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

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Busted
Patterns
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 09/20/2017
22,413 41.79 0.2%
9,654 147.29 1.5%
732 -5.08 -0.7%
6,456 -5.28 -0.1%
2,508 1.59 0.1%
YTD
13.4%
6.8%
10.9%
19.9%
12.0%
Tom's Targets    Overview: 09/14/2017
22,450 or 21,500 by 10/01/2017
9,750 or 9,200 by 10/01/2017
775 or 730 by 10/01/2017
6,650 or 6,200 by 10/01/2017
2,600 or 2,425 by 10/01/2017

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June 2012 Headlines


Archives


Saturday 6/30/12. New Research Released on Trendiness.

I released new research on pattern trendiness.

What is trendiness? It describes how often price trends after the breakout from a chart pattern.

This type of information is most useful for swing traders because they want to catch the move after the breakout when price begins to trend.

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Thursday 6/28/12. Trading Thursday: Nasdaq

The index climbed by 0.7% or 21.26 points. Since 02/05/1971 the index made 347 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 225 occasions.
     Average loss was -1.0% on 122 occasions.
Expect the index to close higher 64.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 18/31 or 58.1% of the time.
     The prediction of the index closing lower has been right 12/24 or 50.0% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

At noon, a complex head-and-shoulders top chart pattern warned that the index was going to go down. When it confirmed at A, the index did plummet and reached the target suggested by the height of the chart pattern subtracted from A.

This head-and-shoulders has multiple shoulders on each side of the head (H). You treat the sell signal just as you would from a simple head-and-shoulders top.

The index pulled back to the head-and-shoulders just before the close and then resumed the downtrend, suggesting a continued downward move tomorrow morning. Will it last to close the day lower?

If you look on the daily chart, we have completed a throwback to a congestion area. My view is that it's time to recover, that the market is going to go up. Thus, I am in line with the probabilities that suggest tomorrow (Thursday) will see the index close higher. However, given the volatility we've seen in the last few months, anything can happen.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,632.49    
 Monthly S1  2,753.91  121.41   
 Weekly S2  2,802.07  48.16   
 Weekly S1  2,838.69  36.63   
 Monthly Pivot  2,848.09  9.40   
 Daily S2  2,850.35  2.25   
 Low  2,860.13  9.78   
 Open  2,862.13  2.00   Yes! The Open is close to the Low.
 Daily S1  2,862.83  0.70   Yes! The Daily S1 is close to the Open.
 61.8% Down from Intraday High  2,868.64  5.80   
 50% Down from Intraday High  2,871.26  2.63   
 Daily Pivot  2,872.62  1.35   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  2,873.89  1.28   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  2,875.32  1.43   Yes! The Close is close to the 38.2% Down from Intraday High.
 High  2,882.40  7.08   
 Daily R1  2,885.10  2.70   
 Weekly Pivot  2,890.49  5.38   
 Daily R2  2,894.89  4.40   
 Weekly R1  2,927.11  32.23   
 Monthly R1  2,969.51  42.39   
 Weekly R2  2,978.91  9.40   
 Monthly R2  3,063.69  84.79   

Tuesday 6/26/12. Trading Tuesday: Dow

The index dropped by -1.1% or -138.12 points. Since 10/01/1928 the index made 288 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 133 occasions.
     Average loss was -1.0% on 155 occasions.
Expect the index to close lower 53.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 27/42 or 64.3% of the time.
     The prediction of the index closing lower has been right 6/9 or 66.7% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

Except for the huge down move right out of the gate, the index didn't move much today (Monday). I did see a head-and-shoulders bottom chart pattern around noon time that confirmed as a valid chart pattern when the index closed above the neckline (A).

The neckline is a trendline that connects the armpits. Unfortunately, the move didn't live up to expectations since the index did not soar as far as the measure rule predicted (basically, the height of the pattern projected upward).

Looking to tomorrow's close (Tuesday), I also expect a lower close but I also expect this plunge to turn upward this week. It might do that tomorrow. I think this is just a throwback to an unnamed congestion area. After the throwback completes, price often soars. I expect that to happen soon.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,615.05    
 Monthly S1  12,058.85  443.81   
 Weekly S2  12,316.87  258.02   
 Daily S2  12,351.65  34.78   
 Weekly S1  12,409.77  58.11   
 Daily S1  12,427.16  17.39   Yes! The Daily S1 is close to the Weekly S1.
 Low  12,458.01  30.85   
 Monthly Pivot  12,478.90  20.89   
 Close  12,502.66  23.76   
 61.8% Down from Intraday High  12,527.48  24.82   
 Daily Pivot  12,533.51  6.03   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  12,548.94  15.43   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  12,570.40  21.46   
 Daily R1  12,609.02  38.62   
 Open  12,639.80  30.78   
 High  12,639.87  0.07   Yes! The High is close to the Open.
 Weekly Pivot  12,654.35  14.48   Yes! The Weekly Pivot is close to the High.
 Daily R2  12,715.37  61.02   
 Weekly R1  12,747.25  31.87   
 Monthly R1  12,922.70  175.46   
 Weekly R2  12,991.83  69.13   
 Monthly R2  13,342.75  350.91   

Monday 6/25/12. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

The Dow utilities index appears on the daily scale because I wanted to show how it has thrown back to the top of the congestion region.

I circled the congestion region in red. This could be any chart pattern or just a collection of horizontal price movement. In this case, it starts as a double top that fizzled into a handle of sorts, for lack of a better name. Then the index made a nice move up.

Just as quickly as the index peaked, it dropped and has thrown back to the congestion region.

The usual recovery move is a resumption of the upward trend, so that is what I expect to happen in the index.

Timing? I expect the move up to resume this week. What surprises me is the strength of the downward plunge to A. The index could continue moving into the circled region before a recovery.

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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 25.35 points.
Tuesday: Up 95.51 points.
Wednesday: Down 12.94 points.
Thursday: Down 250.82 points.
Friday: Up 67.21 points.

For the Week...

The Dow industrials were down 126.39 points or 1.0%.
The Nasdaq composite was up 19.62 points or 0.7%.
The S&P 500 index was down 7.82 points or 0.6%.

Year to Date...

Dow Industrials
     5.2% down from the high of 13,338.66 on 05/01/2012.
     5.0% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     7.7% down from the high of 3,134.17 on 03/27/2012.
     10.1% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     6.1% down from the high of 1,422.38 on 04/02/2012.
     6.0% up from the low of 1,258.86 on 01/03/2012.

Top

Economic Reports

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

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

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

On 06/22/2012, the CPI had:

3 bearish patterns,
6 bullish patterns,
339 patterns waiting for breakout.
The CPI signal is 66.7%, which is bullish (>= 65%).

The chart pattern indicator is bullish 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  12,530  12,586  12,630  12,685  12,729 
Weekly  12,363  12,502  12,700  12,839  13,038 
Monthly  11,661  12,151  12,525  13,015  13,389 
S&P 500 (^GSPC): Daily  1,321  1,328  1,333  1,340  1,345 
Weekly  1,302  1,318  1,341  1,358  1,380 
Monthly  1,225  1,280  1,322  1,377  1,418 
Nasdaq (^IXIC): Daily  2,853  2,873  2,884  2,903  2,914 
Weekly  2,808  2,850  2,896  2,939  2,985 
Monthly  2,638  2,765  2,854  2,981  3,069 
  • 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.
 1 month up 52.0%  Expect a random direction.
 S & P 500 (^GSPC) 1 week down 31.1%  The trend may continue.
 1 month up 53.3%  Expect a random direction.
 Nasdaq composite (^IXIC) 3 weeks up 19.2%  Expect a reversal soon.
 1 month up 47.4%  Expect a random direction.

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

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

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

Buy-and-Hold: 12-Month SMA

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

Top

Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
39Head-and-shoulders bottom
24Double Bottom, Adam and Adam
21Triangle, symmetrical
18Pipe bottom
9Rectangle bottom
5Double Bottom, Eve and Adam
5Triangle, ascending
4Diamond bottom
3Triple bottom
3Double Bottom, Adam and Eve

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

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

 

 

 

 

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

This WeekLast Week
1. Homebuilding1. Homebuilding
2. Biotechnology2. Biotechnology
3. Computers and Peripherals3. Computers and Peripherals
4. Retail Building Supply4. Retail Building Supply
5. Chemical (Basic)5. Chemical (Basic)
48. Natural Gas (Diversified)48. Petroleum (Producing)
49. Short ETFs49. Furn/Home Furnishings
50. Petroleum (Producing)50. Natural Gas (Diversified)
51. Furn/Home Furnishings51. Short ETFs
52. Coal52. Coal

-- Thomas Bulkowski

Top


Thursday 6/21/12. Trading Thursday: Nasdaq

The index climbed by 0.0% or 0.69 points. Since 02/05/1971 the index made 560 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 313 occasions.
     Average loss was -1.0% on 247 occasions.
Expect the index to close higher 55.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 18/30 or 60.0% of the time.
     The prediction of the index closing lower has been right 12/24 or 50.0% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

A double top appears early in the session (CD) and it confirms as a valid pattern when the index closes below the blue line. The height of this one becomes a target when it's subtracted from the bottom of the pattern. The index reaches the target by day's end.

A double bottom (AB) appears later in the session but this one has not confirmed yet. Thus, it's just two valleys and nothing else. The index has to close above the red line before the double bottom becomes valid.

What does this mean for tomorrow's close? On the 10-day, 5 min chart, it looks like the index needs to retrace some of its gains. The move up was too fast, so I can see a retrace happening. On the daily chart, a throwback to a head-and-shoulders bottom looks probable. My guess is that the index will close lower on Thursday. That is at odds with the probabilities which predict a higher close. One of us will be right.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,638.80    
 Monthly S1  2,784.63  145.82   
 Weekly S2  2,791.35  6.72   
 Weekly S1  2,860.90  69.55   
 Weekly Pivot  2,871.93  11.03   
 Monthly Pivot  2,872.50  0.57   Yes! The Monthly Pivot is close to the Weekly Pivot.
 Daily S2  2,895.30  22.79   
 Low  2,910.00  14.70   
 Daily S1  2,912.87  2.87   Yes! The Daily S1 is close to the Low.
 61.8% Down from Intraday High  2,922.33  9.46   
 50% Down from Intraday High  2,926.14  3.81   
 Daily Pivot  2,927.58  1.44   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  2,929.95  2.37   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  2,930.45  0.50   Yes! The Close is close to the 38.2% Down from Intraday High.
 Open  2,932.96  2.51   Yes! The Open is close to the Close.
 Weekly R1  2,941.48  8.52   
 High  2,942.28  0.80   Yes! The High is close to the Weekly R1.
 Daily R1  2,945.15  2.87   Yes! The Daily R1 is close to the High.
 Weekly R2  2,952.51  7.36   
 Daily R2  2,959.86  7.35   
 Monthly R1  3,018.33  58.47   
 Monthly R2  3,106.20  87.88   

Tuesday 6/19/12. Trading Tuesday: Dow

The index dropped by -0.2% or -25.35 points. Since 10/01/1928 the index made 1091 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 539 occasions.
     Average loss was -0.7% on 552 occasions.
Expect the index to close lower 50.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 27/42 or 64.3% of the time.
     The prediction of the index closing lower has been right 6/8 or 75.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

Two chart patterns make an appearance today. The first is a double bottom at AB. This confirms as a valid pattern when price closes above the blue line. Unfortunately, the index does not rise far enough to reach the measure rule target (the height of the pattern added to the breakout price).

A head-and-shoulders top appears at LS (left shoulder), head, and RS (right shoulder). This confirms when the index closes below the red line. This, too, fails to meet its price target, at least so far.

Looking ahead to tomorrow, the probabilities suggest a lower close. I am inclined to agree for no other reason than I expected Monday to be a big up day after the Greece vote. But the markets are still nervous about the EU debt problem and probably will be for months. Thus, it's a good choice to remain in cash for position traders and buy-and-hold folks.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,682.05    
 Monthly S1  12,211.94  529.88   
 Weekly S2  12,262.11  50.18   
 Weekly S1  12,501.97  239.85   
 Monthly Pivot  12,564.97  63.01   
 Weekly Pivot  12,638.33  73.36   
 Daily S2  12,654.23  15.89   
 Low  12,696.18  41.95   
 Daily S1  12,698.02  1.84   Yes! The Daily S1 is close to the Low.
 61.8% Down from Intraday High  12,728.94  30.91   
 50% Down from Intraday High  12,739.05  10.12   
 Daily Pivot  12,739.98  0.92   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  12,741.82  1.84   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  12,749.17  7.35   Yes! The 38.2% Down from Intraday High is close to the Close.
 Open  12,767.02  17.85   
 High  12,781.93  14.91   
 Daily R1  12,783.77  1.84   Yes! The Daily R1 is close to the High.
 Daily R2  12,825.73  41.95   
 Weekly R1  12,878.19  52.46   
 Weekly R2  13,014.55  136.37   
 Monthly R1  13,094.86  80.30   
 Monthly R2  13,447.89  353.04   

Monday 6/18/12. Market Monday: The Week Ahead

My Prediction

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

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

The horizontal lines mark overhead resistance setup by prior peaks or valleys. The top two show a range where the index may stop if it continues moving up from where it is at now.

With Greece deciding the fate of the world today, the market could gap up or down by a large amount at Monday's open, or act as just another day on Wall Street.

My guess is that regardless of who wins, it's what happens in the coming weeks that will determine what will happen to the EU.

I show an unusual head-and-shoulders bottom chart pattern with LS being the left shoulder, RS being the right one. The right shoulder is far above the left one, making it look strange. The pattern has confirmed as a valid one (price has closed above a line drawn connecting the two armpits). This suggests that the markets will move up and that is what I expect as well.

Top 

A Brief Look Back

Picture of a flower from my garden.

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

Monday: Down 142.97 points.
Tuesday: Up 162.57 points.
Wednesday: Down 77.42 points.
Thursday: Up 155.53 points.
Friday: Up 115.26 points.

For the Week...

The Dow industrials were up 212.97 points or 1.7%.
The Nasdaq composite was up 14.38 points or 0.5%.
The S&P 500 index was up 17.18 points or 1.3%.

Year to Date...

Dow Industrials
     4.3% down from the high of 13,338.66 on 05/01/2012.
     6.1% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     8.3% down from the high of 3,134.17 on 03/27/2012.
     9.3% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     5.6% down from the high of 1,422.38 on 04/02/2012.
     6.7% up from the low of 1,258.86 on 01/03/2012.

Top

Economic Reports

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

ReportTimeA-F
Rating
Description
Housing starts8:30 TB-Number of homes beginning construction.
Building permits8:30 TB-Measures building permits for new construction.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Rate decision12:30 W?The Federal Reserves reports on interest rate changes.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Existing home sales10:00 ThCCounts sales of used homes.
Leading indicators10:00 ThD-Summary of already known reports.

Options Expiration

VIX expires on Wednesday.

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Swing and Position Traders: Chart Pattern Indicator

As of 06/15/2012, the CPI had:

4 bearish patterns,
50 bullish patterns,
443 patterns waiting for breakout.
The CPI signal is 92.6%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  12,608  12,687  12,731  12,811  12,854 
Weekly  12,271  12,519  12,647  12,895  13,023 
Monthly  11,691  12,229  12,573  13,112  13,456 
S&P 500 (^GSPC): Daily  1,324  1,334  1,338  1,348  1,353 
Weekly  1,294  1,319  1,331  1,355  1,368 
Monthly  1,226  1,285  1,325  1,383  1,424 
Nasdaq (^IXIC): Daily  2,825  2,849  2,862  2,885  2,898 
Weekly  2,772  2,822  2,853  2,903  2,933 
Monthly  2,620  2,746  2,853  2,980  3,087 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 2 weeks up 29.9%  The trend may continue.
 1 month up 52.0%  Expect a random direction.
 S & P 500 (^GSPC) 2 weeks up 29.1%  The trend may continue.
 1 month up 53.3%  Expect a random direction.
 Nasdaq composite (^IXIC) 2 weeks up 26.4%  The trend may continue.
 1 month up 47.4%  Expect a random direction.

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
22Pipe bottom
18Triangle, symmetrical
11Double Bottom, Adam and Adam
9Rectangle bottom
7Head-and-shoulders bottom
5Dead-cat bounce
4Double Bottom, Eve and Adam
4Double Bottom, Adam and Eve
3Broadening top
3Triangle, 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. Homebuilding1. Homebuilding
2. Biotechnology2. Biotechnology
3. Computers and Peripherals3. Retail Building Supply
4. Retail Building Supply4. Computers and Peripherals
5. Chemical (Basic)5. Chemical (Basic)
48. Petroleum (Producing)48. Oilfield Svcs/Equipment
49. Furn/Home Furnishings49. Petroleum (Producing)
50. Natural Gas (Diversified)50. Natural Gas (Diversified)
51. Short ETFs51. Short ETFs
52. Coal52. Coal

-- Thomas Bulkowski

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Thursday 6/14/12. Trading Thursday: Nasdaq

The index dropped by -0.9% or -24.46 points. Since 02/05/1971 the index made 168 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 77 occasions.
     Average loss was -1.5% on 91 occasions.
Expect the index to close lower 54.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 18/30 or 60.0% of the time.
     The prediction of the index closing lower has been right 12/23 or 52.2% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

One of the things that I want to study is pattern sequences. I started a review of that years ago but gave up because I knew that no one could reproduce my work. I'm talking about one double top following another (as an example). In this case, that's AB and CD. Does the appearance of the second double top mean a larger decline coming?

I don't know the answer to that.

If you want to call AB one peak and CD another, then you have a larger double top, AB CD. Both (or all three) double tops fulfilled the measure rule targets if you were patient enough.

Looking to tomorrow's close, the probabilities suggest a lower close. That's a tough call because the 10-day 5 min chart shows the index resting on support. Pierce that support and down she goes! On the daily chart, the index is moving sideways, hinting of a head-and-shoulders bottom. That is a bullish pattern.

You could vote either way, so I'll go with the probabilities and look for a lower close 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

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,574.12    
 Weekly S2  2,659.38  85.26   
 Monthly S1  2,696.37  36.98   
 Weekly S1  2,739.00  42.63   
 Daily S2  2,784.88  45.88   
 Daily S1  2,801.74  16.87   
 Weekly Pivot  2,806.29  4.55   
 Low  2,810.59  4.30   
 Close  2,818.61  8.02   
 61.8% Down from Intraday High  2,826.86  8.25   
 Daily Pivot  2,827.46  0.60   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  2,831.88  4.42   
 38.2% Down from Intraday High  2,836.90  5.02   
 Open  2,838.12  1.22   Yes! The Open is close to the 38.2% Down from Intraday High.
 Daily R1  2,844.32  6.20   
 Monthly Pivot  2,848.92  4.60   
 High  2,853.17  4.25   Yes! The High is close to the Monthly Pivot.
 Daily R2  2,870.04  16.87   
 Weekly R1  2,885.91  15.87   
 Weekly R2  2,953.20  67.30   
 Monthly R1  2,971.17  17.96   
 Monthly R2  3,123.72  152.56   

Tuesday 6/12/12. Trading Tuesday: Dow

The index dropped by -1.1% or -142.97 points. Since 10/01/1928 the index made 287 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 132 occasions.
     Average loss was -1.0% on 155 occasions.
Expect the index to close lower 54.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 27/42 or 64.3% of the time.
     The prediction of the index closing lower has been right 6/7 or 85.7% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

A triple bottom appears at ABC. This confirmed as a valid chart pattern when the index closed above the red line (the highest peak in the chart pattern). However, the index did not climb far enough to fulfill the measure rule prediction, so the up trend was not a strong one.

Looking to Tuesday's close, the probabilities say the index will close lower and that's been right 86% of the time. I agree with that assessment, given that the Spain bailout news was such a dud.

I believe that the measured move down scenario I outlined yesterday is still valid. That means a lower close 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

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,380.53    
 Weekly S2  11,813.69  433.16   
 Monthly S1  11,895.88  82.19   
 Weekly S1  12,112.46  216.58   
 Daily S2  12,234.74  122.28   
 Daily S1  12,322.98  88.25   
 Weekly Pivot  12,333.86  10.88   Yes! The Weekly Pivot is close to the Daily S1.
 Low  12,398.48  64.62   
 Close  12,411.23  12.75   Yes! The Close is close to the Low.
 Daily Pivot  12,486.73  75.50   
 61.8% Down from Intraday High  12,494.74  8.01   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  12,524.47  29.73   
 Monthly Pivot  12,550.44  25.97   
 Open  12,553.81  3.37   Yes! The Open is close to the Monthly Pivot.
 38.2% Down from Intraday High  12,554.21  0.40   Yes! The 38.2% Down from Intraday High is close to the Open.
 Daily R1  12,574.97  20.76   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Weekly R1  12,632.63  57.66   
 High  12,650.47  17.84   Yes! The High is close to the Weekly R1.
 Daily R2  12,738.72  88.25   
 Weekly R2  12,854.03  115.31   
 Monthly R1  13,065.79  211.76   
 Monthly R2  13,720.35  654.56   

Monday 6/11/12. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

I show the Dow industrials on the daily scale. In red lines I show the ideal measured move down chart pattern. The drop from (blue) A to D is a stair-step one. Following that, price retraces to the corrective phase, BC. Then it typically resumes its downward move. That's why I still show many of the indices heading lower.

Projecting this onto the actual Dow, we see price peak at the red A, bottom in the corrective phase BC and drop to D. The CD drop should mirror the AB move, so a short drop could indicate strength, but I've not checked for that scenario.

The word out of Europe is that Spain will be handed a bailout and the markets will zip upward on Monday. I show that as the slight upward move after E. Then I expect reality to take hold of the market and send it lower, to F.

It's also possible that when pushed to the brink of disaster, the governments in Europe will come to their senses and do the minimum to solve their problems. That includes Greece on the 17th. And that could mean our Dow will continue to move up. I'm beginning to think that will be the likely course.

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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 17.11 points.
Tuesday: Up 26.49 points.
Wednesday: Up 286.84 points.
Thursday: Up 46.17 points.
Friday: Up 93.24 points.

For the Week...

The Dow industrials were up 435.63 points or 3.6%.
The Nasdaq composite was up 110.94 points or 4.0%.
The S&P 500 index was up 47.62 points or 3.7%.

Year to Date...

Dow Industrials
     5.9% down from the high of 13,338.66 on 05/01/2012.
     4.3% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     8.8% down from the high of 3,134.17 on 03/27/2012.
     8.8% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     6.8% down from the high of 1,422.38 on 04/02/2012.
     5.3% up from the low of 1,258.86 on 01/03/2012.

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Economic Reports

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

ReportTimeA-F
Rating
Description
International trade8:30 TC+Import/export prices, trade balance. US economy vs others.
Treasury budget2:00 TDTracks budget deficit. Important in April (tax filing).
Retail sales8:30 WA-Reports total retail sales (not services). Are people spending?
Producer price index8:30 WB-Measures wholesale goods cost. An indication of future inflation.
Business inventories10:00 WC-Reports manufacturing, wholesale, retail inventories.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Consumer price index8:30 ThB+Inflation report. Measures cost of goods and services.
Industrial production9:15 FB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 FB-Gauges economic activity, hints of inflation.

Options Expiration

The following is courtesy of the Options Industry Council.

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

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

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Swing and Position Traders: Chart Pattern Indicator

As of 06/08/2012, the CPI had:

2 bearish patterns,
28 bullish patterns,
282 patterns waiting for breakout.
The CPI signal is 93.3%, 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  12,347  12,450  12,502  12,606  12,658 
Weekly  11,861  12,208  12,382  12,728  12,902 
Monthly  11,428  11,991  12,598  13,161  13,768 
S&P 500 (^GSPC): Daily  1,302  1,314  1,320  1,332  1,338 
Weekly  1,245  1,285  1,307  1,348  1,369 
Monthly  1,203  1,264  1,328  1,389  1,453 
Nasdaq (^IXIC): Daily  2,799  2,829  2,845  2,875  2,891 
Weekly  2,673  2,766  2,820  2,912  2,966 
Monthly  2,587  2,723  2,862  2,998  3,137 
  • 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 43.1%  Expect a random direction.
 1 month up 52.0%  Expect a random direction.
 S & P 500 (^GSPC) 1 week up 42.0%  Expect a random direction.
 1 month up 53.3%  Expect a random direction.
 Nasdaq composite (^IXIC) 1 week up 40.4%  Expect a random direction.
 1 month up 47.4%  Expect a random direction.

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
13Pipe bottom
12Triangle, symmetrical
9Rectangle bottom
6Double Bottom, Adam and Adam
6Dead-cat bounce
5Head-and-shoulders top
4Triangle, descending
4Head-and-shoulders bottom
3Channel
3Double Bottom, 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, 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. Homebuilding1. Homebuilding
2. Biotechnology2. Retail Building Supply
3. Retail Building Supply3. Biotechnology
4. Computers and Peripherals4. Computers and Peripherals
5. Chemical (Basic)5. Chemical (Basic)
48. Oilfield Svcs/Equipment48. Petroleum (Integrated)
49. Petroleum (Producing)49. Oilfield Svcs/Equipment
50. Natural Gas (Diversified)50. Petroleum (Producing)
51. Short ETFs51. Natural Gas (Diversified)
52. Coal52. Coal

-- Thomas Bulkowski

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Thursday 6/7/12. Trading Thursday: Nasdaq

The index climbed by 2.4% or 66.61 points. Since 02/05/1971 the index made 24 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.5% on 12 occasions.
     Average loss was -1.2% on 12 occasions.
Expect the index to close higher 50.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 18/29 or 62.1% of the time.
     The prediction of the index closing lower has been right 12/23 or 52.2% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

The index took off from the opening, which did not give any chart patterns time to form. The afternoon saw the index move sideways to form a head-and-shoulders bottom chart pattern.

This pattern confirmed when the index closed above the red line. This is not the neckline, which slopes upward. This is a horizontal line connecting the right armpit.

Looking to Thursday's close, I agree with the probabilities that the index will close higher. This is not based on any real technical reason, but we might see some follow-through buying which will push the index higher. The index might gap higher, showing an exhaustion gap. Often days following such a large move show much less volatility, so look for a narrow trading range, too.

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

-- Thomas Bulkowski

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,554.29    
 Weekly S2  2,689.34  135.05   
 Monthly S1  2,699.51  10.17   
 Weekly S1  2,767.03  67.52   
 Daily S2  2,780.07  13.04   
 Low  2,796.23  16.16   
 Open  2,796.23  0.00   Yes! The Open is close to the Low.
 Daily S1  2,812.39  16.16   
 61.8% Down from Intraday High  2,814.75  2.36   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  2,820.48  5.72   
 Weekly Pivot  2,824.93  4.45   Yes! The Weekly Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  2,826.20  1.27   Yes! The 38.2% Down from Intraday High is close to the Weekly Pivot.
 Daily Pivot  2,828.56  2.36   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  2,844.72  16.16   
 High  2,844.72  0.00   Yes! The High is close to the Close.
 Daily R1  2,860.88  16.16   
 Daily R2  2,877.05  16.16   
 Monthly Pivot  2,892.45  15.41   
 Weekly R1  2,902.62  10.17   
 Weekly R2  2,960.52  57.90   
 Monthly R1  3,037.67  77.15   
 Monthly R2  3,230.61  192.95   

Wednesday 6/6/12. My Windmill

Picture of the windmill in my back yard.

I know it's a small thing, but I am sooo pleased with how my windmill turned out.

Years ago, I bought this metal windmill. It's 8 feet tall so I buried it in my back yard about three feet to keep it proportional.

Now, the thing was rusting and looked awful.

I watched a This Old House episode about spray painting that could dissolve rust and such. They turned a grungy BBQ grill into a nice looking hunk of road kill cooker.

I thought,why not do the same with my windmill?

I took apart the top half and went to work and the results are what you see pictured. Yes, the red lines aren't straight but I am pleased with how well it turned out. You can see the metal/rust slightly on the platform below the turbines. I think it's galvanized steel or something.


Tuesday 6/5/12. Trading Tuesday: Dow

The index dropped by -0.1% or -17.11 points. Since 10/01/1928 the index made 1202 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 621 occasions.
     Average loss was -0.8% on 581 occasions.
Expect the index to close higher 51.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 26/41 or 63.4% of the time.
     The prediction of the index closing lower has been right 6/7 or 85.7% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

An ascending triangle appears at D. It has a downward breakout that fulfills the measure rule to hit a target.

After that, a double bottom at AB appears and confirms when the index closes above the red line, at C. It also results in a good move upward.

Looking to Tuesday's close, the probabilities say the index will close higher. I think it will close higher, too. This is based on the daily chart which shows a long candle followed by a short one, suggesting a loss of downward momentum. Given that the index is resting on a support area, then a retrace, I feel, is more likely.

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

-- Thomas Bulkowski

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,284.69    
 Monthly S1  11,693.07  408.39   
 Weekly S2  11,769.39  76.31   
 Weekly S1  11,935.42  166.04   
 Daily S2  11,984.81  49.39   
 Low  12,035.09  50.28   
 Daily S1  12,043.14  8.05   Yes! The Daily S1 is close to the Low.
 61.8% Down from Intraday High  12,076.58  33.44   
 50% Down from Intraday High  12,089.39  12.81   
 Daily Pivot  12,093.41  4.02   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  12,101.46  8.05   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  12,102.21  0.75   Yes! The 38.2% Down from Intraday High is close to the Close.
 Open  12,119.85  17.64   
 High  12,143.69  23.84   
 Daily R1  12,151.74  8.05   Yes! The Daily R1 is close to the High.
 Daily R2  12,202.01  50.28   
 Weekly Pivot  12,273.52  71.50   
 Weekly R1  12,439.55  166.04   
 Monthly Pivot  12,515.87  76.31   
 Weekly R2  12,777.65  261.78   
 Monthly R1  12,924.25  146.61   
 Monthly R2  13,747.05  822.79   

Monday 6/4/12. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

I show the Dow industrials on the daily scale.

The index is headed lower but how far will it drop? The measured move down chart pattern provides an answer.

Measure the length of the AB move. That is from the beginning of the down turn to the lowest low before price consolidates (in the so-called corrective phase BC). I show the move as a drop of about 1,000 points.

Project that move downward from the peak in the corrective phase, C, to get a target of 11,600 (well below D).

The time estimate works the same way. The AB drop took 22 days. From C, the drop should end on June 20, 2012. So, we have about three more weeks of a falling market left to come.

The nearest congestion region to 11,600 is 11,700 to 11,800. Look for the index to bottom there (or at least pause). If this estimate is correct, then we can expect a bounce taking it back up to the BC region. That's typical behavior for measured moves.

But all of this is a guess. Greece may decide to stay in the European union and all the debt problems they are having will be resolved. What are the chances of that happening? We will find out.

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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 125.86 points.
Wednesday: Down 160.83 points.
Thursday: Down 26.41 points.
Friday: Down 274.88 points.
Saturday: Holiday or other weird event!

For the Week...

The Dow industrials were down 336.26 points or 2.7%.
The Nasdaq composite was down 90.05 points or 3.2%.
The S&P 500 index was down 39.78 points or 3.0%.

Year to Date...

Dow Industrials
     9.1% down from the high of 13,338.66 on 05/01/2012.
     0.1% up from the low of 12,107.48 on 06/01/2012.
Nasdaq
     12.3% down from the high of 3,134.17 on 03/27/2012.
     4.6% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     10.1% down from the high of 1,422.38 on 04/02/2012.
     1.5% up from the low of 1,258.86 on 01/03/2012.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Factory orders10:00 MD+Durable/non-durable goods orders w/factory inventories.
Productivity & costs8:30 WD+Cost of producing a unit of output.
Crude inventories10:30 W?My guess: Measures oil inventory.
FEDs Beige book2:00 W?Reports on economic conditions.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Consumer credit3:00 ThD-Measures auto, credit card and other debt.
Trade balance8:30 FC+Signals balance of exports & imports.
Wholesale inventories10:00 FD-Wholesale sales and inventory statistics.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

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

152 bearish patterns,
2 bullish patterns,
283 patterns waiting for breakout.
The CPI signal is 1.3%, which is bearish (<= 35%).

The chart pattern indicator is bearish 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  11,922  12,020  12,206  12,304  12,490 
Weekly  11,775  11,947  12,279  12,451  12,783 
Monthly  11,290  11,704  12,522  12,936  13,753 
S&P 500 (^GSPC): Daily  1,256  1,267  1,288  1,300  1,321 
Weekly  1,239  1,259  1,297  1,316  1,354 
Monthly  1,185  1,232  1,324  1,370  1,462 
Nasdaq (^IXIC): Daily  2,705  2,726  2,768  2,789  2,831 
Weekly  2,657  2,702  2,793  2,838  2,928 
Monthly  2,522  2,635  2,860  2,973  3,198 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week down 30.9%  The trend may continue.
 2 months down 12.1%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week down 31.3%  The trend may continue.
 3 months down 7.5%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 1 week down 34.2%  The trend may continue.
 3 months down 10.1%  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
13Triangle, symmetrical
10Pipe bottom
8Dead-cat bounce
7Triangle, descending
7Rectangle bottom
5Head-and-shoulders bottom
5Triangle, ascending
4Broadening top
4Double Top, Adam and Adam
4Double Bottom, Adam and Adam

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

The 10 types of most frequently appearing chart patterns in the stocks, 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. Homebuilding1. Homebuilding
2. Retail Building Supply2. Biotechnology
3. Biotechnology3. Retail Building Supply
4. Computers and Peripherals4. Computers and Peripherals
5. Chemical (Basic)5. Chemical (Basic)
48. Petroleum (Integrated)48. Oilfield Svcs/Equipment
49. Oilfield Svcs/Equipment49. Petroleum (Producing)
50. Petroleum (Producing)50. Natural Gas (Diversified)
51. Natural Gas (Diversified)51. Short ETFs
52. Coal52. Coal

-- Thomas Bulkowski

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