close is close to the 38.2% Down from Intraday High.
 Weekly Pivot  12,045.28  1.72   Yes! The Weekly Pivot is close to the Close.
 High  12,098.81  53.53   
 Daily R1  12,116.90  18.09   
 Monthly Pivot  12,170.31  53.41   
 Daily R2  12,190.23  19.93   
 Weekly R1  12,215.61  25.38   
 Weekly R2  12,387.67  172.05   
 Monthly R1  12,478.08  90.42   
 Monthly R2  12,912.61  434.52   

Monday 6/27/11. 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 and it is a troubling picture. Why?

At B and D, price has made what appears, at least so far, to be an Eve & Adam double bottom. It is unconfirmed, meaning price has not closed above the top of the peak between the two bottoms (C). Therein lies the problem.

If price closes below D, then the pattern could become a measured move down.

That chart patterns unfolds this way. Price slides down from A (or even the May peak) to B, recovers to C in what is called the corrective phase, and continues lower, well past D, such that the CD drop is about the same length as the AB move.

Will that happen? The European markets are still worrying Wall Street and there is the coming US debt ceiling issue. Raising the debt ceiling will make the markets more nervous going into August. For now, Europe has center stage.

My guess is that we will see a double bottom here and not a measured move down, but Monday's trading could tell which one it is going to be depending on a higher or lower close. I think we will move sideways for a time before beginning to recover, so that is what I expect to happen this week.

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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 76.02 points.
Tuesday: Up 109.63 points.
Wednesday: Down 80.34 points.
Thursday: Down 59.67 points.
Friday: Down 115.42 points.

For the Week...

The Dow industrials were down 69.78 points or 0.6%.
The Nasdaq composite was up 36.41 points or 1.4%.
The S&P 500 index was down 3.05 points or 0.2%.

Year to Date...

Dow Industrials
     7.3% down from the high of 12,876.00 on 05/02/2011.
     3.3% up from the low of 11,555.48 on 03/16/2011.
Nasdaq
     8.1% down from the high of 2,887.75 on 05/02/2011.
     2.0% up from the low of 2,599.88 on 06/16/2011.
S&P 500
     7.5% down from the high of 1,370.58 on 05/02/2011.
     1.6% up from the low of 1,249.05 on 03/16/2011.

Top 

Economic Reports

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

ReportTimeA-F
Rating
Description
Personal income & consumption8:30 MC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 MC+Covers durables, non-durables, and services.
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Chicago purchasing managers index9:45 ThBMonitors regional manufacturing activity.
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 sales3:00? FC-Monthly sales of domestically produced vehicles.

Options Expiration

No options expire this week.

Top 

Swing and Position Traders: Chart Pattern Indicator

On 06/24/2011, the chart pattern indicator (CPI) had:

24 bearish patterns,
8 bullish patterns,
298 patterns waiting for breakout.
The CPI signal is 25.0%, which is bearish (<= 35%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  11,841  11,888  11,972  12,019  12,104 
Weekly  11,667  11,801  12,009  12,143  12,351 
Monthly  11,392  11,663  12,134  12,405  12,876 
S&P 500 (^GSPC): Daily  1,257  1,262  1,273  1,279  1,290 
Weekly  1,241  1,255  1,277  1,290  1,312 
Monthly  1,203  1,236  1,291  1,323  1,378 
Nasdaq (^IXIC): Daily  2,626  2,639  2,661  2,674  2,696 
Weekly  2,566  2,609  2,651  2,695  2,737 
Monthly  2,461  2,557  2,696  2,792  2,931 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

Top 

Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week down 30.7%  The trend may continue.
 2 months down 10.5%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week down 31.6%  The trend may continue.
 2 months down 10.8%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 1 week up 39.9%  The trend may continue.
 2 months down 15.4%  Expect a reversal soon.

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

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

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

Buy-and-Hold: 12-Month SMA

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

Top 

Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
40Head-and-shoulders top
15Pipe bottom
14Triangle, symmetrical
13Pipe top
10Double Top, Adam and Adam
9Triple top
8Triangle, descending
6Rectangle top
6Broadening wedge, descending
5Double 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, indexes, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

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

This WeekLast Week
1. Medical Supplies1. Medical Supplies
2. Toiletries/Cosmetics2. Natural Gas (Diversified)
3. Natural Gas (Diversified)3. Petroleum (Integrated)
4. Biotechnology4. Toiletries/Cosmetics
5. Petroleum (Integrated)5. Electric Utility (East)
48. Semiconductor48. Semiconductor
49. Cement and Aggregates49. Securities Brokerage
50. Coal50. Coal
51. Human Resources51. Cement and Aggregates
52. Securities Brokerage52. Human Resources
53. Alternate Energy53. Alternate Energy

-- Thomas Bulkowski

Top 


Thursday 6/23/11. Trading Thursday: Nasdaq

Today, I finally had a day in which the wind was calm enough (6 mph) so that I could propel my bicycle to a season's best time: 18.34 mph over a 14.90 mile course. That includes 6 hills (think Mt. Everest).

Early in the riding season, I decided to not ride because of the risk of an accident (PTSD brought on by crashing 3 times with assorted broken bones). I wanted to finish writing a book I've been working on for two years before I started riding. With the finish date now at year's end, I started riding. And that's when the winds started up.

There is no sense trying to beat my best time if the wind is blowing 25 mph, which it has done every day for a week and sporadically for the past month or two. In fact, gusts were up to 40 mph just two days ago.

# # #

I want to mention new research I finished on reversal times for day traders. In short, here is what I found.

The research shows that the top three reversal minutes each hour are:

  • A minute after each hour (10:01, 11:01, and so on)
  • A minute after each half hour (9:31, 10:31, and so on)
  • 51 minutes after the hour (9:51, 11:51, and so on)

This applies regardless of the price trend: Both peaks and valleys reverse most often at these minutes. For more information on the research, click on the link.

# # #

The following is provided by my computer. No chart and analysis today. Sorry.

The index dropped by -0.7% or -18.07 points. Since 02/05/1971 the index made 231 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 104 occasions.
     Average loss was -1.2% on 127 occasions.
Look for the index to close lower.

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

-- Thomas Bulkowski

Top 

© 2011 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,448.56    
 Monthly S1  2,558.88  110.31   
 Weekly S2  2,565.80  6.93   
 Weekly S1  2,617.50  51.69   
 Weekly Pivot  2,651.57  34.08   
 Daily S2  2,652.04  0.47   Yes! The Daily S2 is close to the Weekly Pivot.
 Daily S1  2,660.62  8.57   
 Low  2,668.35  7.73   
 Close  2,669.19  0.84   Yes! The Close is close to the Low.
 Daily Pivot  2,676.92  7.73   
 Open  2,677.18  0.26   Yes! The Open is close to the Daily Pivot.
 61.8% Down from Intraday High  2,677.85  0.67   Yes! The 61.8% Down from Intraday High is close to the Open.
 50% Down from Intraday High  2,680.79  2.94   
 38.2% Down from Intraday High  2,683.73  2.94   
 Daily R1  2,685.50  1.77   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 High  2,693.23  7.73   
 Daily R2  2,701.80  8.57   
 Weekly R1  2,703.27  1.46   Yes! The Weekly R1 is close to the Daily R2.
 Monthly Pivot  2,710.19  6.93   
 Weekly R2  2,737.34  27.15   
 Monthly R1  2,820.51  83.16   
 Monthly R2  2,971.82  151.32   

Tuesday 6/21/11. Trading Tuesday: Dow

Picture of the Dow industrials on the 5 minute scale.

The index climbed by 0.6% or 76.02 points. Since 10/01/1928 the index made 775 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 427 occasions.
     Average loss was -0.7% on 348 occasions.
Look for the index to close higher.

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

Peaks A and B form a potential Adam & Adam double top. I write potential because it is just squiggles on a chart until the index closes below the low at C.

Starting at D, price has formed a support area connecting D, F and C. Thus, it could be difficult for the index to push through that layer tomorrow. If it does, then I would expect it to drop to E, but it has to push through another support region at 12,040 setup by the apex of a symmetrical triangle Friday (from 10:00 to 12:00) and a peak at 12:20ish.

All of that suggests that I expect the index to move up in the opening minutes then reverse at 9:51 (yes, 9:51) followed by a decline to support at C. From there, I expect the index to move up and close higher. Or it could just soar out of the box and not look back. And the 9:51 reversal time is from new research I completed today. I will tell you about it another time.

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

-- Thomas Bulkowski

Top 

© 2011 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,367.17    
 Monthly S1  11,723.77  356.61   
 Weekly S2  11,762.97  39.19  
 Weekly S1  11,921.67  158.71   
 Daily S2  11,921.93  0.26   Yes! The Daily S2 is close to the Weekly S1.
 Low  11,971.29  49.36  
 Daily S1  12,001.16  29.87  
 Open  12,004.28  3.12   Yes! The Open is close to the Daily S1.
 61.8% Down from Intraday High  12,020.41  16.13  
 Weekly Pivot  12,021.24  0.83  Yes! The Weekly Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  12,035.58  14.34  
 Daily Pivot  12,050.51  14.93  
 38.2% Down from Intraday High  12,050.75  0.24   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  12,080.38  29.63  
 High  12,099.87  19.49  
 Daily R1  12,129.74  29.87  
 Daily R2  12,179.09  49.36  
 Weekly R1  12,179.94  0.85  Yes! The Weekly R1 is close to the Daily R2.
 Monthly Pivot  12,219.14  39.19  
 Weekly R2  12,279.51  60.37  
 Monthly R1  12,575.74  296.24  
 Monthly R2  13,071.11  495.36  

Monday 6/20/11. Market Monday: The Week Ahead

My Prediction

I was born in New York and disliked driving through slush, snow, and ice (that's less of a problem in the summer, which happened on a Thursday, last year). So, I moved south 30 years ago and have been thawing ever since.

For example, last night (Saturday), at 9:30 PM, the temperature upstairs (inside) was 97 degrees, so I decided to turn on the central air conditioner. An hour later I went to bed.

At 2:00 AM, it was time to tinkle, so I decided to open up my windows and let the cool night air chill the place down through the morning. I switched off the central air, opened the windows and then looked outside at the thermometer. It was 90 degrees! At two in the morning! Wow. You may not know this, but that's just a few degrees cooler than the surface of the sun.

I shut my windows (left the A/C off) and went back to bed. No wonder I feel tired this morning. And yes, in the winter I sleep in the kitchen...in the oven.

# # #

Picture of the Dow transports on the daily scale.

I show the Dow transports on the daily scale.

At B, a broadening top appears with price diverging from top to bottom. At A, a partial decline predicts an upward breakout, which occurs.

The index forms a down-sloping channel at C. If you extend the bottom trendline, as I have in red, you see that it intersects the index at E. That suggests the index has reached overhead resistance after having bounced off the low at D.

Even so, I expect the index to recover (move up). I have flipped most of the indices to upward going into July and even into mid July. The Nasdaq's direction isn't clear as yet. It could continue lower. So could the other indices. And did I mention how hot the sun is?

Top 

A Brief Look Back

Picture of a flower from my garden.

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

Monday: Up 1.06 points.
Tuesday: Up 123.14 points.
Wednesday: Down 178.84 points.
Thursday: Up 64.25 points.
Friday: Up 42.84 points.

For the Week...

The Dow industrials were up 52.45 points or 0.4%.
The Nasdaq composite was down 27.25 points or 1.0%.
The S&P 500 index was up 0.52 points or 0.0%.

Year to Date...

Dow Industrials
     6.8% down from the high of 12,876.00 on 05/02/2011.
     3.9% up from the low of 11,555.48 on 03/16/2011.
Nasdaq
     9.4% down from the high of 2,887.75 on 05/02/2011.
     0.6% up from the low of 2,599.88 on 06/16/2011.
S&P 500
     7.2% down from the high of 1,370.58 on 05/02/2011.
     1.8% up from the low of 1,249.05 on 03/16/2011.

Top 

Economic Reports

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

ReportTimeA-F
Rating
Description
Existing home sales10:00 TCCounts sales of used homes.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Rate decision2:15 W?The Federal Reserves reports on interest rate changes.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
New home sales10:00 ThC+Shows sales of single-family homes.
Gross domestic product8:30 FBMeasures economic activity; GDP deflator measures inflation.
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

As of 06/17/2011, the CPI had:

6 bearish patterns,
9 bullish patterns,
236 patterns waiting for breakout.
The CPI signal is 60.0%, which is neutral (between 35% and 65%).

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  11,903  11,954  12,013  12,064  12,124 
Weekly  11,738  11,871  11,996  12,129  12,254 
Monthly  11,342  11,673  12,194  12,525  13,046 
S&P 500 (^GSPC): Daily  1,260  1,266  1,273  1,278  1,285 
Weekly  1,240  1,256  1,274  1,290  1,308 
Monthly  1,201  1,236  1,293  1,329  1,386 
Nasdaq (^IXIC): Daily  2,585  2,601  2,625  2,640  2,664 
Weekly  2,548  2,582  2,634  2,668  2,720 
Monthly  2,431  2,524  2,693  2,785  2,954 
  • 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 43.8%  Expect a random direction.
 2 months down 10.5%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week up 41.2%  Expect a random direction.
 2 months down 10.8%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 5 weeks down 4.6%  Expect a reversal soon.
 2 months down 15.4%  Expect a reversal soon.

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
39Head-and-shoulders top
13Pipe top
13Triangle, symmetrical
11Double Top, Adam and Adam
10Triple top
8Pipe bottom
8Rectangle top
7Head-and-shoulders complex top
6Double Bottom, Adam and Adam
6Triangle, descending

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

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

 

 

 

 

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

This WeekLast Week
1. Medical Supplies1. Medical Supplies
2. Natural Gas (Diversified)2. Petroleum (Integrated)
3. Petroleum (Integrated)3. Natural Gas (Diversified)
4. Toiletries/Cosmetics4. Precision Instrument
5. Electric Utility (East)5. Biotechnology
48. Semiconductor48. Short ETFs
49. Securities Brokerage49. Semiconductor
50. Coal50. Cement and Aggregates
51. Cement and Aggregates51. Human Resources
52. Human Resources52. Securities Brokerage
53. Alternate Energy53. Alternate Energy

-- Thomas Bulkowski

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Thursday 6/16/11. Trading Thursday: Nasdaq

Picture of the Nasdaq composite on the 5 minute scale.

The index dropped by -1.8% or -47.26 points. Since 02/05/1971 the index made 47 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.2% on 19 occasions.
     Average loss was -1.4% on 28 occasions.
Look for the index to close lower.

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

After such a large decline, the historical data only finds 47 such incidents. Even so, the numbers suggest a lower close on Thursday...and so does the chart.

For much of Wednesday's trading, the index didn't see much in terms of technical development. In other words, I see only one chart pattern: a descending triangle.

Price moved horizontally, forming a support area but price pushed through that just after 3:00. Later the line became a weak resistance area.

Connecting the two peaks between 2:00 and 3:00, combined with the horizontal bottom line, highlights a descending triangle. There are not enough trendline touches in my view (I would prefer to see another top one in the 1:00 to 2:00 period), so I do not consider this a good example of a descending triangle.

After the triangle broke out downward, the index pulled back. That happens 54% of the time on the daily scale. The breakout is downward 64% of the time, too.

The index has closed at or slightly below the resistance line. Even so, my guess is that the index will move up at the open in a snap-back rally. Continuing worries about Greece will likely mute any optimism, forcing price back down to close lower. That's my guess.

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

©ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,482.93     
 Monthly S1  2,557.20   74.26   
 Weekly S2  2,574.90   17.70   
 Daily S2  2,598.47   23.57   
 Weekly S1  2,603.18   4.71   
 Daily S1  2,614.96   11.78   
 Low  2,625.86   10.90   
 Close  2,631.46   5.60   
 Daily Pivot  2,642.36   10.90   
 61.8% Down from Intraday High  2,642.63   0.27   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  2,647.80   5.18   
 38.2% Down from Intraday High  2,652.98   5.18   
 Open  2,653.17   0.19   Yes! The Open is close to the 38.2% Down from Intraday High.
 Daily R1  2,658.85   5.68   
 High  2,669.75   10.90   
 Weekly Pivot  2,669.92   0.17   Yes! The Weekly Pivot is close to the High.
 Daily R2  2,686.25   16.33   
 Weekly R1  2,698.20   11.95   
 Monthly Pivot  2,715.90   17.70   
 Weekly R2  2,764.94   49.04   
 Monthly R1  2,790.17   25.23   
 Monthly R2  2,948.87   158.71   

-- Thomas Bulkowski

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Tuesday 6/14/11. Trading Tuesday: Dow

Picture of the Dow industrials on the 5 minute scale.

The index climbed by 0.0% or 1.06 points. Since 10/01/1928 the index made 1148 similar moves on a percentage basis. After those moves, the next day's...

     Average gain was 0.6% on 612 occasions.
     Average loss was -0.7% on 536 occasions.
Look for the index to close higher.

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

Points C, D, and E qualify either as a triple top or if you combine C and D, as an Eve & Eve double top. The pattern behaved as expected with the index trending lower after price closed below the lowest valley between the peaks (called confirmation).

A double top appeared at A and B, which also pointed to weakness. Notice that all of the peaks stopped rising near 12000. That level appears to be a potent resistance level. After peak B, the index seemed reluctant to drop and that matches with the above analysis that suggests tomorrow the index will close higher.

Also shown on the chart is a head-and-shoulders bottom with the left shoulder at LS, right shoulder at RS, and head as, well, head. Cleaver, no? The left shoulder began on Friday, but the bottom is near the LS label, too.

When price closes above the neckline (not shown, but it is a line drawn across the armpits, connecting peaks E and A), then that suggests an upward move, too.

Finally, I show support as a green line setup by the somewhat flat area where the green line begins on the left, between 1:00 and 2:00.

Putting all of this information together, I think that the index will bounce upward off of support and also close up for the day. However, check the futures before the market opens to get a more accurate direction for the open.

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

 Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,380.18     
 Monthly S1  11,666.57   286.40   
 Weekly S2  11,778.80   112.23   
 Weekly S1  11,865.89   87.08   
 Daily S2  11,866.92   1.04   Yes! The Daily S2 is close to the Weekly S1.
 Daily S1  11,909.95   43.02   
 Low  11,917.78   7.83   Yes! The Low is close to the Daily S1.
 Open  11,945.33   27.55   
 Close  11,952.97   7.64   Yes! The Close is close to the Open.
 61.8% Down from Intraday High  11,953.64   0.67   Yes! The 61.8% Down from Intraday High is close to the Close.
 Daily Pivot  11,960.80   7.16   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  11,964.72   3.92   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  11,975.80   11.08   
 Daily R1  12,003.83   28.03   
 High  12,011.66   7.83   Yes! The High is close to the Daily R1.
 Weekly Pivot  12,024.50   12.84   
 Daily R2  12,054.68   30.18   
 Weekly R1  12,111.59   56.90   
 Monthly Pivot  12,223.82   112.23   
 Weekly R2  12,270.20   46.39   
 Monthly R1  12,510.21   240.01   
 Monthly R2  13,067.46   557.24   

-- Thomas Bulkowski

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Monday 6/13/11. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

This week is likely to be bumpy, given that options expire and important economic reports come out on Tuesday and Wednesday.

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

I measured the time between various peaks and valleys in trying to decide what will happen next and when. Those numbers, in days, appear in red on the chart.

If you view them in this context: short, long, short, long, then the current period should be a short one. Thus, we could see a reversal on Monday to 2 weeks later.

I am still hoping for an upward turn but have changed by predictions going into July for more downward before that happens. Since the indices are at or slightly below support areas, it's hard to judge which way the index will trend. Thus, I tend to go with the flow and assume that the indices will continue dropping until the market decides to stop.

In short, look for more of a down move ahead. I also asked my computer what happened the last time the Dow dropped 172 points and it told me that it closed lower the next day most often. That suggests, but does not guarantee, that Monday will be a down day.

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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 61.3 points.
Tuesday: Down 19.15 points.
Wednesday: Down 21.87 points.
Thursday: Up 75.42 points.
Friday: Down 172.45 points.

For the Week...

The Dow industrials were down 199.35 points or 1.6%.
The Nasdaq composite was down 89.05 points or 3.3%.
The S&P 500 index was down 29.18 points or 2.2%.

Year to Date...

Dow Industrials
     7.2% down from the high of 12,876.00 on 05/02/2011.
     3.4% up from the low of 11,555.48 on 03/16/2011.
Nasdaq
     8.5% down from the high of 2,887.75 on 05/02/2011.
     1.5% up from the low of 2,603.50 on 03/16/2011.
S&P 500
     7.3% down from the high of 1,370.58 on 05/02/2011.
     1.8% up from the low of 1,249.05 on 03/16/2011.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Retail sales8:30 TA-Reports total retail sales (not services). Are people spending?
Producer price index8:30 TB-Measures wholesale goods cost. An indication of future inflation.
Business inventories10:00 TC-Reports manufacturing, wholesale, retail inventories.
Consumer price index8:30 WB+Inflation report. Measures cost of goods and services.
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.
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, P.M. settled index options and treasury/interest rate options classes cease trading. Expiring cash-settled currency options cease trading at 12:00 P.M. EST.Friday
Equity, index, cash-settled currency and treasury/interest rate 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 06/10/2011, the CPI had:

159 bearish patterns,
0 bullish patterns,
250 patterns waiting for breakout.
The CPI signal is 0.0%, 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  11,817  11,885  12,005  12,072  12,192 
Weekly  11,778  11,865  12,024  12,111  12,270 
Monthly  11,380  11,666  12,223  12,510  13,067 
S&P 500 (^GSPC): Daily  1,256  1,263  1,276  1,284  1,296 
Weekly  1,248  1,259  1,280  1,291  1,312 
Monthly  1,208  1,240  1,300  1,331  1,391 
Nasdaq (^IXIC): Daily  2,619  2,631  2,654  2,666  2,689 
Weekly  2,579  2,611  2,674  2,706  2,769 
Monthly  2,487  2,565  2,720  2,798  2,953 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 6 weeks down 1.3%  Expect a reversal soon.
 2 months down 10.5%  Expect a reversal soon.
 S & P 500 (^GSPC) 6 weeks down 1.5%  Expect a reversal soon.
 2 months down 10.8%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 4 weeks down 8.3%  Expect a reversal soon.
 2 months down 15.4%  Expect a reversal soon.

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
31Head-and-shoulders top
16Triangle, symmetrical
10Pipe top
10Double Top, Adam and Adam
10Triangle, ascending
9Rectangle top
7Triple top
6Head-and-shoulders complex top
6Channel
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, indexes, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

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

This WeekLast Week
1. Medical Supplies1. Medical Supplies
2. Petroleum (Integrated)2. Petroleum (Integrated)
3. Natural Gas (Diversified)3. Precision Instrument
4. Precision Instrument4. Natural Gas (Diversified)
5. Biotechnology5. Biotechnology
48. Short ETFs48. Semiconductor
49. Semiconductor49. Human Resources
50. Cement and Aggregates50. Cement and Aggregates
51. Human Resources51. Securities Brokerage
52. Securities Brokerage52. Short ETFs
53. Alternate Energy53. Alternate Energy

-- Thomas Bulkowski

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Thursday 6/9/11. Trading Thursday: Nasdaq

Picture of the Nasdaq composite on the 5 minute scale.

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

A symmetrical triangle with a downward breakout presented a shorting opportunity with a target based on the triangle's height. That would have gotten you out near the low to the right of A.

An Eve & Eve double bottom, unconfirmed, appears at valleys A and B. The underlying support suggests that price will rise up in the opening minutes of tomorrow's (Thursday's) action. However, since the daily pivot is at 2,681, which is also near a 61.8% retrace of the day's high-low range, price might stall there.

If price does push higher, then look for the index to climb to 2,693, the daily R1, which is close to Wednesday's opening price and just above the apex of the triangle. The apex is also a known resistance area, so watch for that.

Balancing that bullish outlook is the finding that a descending triangle is forming. Those breakout downward 64% of the time (based on end-of-day patterns, not intraday ones), so the market could drop. I show the triangle outlined in blue.

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

 Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,607.47     
 Monthly S1  2,641.42   33.96   
 Weekly S2  2,642.41   0.98   Yes! The Weekly S2 is close to the Monthly S1.
 Daily S2  2,654.53   12.12   
 Weekly S1  2,658.89   4.37   
 Daily S1  2,664.95   6.06   
 Low  2,671.09   6.14   
 Close  2,675.38   4.29   
 61.8% Down from Intraday High  2,681.40   6.02   
 Daily Pivot  2,681.52   0.12   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  2,684.58   3.07   
 38.2% Down from Intraday High  2,687.77   3.18   
 Daily R1  2,691.94   4.17   
 Open  2,693.69   1.75   Yes! The Open is close to the Daily R1.
 High  2,698.08   4.39   
 Daily R2  2,708.51   10.43   
 Weekly Pivot  2,747.12   38.61   
 Weekly R1  2,763.60   16.49   
 Monthly Pivot  2,764.59   0.98   Yes! The Monthly Pivot is close to the Weekly R1.
 Monthly R1  2,798.54   33.96   
 Weekly R2  2,851.83   53.28   
 Monthly R2  2,921.71   69.88   

-- Thomas Bulkowski

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Tuesday 6/7/11. Trading Tuesday

Picture of the Dow Industrials on the 5 minute scale.

Julie gave me the idea for this blog post. I'll be doing this on Tuesday's and Thursday's. Please let me know if you find this useful, especially about the table below. And before you ask, it would take too long to hand draw in the pivot points on the chart. Sorry.

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

A large rectangle top with a downward breakout presented those courageous enough to short the index with a trading opportunity. Target would be the support zone just below 12,100.

Now, the index is resting on another support area, a smaller one but with what we in the biz call a shelf. It has a flat top. The index has already touched the area once and the candle heights are narrowing (inside days plus an Nr4 and Nr7). That suggests a reversal with a quick move up. In fact, the last three candles on the right look to me like a variation of the three stars in the South candle pattern. Since the candlestick is so rare all I can say is that the nine I tested acted as bullish reversals 86% of the time.

Thus, I expect the market to rebound in the first few minutes tomorrow (Tuesday) but given that the longer-term trend is downward, the up move might not last long.

The International Paper and Temple-Inland merger news might be the catalyst for this, but check the futures before the market opens to get the initial market direction.

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

 Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,584.69     
 Weekly S2  11,785.83   201.14   
 Monthly S1  11,837.33   51.49   
 Weekly S1  11,937.90   100.57   
 Daily S2  12,023.21   85.31   
 Daily S1  12,056.58   33.38   
 Low  12,070.66   14.08   
 Close  12,089.96   19.30   
 61.8% Down from Intraday High  12,101.54   11.58   
 Daily Pivot  12,104.04   2.50   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  12,111.08   7.04   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  12,120.61   9.54   
 Daily R1  12,137.41   16.80   
 Open  12,151.19   13.78   
 High  12,151.49   0.30   Yes! The High is close to the Open.
 Daily R2  12,184.87   33.38   
 Weekly Pivot  12,256.09   71.23   
 Monthly Pivot  12,356.66   100.57   
 Weekly R1  12,408.16   51.49   
 Monthly R1  12,609.30   201.14   
 Weekly R2  12,726.35   117.06   
 Monthly R2  13,128.63   402.28   

-- Thomas Bulkowski

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Monday 6/6/11. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq composite on the daily scale.

I show the Nasdaq composite index on the daily scale. The chart looks similar to the Dow and other market indices.

A channel, outlined in red, shows the plunge that the markets have undergone over the past month.

In the inset (blue box), I have highlighted the most recent candle pattern. It looks like a shooting star, only the inbound trend is wrong. It should be upward leading to the candle instead of downward.

It also reminds me of a collapsing doji star, but the colors are wrong. Let's ignore the candle color problem, and assume it's a valid collapsing doji star.

That candle pattern acts as a bearish reversal 63% of the time. That's no big surprise since price trended higher going into the three candle pattern and then price dropped as the candle formed. Having price close below the bottom of the pattern before it can close above the top should be no big stretch, but it can take several days for that to happen. Unfortunately, I found too few collapsing doji stars to create a good statistical assessment of their performance.

I think the big key to the index this week is support. I show that at point A. Point A marks the turn from down to up. Since price hasn't dropped that far yet, those that missed buying then may do so soon if the index drops near that level. That buying, if it's enthusiastic enough, should send the index rising.

Also, the bottom of the down-sloping channel should lend a hand in supporting the index.

Thus, I'm looking for the index to bottom this week, maybe as soon as Monday (I'm writing this on Sunday). After we see a turn, I expect a recovery. Of course, I've been expecting a recovery for several weeks now and the index has continued to drop. Apparently it's not listening to me...

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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: Up 128.21 points.
Wednesday: Down 279.65 points.
Thursday: Down 41.59 points.
Friday: Down 97.29 points.
Saturday: Holiday or other weird event!

For the Week...

The Dow industrials were down 290.32 points or 2.3%.
The Nasdaq composite was down 64.08 points or 2.3%.
The S&P 500 index was down 30.94 points or 2.3%.

Year to Date...

Dow Industrials
     5.6% down from the high of 12,876.00 on 05/02/2011.
     5.2% up from the low of 11,555.48 on 03/16/2011.
Nasdaq
     5.4% down from the high of 2,887.75 on 05/02/2011.
     5.0% up from the low of 2,603.50 on 03/16/2011.
S&P 500
     5.1% down from the high of 1,370.58 on 05/02/2011.
     4.1% up from the low of 1,249.05 on 03/16/2011.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Consumer credit3:00 TD-Measures auto, credit card and other debt.
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.
Trade balance8:30 ThC+Signals balance of exports & imports.
Wholesale inventories10:00 ThD-Wholesale sales and inventory statistics.
International trade8:30 FC+Import/export prices, trade balance. US economy vs others.
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 06/03/2011, the CPI had:

63 bearish patterns,
0 bullish patterns,
182 patterns waiting for breakout.
The CPI signal is 0.0%, 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  12,024  12,088  12,168  12,231  12,312 
Weekly  11,806  11,979  12,277  12,449  12,747 
Monthly  11,605  11,878  12,377  12,650  13,149 
S&P 500 (^GSPC): Daily  1,289  1,294  1,304  1,309  1,319 
Weekly  1,267  1,284  1,314  1,331  1,362 
Monthly  1,250  1,275  1,323  1,348  1,396 
Nasdaq (^IXIC): Daily  2,710  2,721  2,742  2,753  2,774 
Weekly  2,662  2,697  2,766  2,802  2,871 
Monthly  2,627  2,680  2,784  2,837  2,941 
  • 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) 5 weeks down 3.5%  Expect a reversal soon.
 2 months down 10.5%  Expect a reversal soon.
 S & P 500 (^GSPC) 5 weeks down 4.8%  Expect a reversal soon.
 2 months down 10.8%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 3 weeks down 14.9%  Expect a reversal soon.
 2 months down 15.4%  Expect a reversal soon.

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
29Head-and-shoulders top
19Triangle, symmetrical
11Triangle, ascending
8Rectangle top
7Rising wedge
6Dead-cat bounce
6Channel
6Pipe bottom
6Double Top, Eve and Eve
6Double Top, 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, indexes, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

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

This WeekLast Week
1. Medical Supplies1. Furn/Home Furnishings
2. Petroleum (Integrated)2. Medical Supplies
3. Precision Instrument3. Petroleum (Integrated)
4. Natural Gas (Diversified)4. Precision Instrument
5. Biotechnology5. Toiletries/Cosmetics
48. Semiconductor48. Insurance (Prop/Casualty)
49. Human Resources49. Cement and Aggregates
50. Cement and Aggregates50. Internet
51. Securities Brokerage51. Securities Brokerage
52. Short ETFs52. Alternate Energy
53. Alternate Energy53. Short ETFs

-- Thomas Bulkowski

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Thursday 6/2/11. The CHG Trade, Part 2

I show a chart of CH Energy (CHG) on the daily scale.

CHG is an electric utility that I like to buy in the high 30s and sell it in the low 50s. My recent target, A, was at 52. I wrote about that trade already.

This trade began at two times, the first of which is on January 25, 2008. Here's what I wrote in my notebook. "1/25/08 I think this has reached a low of 35 and will hold that support, so it's a good time to buy more. Buy reason: averaging down."

Picture of the CH Energy on the daily scale.

I received a fill at 36.23. The next trade happened on October 10, 2008. I don't have any notes regarding that trade. That happens from time to time, especially when several trades occur at the same time. That trade filled at 34.80.

I am calling these trades, but they are really buy-and-hold investments. However, I like to think of them as long-term range trades. Buy low, sell high, and collect a tasty dividend along the way.

That's what I did here. When price hit 52 at A, I sold half my position which is unusual. Nearly always, I sell the entire position. However, I felt that this stock still had more upside potential, so I held on to the other half.

The A trade timing, was spectacular. I sold the day before price reversed in a short-term decline.

For the trade which ended yesterday (Tuesday), I used Weinstein's Swing Rule to determine the exit price. Simply, that measures the drop from the peak at C to the low at B and projects it upward from C. That gave me a target of 56. I placed a limit order to sell at that price.

Here's what I wrote in my notebook about the stop. "4/29/11 I replaced the stop with a limit order to sell at 56. 56 came from the swing rule projection of the drop from 4/6/11 to 4/14 projected upward from 4/6 or 52.67 - 48.76 = 3.91. 3.91 + 52.67 = 56.58 but I rounded down to 56 to increase the chance of a hit."

In recent days, I thought that it might be difficult for the stock to reach 56. So, I changed the target to 54. Why 54? I drew a trendline, D, across the peaks and guessed where price might cross the line. That was 54. And that's the price at which I placed a limit order. That order filled the day before the Dow's 279 point drop.

On the trades, I made 51%, but when you include the dividend (10 and 13 payments), it boosts the return to 69%. That's over 20% annually.

-- Thomas Bulkowski

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