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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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Patterns
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Patterns
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 09/20/2017
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 2013 Headlines


Archives


Saturday 6/29/13. Saturday Supplement

Picture of a flower from my garden.

I completed a few trades recently. The first was in Stein Mart (SMRT). This was two trades. On one I made 47% and the other made 69%. That includes dividends. Annualized, the returns were 18% and 25%, respectively. I sold too soon (at 13.11) and price closed Friday at 13.65. I expected a reverse, and that's not out of the question, but it appears the stock will continue moving up.

I entered the first trade on a throwback to a head-and-shoulders bottom and the second was an upward breakout from a channel. I sold because price hit my target and as I said, I thought it was going to drop.

The next trade was in Balchem (BCPC), also in two parts. I bought an ascending triangle breakout and the second time to average up (at the bottom in November...very timely). I made 43% on the first trade and 37% on the second. Annualized, that's 42% on the first and 60% on the second.

I sold because of a 2B pattern. I expect this to continue into a support region (March through May...it's at the top of it now) and I didn't want to follow it down.


Thursday 6/27/13. Trading Thursday: Nasdaq

The index climbed by 0.8% or 28.33 points. Since 02/05/1971 the index made 353 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 233 occasions.
     Average loss was -0.9% on 120 occasions.
Expect the index to close higher 66.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 39/67 or 58.2% of the time.
     The prediction of the index closing lower has been right 20/38 or 52.6% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

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

The index formed a triple bottom at ABC. This confirmed as a valid bottom when the index closed above the top of the pattern, at D.

However, notice E and F. Those are two shoulders of a complex head-and-shoulders bottom. I don't show the neckline, but it would get you into the trade after F, slightly above the price level of D.

The probabilities say that the index has closed higher in two out of three trades in the past. I bothers me that the index made a strong move down going into the last half hour or so of the session. On the daily chart, the index has gapped away from the turn two days ago. I expect the momentum to continue and look for a higher close on Thursday, too.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,206.53    
 Weekly S2  3,235.68  29.15   
 Monthly S1  3,291.38  55.70   
 Weekly S1  3,305.95  14.57   
 Daily S2  3,356.91  50.96   
 Low  3,365.48  8.57   
 Daily S1  3,366.57  1.09   Yes! The Daily S1 is close to the Low.
 61.8% Down from Intraday High  3,372.44  5.87   
 50% Down from Intraday High  3,374.59  2.15   
 Daily Pivot  3,375.13  0.54   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Open  3,375.70  0.57   Yes! The Open is close to the Daily Pivot.
 Close  3,376.22  0.52   Yes! The Close is close to the Open.
 38.2% Down from Intraday High  3,376.74  0.52   Yes! The 38.2% Down from Intraday High is close to the Close.
 High  3,383.70  6.96   
 Daily R1  3,384.79  1.09   Yes! The Daily R1 is close to the High.
 Daily R2  3,393.35  8.57   
 Weekly Pivot  3,397.13  3.78   
 Monthly Pivot  3,411.70  14.57   
 Weekly R1  3,467.40  55.70   
 Monthly R1  3,496.55  29.15   
 Weekly R2  3,558.58  62.03   
 Monthly R2  3,616.88  58.30   

Tuesday 6/25/13. Trading Tuesday: Dow

The index dropped by -0.9% or -139.84 points. Since 10/01/1928 the index made 402 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 189 occasions.
     Average loss was -0.8% on 213 occasions.
Expect the index to close lower 53.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 53/78 or 67.9% of the time.
     The prediction of the index closing lower has been right 13/23 or 56.5% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

This chart shows a descending triangle highlighted in red. The breakout is unusual since a descending triangle normally breaks out downward. The upward move can be a strong one under those conditions.

What is interesting is how closely the apex of the triangle is below a major turn in the index (blue line). That happens more than one might expect (60% of the time). If you draw the triangle boundary lines carefully, a short-term turn is often within a few bars of the apex. Thus, you can use that to help determine when it's time to sell.

The above probabilities say to look for a lower close. The chart also shows the index making a strong downward move going into the close. I think the index may close lower tomorrow, but the trend is going to turn in a day or two. I'm thinking that tomorrow will put in a lower low but then a recovery will start. I expect the index to hit 14,400 and start to recover.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,109.49    
 Weekly S2  14,244.37  134.87   
 Monthly S1  14,384.53  140.16   
 Daily S2  14,424.35  39.83   
 Weekly S1  14,451.96  27.61   
 Daily S1  14,541.96  89.99   
 Low  14,551.27  9.31   Yes! The Low is close to the Daily S1.
 61.8% Down from Intraday High  14,644.68  93.41   
 Close  14,659.56  14.88   Yes! The Close is close to the 61.8% Down from Intraday High.
 Daily Pivot  14,668.87  9.31   Yes! The Daily Pivot is close to the Close.
 50% Down from Intraday High  14,673.53  4.66   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  14,702.38  28.85   
 Daily R1  14,786.48  84.09   
 Open  14,795.79  9.31   Yes! The Open is close to the Daily R1.
 High  14,795.79  0.00   Yes! The High is close to the Open.
 Weekly Pivot  14,896.03  100.24   
 Daily R2  14,913.39  17.37   Yes! The Daily R2 is close to the Weekly Pivot.
 Monthly Pivot  14,963.46  50.07   
 Weekly R1  15,103.62  140.16   
 Monthly R1  15,238.50  134.87   
 Weekly R2  15,547.69  309.19   
 Monthly R2  15,817.43  269.75   

Monday 6/24/13. 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 index has dropped along with the other indices and I chose this one instead of the Dow because it represents a larger market share than just the 30 Dow stocks.

A support area marked by the appearance of a broadening formation I think will stop the decline. It might not, of course, so I'm only guessing along with the rest of the market players.

The horizontal green shows where the index closed on Friday. It shows that the index has more room to fall. But I really think the drop is nearing its end. (I hope...)

 

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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 109.67 points.
Tuesday: Up 138.38 points.
Wednesday: Down 206.04 points.
Thursday: Down 353.87 points.
Friday: Up 41.08 points.

For the Week...

The Dow industrials were down 270.78 points or 1.8%.
The Nasdaq composite was down 66.31 points or 1.9%.
The S&P 500 index was down 34.3 points or 2.1%.

Year to Date...

Dow Industrials
     4.8% down from the high of 15,542.40 on 05/22/2013.
     12.9% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     4.9% down from the high of 3,532.03 on 05/22/2013.
     9.1% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     5.6% down from the high of 1,687.18 on 05/22/2013.
     11.7% up from the low of 1,426.19 on 01/02/2013.

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

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 06/21/2013, the CPI had:

21 bearish patterns,
1 bullish patterns,
143 patterns waiting for breakout.
The CPI signal is 4.5%, which is bearish (<= 35%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  14,612  14,706  14,782  14,876  14,952 
Weekly  14,291  14,545  14,943  15,197  15,594 
Monthly  14,156  14,478  15,010  15,332  15,864 
S&P 500 (^GSPC): Daily  1,568  1,580  1,590  1,602  1,611 
Weekly  1,532  1,562  1,608  1,639  1,685 
Monthly  1,510  1,551  1,619  1,661  1,729 
Nasdaq (^IXIC): Daily  3,303  3,330  3,354  3,381  3,404 
Weekly  3,229  3,293  3,391  3,455  3,552 
Monthly  3,200  3,279  3,405  3,484  3,611 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 2 weeks down 16.8%   Expect a reversal soon. 
 1 month down 20.3%   Expect a reversal soon. 
 S & P 500 (^GSPC) 2 weeks down 16.3%   Expect a reversal soon. 
 1 month down 21.2%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 2 weeks down 19.0%   Expect a reversal soon. 
 1 month down 26.5%   The trend may continue. 

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
19Head-and-shoulders top
14Double Top, Adam and Adam
10Rectangle top
10Triangle, symmetrical
8Triple top
5Double Top, Eve and Adam
5Rising wedge
4Flag, high and tight
4Channel
4Pipe bottom

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

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

 

 

 

 

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

This WeekLast Week
1. Insurance (Life)1. Insurance (Life)
2. Retail (Special Lines)2. Securities Brokerage
3. Trucking/Transp. Leasing3. Retail (Special Lines)
4. Semiconductor4. Semiconductor
5. Shoe5. Retail Building Supply
48. Electric Utility (East)48. Chemical (Specialty)
49. E-Commerce49. Medical Supplies
50. Homebuilding50. Electric Utility (East)
51. Investment Co. (Foreign)51. Investment Co. (Foreign)
52. Computers and Peripherals52. Computers and Peripherals
53. Metals and Mining (Div.)53. Metals and Mining (Div.)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Tuesday 6/18/13. Trading Tuesday: Dow

The index climbed by 0.7% or 109.67 points. Since 10/01/1928 the index made 618 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 339 occasions.
     Average loss was -0.7% on 279 occasions.
Expect the index to close higher 54.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 52/77 or 67.5% of the time.
     The prediction of the index closing lower has been right 13/23 or 56.5% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

The move upward occurred in the opening minutes of the session. After a quick rise, price often moves horizontally, and that's what happened here. Eventually, the Dow began a slide that turned into a strong downtrend.

The horizontal move can be classified as many chart patterns. There's a triple bottom between A and B. The entire move from 10:00 to 2:00 can be classified as a rectangle. However, the best interpretation is that AB is a double top. That confirms as a valid pattern when the index closes below the low between the two valleys, at C.

The index has been moving sideways for a few weeks now, so it's hard to predict tomorrow's close. The probabilities suggest a higher close on Tuesday. I don't have a strong feeling either way, so I'll look for a higher close as well.

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

-- Thomas Bulkowski

Top

© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,490.64    
 Weekly S2  14,797.46  306.81   
 Monthly S1  14,835.25  37.79   
 Weekly S1  14,988.65  153.41   
 Daily S2  14,990.42  1.77   Yes! The Daily S2 is close to the Weekly S1.
 Low  15,078.71  88.29   
 Open  15,078.71  0.00   Yes! The Open is close to the Low.
 Daily S1  15,085.14  6.43   Yes! The Daily S1 is close to the Open.
 Weekly Pivot  15,144.65  59.51   
 61.8% Down from Intraday High  15,148.62  3.97   Yes! The 61.8% Down from Intraday High is close to the Weekly Pivot.
 50% Down from Intraday High  15,170.21  21.59   
 Daily Pivot  15,173.42  3.21   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  15,179.85  6.43   Yes! The Close is close to the Daily Pivot.
 Monthly Pivot  15,188.82  8.97   Yes! The Monthly Pivot is close to the Close.
 38.2% Down from Intraday High  15,191.80  2.98   Yes! The 38.2% Down from Intraday High is close to the Monthly Pivot.
 High  15,261.71  69.91   
 Daily R1  15,268.14  6.43   Yes! The Daily R1 is close to the High.
 Weekly R1  15,335.84  67.71   
 Daily R2  15,356.42  20.58   
 Weekly R2  15,491.84  135.41   
 Monthly R1  15,533.43  41.59   
 Monthly R2  15,887.00  353.58   

Monday 6/17/13. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq composite on the daily scale.

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

A broadening top appears at A. Ignore the gap in the red line. I didn't notice it until I was too lazy to fix it.

At B, a channel appears. I like this one. The two lines are nearly parallel. It acts as a flag type pattern with a long flagpole that started at the bottom in April.

It's NOT a flag, of course because it's too long (3 weeks is the maximum length of a flag or pennant, by convention).

The channel suggests the index will continue lower until breaking out of the channel, either with a sharp decline or upward. My guess is the direction will be upward.

 

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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 9.53 points.
Tuesday: Down 116.57 points.
Wednesday: Down 126.79 points.
Thursday: Up 180.85 points.
Friday: Down 105.9 points.

For the Week...

The Dow industrials were down 177.94 points or 1.2%.
The Nasdaq composite was down 45.66 points or 1.3%.
The S&P 500 index was down 16.65 points or 1.0%.

Year to Date...

Dow Industrials
     3.0% down from the high of 15,542.40 on 05/22/2013.
     15.0% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     3.1% down from the high of 3,532.03 on 05/22/2013.
     11.3% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     3.6% down from the high of 1,687.18 on 05/22/2013.
     14.1% up from the low of 1,426.19 on 01/02/2013.

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
Consumer price index8:30 TB+Inflation report. Measures cost of goods and services.
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 decision2:00 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

The following is courtesy of the Options Industry Council.

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

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

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Swing and Position Traders: Chart Pattern Indicator

As of 06/14/2013, the CPI had:

13 bearish patterns,
8 bullish patterns,
410 patterns waiting for breakout.
The CPI signal is 38.1%, which is neutral (between 35% and 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  14,946  15,008  15,107  15,169  15,268 
Weekly  14,761  14,916  15,108  15,263  15,455 
Monthly  14,454  14,762  15,152  15,460  15,850 
S&P 500 (^GSPC): Daily  1,614  1,620  1,630  1,637  1,647 
Weekly  1,587  1,607  1,628  1,648  1,668 
Monthly  1,548  1,588  1,637  1,677  1,726 
Nasdaq (^IXIC): Daily  3,401  3,412  3,430  3,442  3,460 
Weekly  3,335  3,379  3,432  3,476  3,529 
Monthly  3,303  3,363  3,448  3,508  3,592 
  • 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 28.9%   The trend may continue. 
 1 month down 20.3%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week down 27.7%   The trend may continue. 
 1 month down 21.2%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week down 31.1%   The trend may continue. 
 1 month down 26.5%   The trend may continue. 

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
11Head-and-shoulders top
11Double Top, Adam and Adam
9Triangle, symmetrical
8Rectangle top
7Triple top
6Pipe top
6Flag, high and tight
5Diamond top
5Broadening top, right-angled and ascending
4Double Top, Eve and Adam

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

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

 

 

 

 

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

This WeekLast Week
1. Insurance (Life)1. Insurance (Life)
2. Securities Brokerage2. Securities Brokerage
3. Retail (Special Lines)3. Trucking/Transp. Leasing
4. Semiconductor4. Semiconductor
5. Retail Building Supply5. Retail (Special Lines)
48. Chemical (Specialty)48. Computer Software and Svcs
49. Medical Supplies49. Chemical (Specialty)
50. Electric Utility (East)50. Electric Utility (East)
51. Investment Co. (Foreign)51. Investment Co. (Foreign)
52. Computers and Peripherals52. Computers and Peripherals
53. Metals and Mining (Div.)53. Metals and Mining (Div.)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 6/15/13. Saturday Supplement

Alan Battista has reviewed my Swing and Day Trading book, which is pictured on the right.

Visit Alan's website (Stockineer.com). It's worth a look. Here is part of his mission statement: "The purpose of this site is to create a community of not only experienced traders but also novices interested in using technical analysis to understand the stock market so that together we can all make wise financial decisions. Fundamental analysis is also welcome as I believe the blending of the two methods gives the best opportunities for success."

-- Thomas Bulkowski


Thursday 6/13/13. Trading Thursday: Nasdaq

The index dropped by -1.1% or -36.52 points. Since 02/05/1971 the index made 143 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.5% on 73 occasions.
     Average loss was -1.2% on 70 occasions.
Expect the index to close higher 51.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 38/66 or 57.6% of the time.
     The prediction of the index closing lower has been right 20/38 or 52.6% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

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

A small double top appears at AB. That confirms as a valid chart pattern when the index closes below the red line. The pattern is short enough that the measure rule target (the height of the pattern subtracted from the value of the red line) is quickly reached.

Do you recognize the pattern at CDBE? It's called a measured move down. The idea behind the pattern is that the first leg, CD, will approximate the length of the second leg, BE. Once the pattern completes, price often recovers to the corrective phase, DB (on the daily chart, that is). That's valuable information. Look for the pattern at your favorite high-end retailer.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,272.52    
 Monthly S1  3,336.48  63.95   
 Weekly S2  3,342.19  5.71   Yes! The Weekly S2 is close to the Monthly S1.
 Daily S2  3,355.24  13.05   
 Weekly S1  3,371.31  16.07   
 Daily S1  3,377.83  6.52   
 Low  3,395.91  18.08   
 Close  3,400.43  4.52   Yes! The Close is close to the Low.
 Daily Pivot  3,418.51  18.08   
 61.8% Down from Intraday High  3,420.08  1.57   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 Weekly Pivot  3,427.03  6.95   
 50% Down from Intraday High  3,427.54  0.51   Yes! The 50% Down from Intraday High is close to the Weekly Pivot.
 Monthly Pivot  3,434.25  6.71   
 38.2% Down from Intraday High  3,435.01  0.76   Yes! The 38.2% Down from Intraday High is close to the Monthly Pivot.
 Daily R1  3,441.10  6.09   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Weekly R1  3,456.15  15.05   
 Open  3,458.14  1.99   Yes! The Open is close to the Weekly R1.
 High  3,459.18  1.04   Yes! The High is close to the Open.
 Daily R2  3,481.78  22.60   
 Monthly R1  3,498.21  16.43   
 Weekly R2  3,511.87  13.66   
 Monthly R2  3,595.99  84.12   

Tuesday 6/11/13. Trading Tuesday: Dow

The index dropped by -0.1% or -9.53 points. Since 10/01/1928 the index made 1220 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 635 occasions.
     Average loss was -0.8% on 585 occasions.
Expect the index to close higher 52.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 52/76 or 68.4% of the time.
     The prediction of the index closing lower has been right 13/23 or 56.5% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

A head-and-shoulders top appears and it confirms when the index closes below the blue neckline. However, since the neckline slopes downward, I would use the right shoulder armpit as a confirmation (short sale) signal (green line B).

After that, the index forms a broadening formation, right-angled and descending pattern (A). This had an upward breakout that didn't last long (throwback to the breakout price). My initial thought is that tomorrow the index will resume moving up since the throwback has completed. That suggests a higher close and that agrees with the above probabilities. The daily chart shows the index forming a bearish doji star which testing has revealed isn't bearish at all. So I'm looking for a higher close tomorrow (Tuesday).

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,493.37    
 Weekly S2  14,668.50  175.13   
 Monthly S1  14,865.98  197.48   
 Weekly S1  14,953.55  87.57   
 Weekly Pivot  15,129.26  175.72   
 Daily S2  15,160.77  31.51   
 Daily S1  15,199.68  38.91   
 Monthly Pivot  15,204.19  4.51   Yes! The Monthly Pivot is close to the Daily S1.
 Low  15,211.25  7.06   Yes! The Low is close to the Monthly Pivot.
 Close  15,238.59  27.34   
 61.8% Down from Intraday High  15,245.40  6.81   Yes! The 61.8% Down from Intraday High is close to the Close.
 Open  15,247.81  2.41   Yes! The Open is close to the 61.8% Down from Intraday High.
 Daily Pivot  15,250.16  2.35   Yes! The Daily Pivot is close to the Open.
 50% Down from Intraday High  15,255.95  5.79   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  15,266.49  10.55   
 Daily R1  15,289.07  22.58   
 High  15,300.64  11.57   
 Daily R2  15,339.55  38.91   
 Weekly R1  15,414.31  74.76   
 Monthly R1  15,576.80  162.49   
 Weekly R2  15,590.02  13.22   
 Monthly R2  15,915.01  324.99   

Monday 6/10/13. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the weekly scale.

I mentioned the utility index earlier in the week, saying that the index was oversold and that dividend paying companies such as utilities might be worth a look.

The index appears to have hit bottom. On Monday, I plan to add to an existing position in one of my utility stocks and maybe go shopping in the others that I have on my watch list. I don't plan to go wild on these because the utility index could still make another move down. Let's take a closer look at the index.

The chart shows a red line (C) that matches the current low. It's in the middle of green lines A and B. Those are support areas (between the lines, that is). The chart is on the weekly scale, by the way.

The daily chart, not shown, makes the turn clearer. I think, and I'm only guessing, that the index has bottomed. Thus, it's time to grab utility stocks that are both safe and yielding near 5%. That kind of dividend provides a good measure of safety. However, if you look at their charts, you'll also see that the stocks are close to their highs. It's a trade off. You could be buying high and hoping for a momentum play while collecting a tasty dividend.

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A Brief Look Back

Picture of a praying mantis 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 138.46 points.
Tuesday: Down 76.49 points.
Wednesday: Down 216.95 points.
Thursday: Up 80.03 points.
Friday: Up 207.5 points.

For the Week...

The Dow industrials were up 132.55 points or 0.9%.
The Nasdaq composite was up 13.31 points or 0.4%.
The S&P 500 index was up 12.64 points or 0.8%.

Year to Date...

Dow Industrials
     1.9% down from the high of 15,542.40 on 05/22/2013.
     16.4% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     1.8% down from the high of 3,532.03 on 05/22/2013.
     12.8% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     2.6% down from the high of 1,687.18 on 05/22/2013.
     15.2% up from the low of 1,426.19 on 01/02/2013.

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

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 06/07/2013, the CPI had:

2 bearish patterns,
21 bullish patterns,
233 patterns waiting for breakout.
The CPI signal is 91.3%, 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  14,972  15,110  15,183  15,321  15,394 
Weekly  14,672  14,960  15,132  15,421  15,593 
Monthly  14,497  14,872  15,207  15,583  15,918 
S&P 500 (^GSPC): Daily  1,619  1,631  1,638  1,650  1,657 
Weekly  1,581  1,612  1,629  1,661  1,678 
Monthly  1,553  1,598  1,643  1,688  1,732 
Nasdaq (^IXIC): Daily  3,415  3,442  3,457  3,484  3,499 
Weekly  3,365  3,417  3,450  3,502  3,535 
Monthly  3,295  3,382  3,457  3,544  3,619 
  • 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 43.9%  Expect a random direction.
 7 months up 2.6%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week up 43.9%  Expect a random direction.
 8 months up 0.0%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 1 week up 42.8%  Expect a random direction.
 8 months up 3.3%  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: bearish.

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
9Head-and-shoulders top
8Double Top, Adam and Adam
8Triangle, symmetrical
7Pipe top
6Rectangle top
5Flag, high and tight
5Dead-cat bounce
5Triple top
4Wolfe wave, bear
4Broadening top, right-angled and ascending

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

The 10 types of most frequently appearing chart patterns in the stocks, 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. Insurance (Life)1. Insurance (Life)
2. Securities Brokerage2. Semiconductor
3. Trucking/Transp. Leasing3. Securities Brokerage
4. Semiconductor4. Trucking/Transp. Leasing
5. Retail (Special Lines)5. Biotechnology
48. Computer Software and Svcs48. Retail Store
49. Chemical (Specialty)49. Medical Supplies
50. Electric Utility (East)50. Electric Utility (East)
51. Investment Co. (Foreign)51. Investment Co. (Foreign)
52. Computers and Peripherals52. Metals and Mining (Div.)
53. Metals and Mining (Div.)53. Computers and Peripherals
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 6/8/13. Saturday Supplement

Picture of my books

I have four new children born this year. Their pictures are on the right. They are:

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

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

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

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

The Visual Guide to Chart Patterns is a concise and accessible visual guide to identifying, understanding, and using chart patterns to predict the direction and extent of price moves. Packed with visual learning enhancements and exercises, this innovative book helps savvy investors and professionals alike master the essential skills of chart pattern recognition. Follow along as chart pattern expert Thomas Bulkowski teaches you to recognize important peaks and valleys that form patterns-footprints of the smart money.

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Thursday 6/6/13. Trading Thursday: Nasdaq

The index dropped by -1.3% or -43.48 points. Since 02/05/1971 the index made 98 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.6% on 36 occasions.
     Average loss was -0.9% on 62 occasions.
Expect the index to close lower 63.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 38/66 or 57.6% of the time.
     The prediction of the index closing lower has been right 20/37 or 54.1% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

I show a picture of the Nasdaq composite on the 5-minute scale from Wednesday's trading. A descending triangle appears late in the session. Price has not broken out from the pattern.

What does this mean for tomorrow's (Thursday's) trading?

It's been my experience that today's chart pattern, intraday, won't mean a thing tomorrow. Thus, a descending triangle is bearish but who knows what will happen tomorrow?

The above probabilities show a lower close. I think that's right. The index has pierced a congestion area (downward breakout), so I expect the downtrend to gather steam. I'm looking for a lower close.

# # #

With the Dow utility index making a steep and extended drop, it represents a buying opportunity for utility companies. I posted my picks on my watch list.

# # #

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,165.13    
 Monthly S1  3,283.46  118.32   
 Daily S2  3,367.04  83.58   
 Daily S1  3,384.41  17.37   
 Weekly S2  3,391.26  6.85   
 Weekly S1  3,396.52  5.26   
 Low  3,397.91  1.39   Yes! The Low is close to the Weekly S1.
 Close  3,401.78  3.87   Yes! The Close is close to the Low.
 Monthly Pivot  3,407.74  5.96   
 Daily Pivot  3,415.28  7.54   
 61.8% Down from Intraday High  3,416.34  1.06   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  3,422.03  5.69   
 38.2% Down from Intraday High  3,427.72  5.69   
 Daily R1  3,432.65  4.93   
 Open  3,432.85  0.20   Yes! The Open is close to the Daily R1.
 High  3,446.15  13.30   
 Weekly Pivot  3,455.66  9.51   
 Weekly R1  3,460.92  5.26   
 Daily R2  3,463.52  2.60   Yes! The Daily R2 is close to the Weekly R1.
 Weekly R2  3,520.06  56.54   
 Monthly R1  3,526.07  6.01   
 Monthly R2  3,650.36  124.29   

Tuesday 6/4/13. Trading Tuesday: Dow

The index climbed by 0.9% or 138.46 points. Since 10/01/1928 the index made 477 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 284 occasions.
     Average loss was -0.7% on 193 occasions.
Expect the index to close higher 59.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 52/75 or 69.3% of the time.
     The prediction of the index closing lower has been right 13/23 or 56.5% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

The index formed an ascending triangle early in the session but it would have taken some time to actually recognize it as a triangle.

After the breakout, the index climbed hesitantly but still fulfilled the measure rule. That's the height of the triangle applied to the top of it to determine a price target.

Will the index close higher on Tuesday? My brother says no. It seems to me that the drop from the recent peak in May has been brief (daily chart), maybe too brief. More of a down move is in store. However, that's just a feeling. I'll be looking for a higher close, in line with the above probabilities.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,305.81    
 Monthly S1  14,779.92  474.11   
 Weekly S2  14,891.11  111.19   
 Weekly S1  15,072.57  181.46   
 Daily S2  15,080.00  7.43   Yes! The Daily S2 is close to the Weekly S1.
 Low  15,123.55  43.55   
 Open  15,123.55  0.00   Yes! The Open is close to the Low.
 Monthly Pivot  15,161.16  37.61   
 Daily S1  15,167.02  5.86   Yes! The Daily S1 is close to the Monthly Pivot.
 61.8% Down from Intraday High  15,173.42  6.41   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  15,188.83  15.41   
 38.2% Down from Intraday High  15,204.24  15.41   
 Daily Pivot  15,210.56  6.33   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  15,254.03  43.47   
 High  15,254.11  0.08   Yes! The High is close to the Close.
 Weekly Pivot  15,297.03  42.92   
 Daily R1  15,297.58  0.55   Yes! The Daily R1 is close to the Weekly Pivot.
 Daily R2  15,341.12  43.55   
 Weekly R1  15,478.49  137.37   
 Monthly R1  15,635.27  156.78   
 Weekly R2  15,702.95  67.68   
 Monthly R2  16,016.51  313.56   

Monday 6/3/13. Market Monday: The Week Ahead

My Prediction

Picture of the Dow transports on the daily scale.

If you look at the Dow utility index, you'll see a steep drop.

Will the transports and the other indices follow suit?

I show the Dow transports on the daily chart. This is the only index that I expect to have a meaningful decline over the next two weeks. That's not to say the industrials won't tank. It could, but the drop isn't clear at this point.

With the transports, a weird looking head-and-shoulders top appears in the index. I say "weird" since the two shoulders are uneven. The pattern has confirmed as a valid one, however.

I predict a drop to the blue line shown as the middle of a congestion zone setup during March and April. We'll have to wait for the other indices to make a move before confirming the potential decline in the transports.

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A Brief Look Back

Picture of a goat.

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 106.29 points.
Wednesday: Down 106.59 points.
Thursday: Up 21.73 points.
Friday: Down 208.96 points.
Saturday: Holiday or other weird event!

For the Week...

The Dow industrials were down 187.53 points or 1.2%.
The Nasdaq composite was down 3.23 points or 0.1%.
The S&P 500 index was down 18.86 points or 1.1%.

Year to Date...

Dow Industrials
     2.7% down from the high of 15,542.40 on 05/22/2013.
     15.3% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     2.2% down from the high of 3,532.03 on 05/22/2013.
     12.3% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     3.3% down from the high of 1,687.18 on 05/22/2013.
     14.3% up from the low of 1,426.19 on 01/02/2013.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Construction spending10:00 MDCovers residential/non-residential/public spending on new construction.
Auto & truck sales2:00 MC-Monthly sales of domestically produced vehicles.
Trade balance8:30 TC+Signals balance of exports & imports.
Productivity & costs8:30 WD+Cost of producing a unit of output.
Factory orders10:00 WD+Durable/non-durable goods orders w/factory inventories.
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.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Consumer credit3:00 FD-Measures auto, credit card and other debt.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 05/31/2013, the CPI had:

54 bearish patterns,
5 bullish patterns,
263 patterns waiting for breakout.
The CPI signal is 8.5%, 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  14,931  15,023  15,208  15,300  15,485 
Weekly  14,845  14,980  15,251  15,386  15,657 
Monthly  14,260  14,688  15,115  15,543  15,970 
S&P 500 (^GSPC): Daily  1,612  1,621  1,640  1,650  1,668 
Weekly  1,602  1,616  1,645  1,660  1,689 
Monthly  1,527  1,579  1,633  1,685  1,739 
Nasdaq (^IXIC): Daily  3,426  3,441  3,471  3,486  3,516 
Weekly  3,409  3,433  3,474  3,497  3,538 
Monthly  3,183  3,320  3,426  3,562  3,668 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 2 weeks down 16.9%  Expect a reversal soon.
 6 months up 7.2%  Expect a reversal soon.
 S & P 500 (^GSPC) 2 weeks down 16.4%  Expect a reversal soon.
 7 months up 7.9%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 2 weeks down 19.1%  Expect a reversal soon.
 7 months up 3.3%  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 either underway or should be starting soon. The sessions could be more volatile.

 Found Chart Pattern Name
21Head-and-shoulders bottom
8Wolfe wave, bear
8Triangle, symmetrical
7Diamond top
6Rectangle top
5Double Bottom, Adam and Adam
5Pipe top
5Triple bottom
5Double Top, Adam and Adam
5Head-and-shoulders top

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

The 10 types of most frequently appearing chart patterns in the stocks, 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. Insurance (Life)1. Shoe
2. Semiconductor2. Semiconductor
3. Securities Brokerage3. Insurance (Life)
4. Trucking/Transp. Leasing4. Cement and Aggregates
5. Biotechnology5. Homebuilding
48. Retail Store48. Retail Store
49. Medical Supplies49. Electric Utility (East)
50. Electric Utility (East)50. Investment Co. (Foreign)
51. Investment Co. (Foreign)51. Medical Supplies
52. Metals and Mining (Div.)52. Computers and Peripherals
53. Computers and Peripherals53. Metals and Mining (Div.)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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