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

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Chart Patterns: After the Buy
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Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 04/28/2017
20,941 -40.82 -0.2%
9,098 -96.36 -1.0%
704 -3.23 -0.5%
6,048 -1.33 0.0%
2,384 -4.57 -0.2%
YTD
6.0%
0.6%
6.8%
12.3%
6.5%
Tom's Targets    Overview: 04/17/2017
20,100 or 21,150 by 05/01/2017
8,500 or 9,500 by 05/01/2017
725 or 685 by 05/01/2017
6,150 or 5,900 by 05/15/2017
2,275 or 2,425 by 05/01/2017
Mutt Winners: None YTD

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June 2014 Headlines


Archives


Monday 6/30/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow transports on the daily scale.

I picked the Dow transports (daily scale) because of the chart pattern highlighted in red.

Do you know what it is?

It's a diamond top chart pattern.

The breakout from diamond tops is downward 69% of the time.

Does that mean Monday's close will be lower? Maybe. Maybe not.

If it is downward, then look for a swift decline, one that mirrors the rapid rise that lead to the diamond top.

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A Brief Look Back

Picture of a flower from my garden.

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

Monday: Down 9.82 points.
Tuesday: Down 119.13 points.
Wednesday: Up 49.38 points.
Thursday: Down 21.38 points.
Friday: Up 5.71 points.

For the Week...

The Dow industrials were down 95.24 points or 0.6%.
The Nasdaq composite was up 29.89 points or 0.7%.
The S&P 500 index was down 1.91 points or 0.1%.

Year to Date...

Dow Industrials
     0.7% down from the high of 16,978.02 on 06/20/2014.
     9.9% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     0.0% down from the high of 4,399.87 on 06/24/2014.
     11.5% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     0.4% down from the high of 1,968.17 on 06/24/2014.
     12.8% up from the low of 1,737.92 on 02/05/2014.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Chicago purchasing managers index9:45 MBMonitors regional manufacturing activity.
Construction spending10:00 TDCovers residential/non-residential/public spending on new construction.
Auto & truck sales2:00 TC-Monthly sales of domestically produced vehicles.
Factory orders10:00 WD+Durable/non-durable goods orders w/factory inventories.
Crude inventories10:30 W?My guess: Measures oil inventory.
4 Employment reports8:30 ThANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Trade balance8:30 ThC+Signals balance of exports & imports.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 06/27/2014, the CPI had:

11 bearish patterns,
34 bullish patterns,
274 patterns waiting for breakout.
The CPI signal is 75.6%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,741  16,796  16,829  16,885  16,918 
Weekly  16,632  16,742  16,856  16,966  17,079 
Monthly  16,358  16,605  16,791  17,038  17,225 
S&P500 (^GSPC): Daily  1,949  1,955  1,958  1,964  1,967 
Weekly  1,934  1,948  1,958  1,971  1,981 
Monthly  1,866  1,913  1,941  1,988  2,016 
Nasdaq (^IXIC): Daily  4,362  4,380  4,389  4,407  4,417 
Weekly  4,319  4,358  4,379  4,419  4,440 
Monthly  4,064  4,231  4,315  4,482  4,567 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week down 29.9%   The trend may continue. 
 5 months up 13.1%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week down 28.1%   The trend may continue. 
 5 months up 20.9%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 2 weeks up 29.7%   The trend may continue. 
 2 months up 41.2%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
34Triangle, symmetrical
13Rising wedge
10Triangle, ascending
7Double Top, Adam and Adam
7Double Bottom, Adam and Adam
7Head-and-shoulders bottom
6Double Bottom, Eve and Adam
5Channel
4Falling wedge
4Rectangle bottom

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

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

 

 

 

 

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

This WeekLast Week
1. Cement and Aggregates1. Cement and Aggregates
2. Petroleum (Producing)2. Petroleum (Producing)
3. Natural Gas (Distributor)3. Natural Gas (Distributor)
4. Natural Gas (Diversified)4. Natural Gas (Diversified)
5. Biotechnology5. Biotechnology
50. Household Products50. Household Products
51. Retail Building Supply51. Toiletries/Cosmetics
52. Retail (Special Lines)52. Retail Building Supply
53. Toiletries/Cosmetics53. Retail (Special Lines)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 6/28/14. Hight and Tight Flag

In my book, Swing and Day Trading, I discuss the high and tight flag as being a premiere chart pattern to use for swing trading. When researching the chart pattern, one of the things I discovered is that "Shallow sloping price trends leading to the start of the high and tight flag result in better post-breakout performance." That is from page 36 of the text.

Table 3.2 on the same page shows a list of performance numbers for steep and shallow slopes to prove my case. Unlike many other authors, I support my ideas with facts.

Here's another that may make you consider how you trade a hight and tight flag. If you wait for price to close above the top of the high and tight flag, the failure rate is 19%. If you don't wait, the failure rate is a massive 33%. Ouch!

Want to learn more? Then buy a copy of the book. It's the best selling book in the series.

-- Thomas Bulkowski


Thursday 6/26/14. Trading Thursday: Nasdaq

The index climbed by 0.7% or 29.4 points. Since 02/05/1971 the index made 370 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 235 occasions.
     Average loss was -0.9% on 135 occasions.
Expect the index to close higher 63.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 64/108 or 59.3% of the time.
     The prediction of the index closing lower has been right 25/50 or 50.0% of the time.

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

Picture of the Nasdaq composite on the 5 minute scale.

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

A head-and-shoulders bottom appears on the chart but it spans the two days (ls = left shoulder, h = head, rs = right shoulder). That's unusual. It comes after an extensive drop on Tuesday. That was good news for the chart pattern since it indicates that there's something to reverse.

The double top at A wasn't so lucky. The rise to the chart pattern wasn't much of a move so there was little to reverse. The pattern confirmed at A but the decline was disappointing. Traders should have avoided this double top for that reason. The head-and-shoulders, by comparison, led to a wonderful profit opportunity.

Need more up-to-date statistics on the head-and-shoulders bottom? Then buy a copy of my recently released book, Visual Guide to Chart Patterns, Second Edition

I describe how to identify the pattern on page 106 and trading tactics begin near the bottom of the next page.

If you happen to own a copy of the book, then please post a positive review of it on your favorite e-tailer. Thanks!

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

-- Thomas Bulkowski

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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,937.49    
 Monthly S1  4,158.63  221.13   
 Monthly Pivot  4,265.40  106.78   
 Weekly S2  4,273.48  8.08   
 Daily S2  4,323.43  49.95   
 Weekly S1  4,326.62  3.19   Yes! The Weekly S1 is close to the Daily S2.
 Low  4,339.41  12.79   
 Open  4,341.82  2.41   Yes! The Open is close to the Low.
 Weekly Pivot  4,349.40  7.58   
 Daily S1  4,351.60  2.20   Yes! The Daily S1 is close to the Weekly Pivot.
 61.8% Down from Intraday High  4,356.27  4.67   
 50% Down from Intraday High  4,361.48  5.21   
 38.2% Down from Intraday High  4,366.69  5.21   
 Daily Pivot  4,367.57  0.88   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  4,379.76  12.19   
 High  4,383.55  3.79   Yes! The High is close to the Close.
 Daily R1  4,395.74  12.19   
 Weekly R1  4,402.54  6.80   
 Daily R2  4,411.71  9.17   
 Weekly R2  4,425.32  13.61   
 Monthly R1  4,486.54  61.22   
 Monthly R2  4,593.31  106.78   

Tuesday 6/24/14. Trading Tuesday: Dow

The index dropped by -0.1% or -9.82 points. Since 10/01/1928 the index made 1236 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 642 occasions.
     Average loss was -0.8% on 594 occasions.
Expect the index to close higher 51.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 76/116 or 65.5% of the time.
     The prediction of the index closing lower has been right 20/37 or 54.1% of the time.

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

Picture of the Dow industrials on the 5 minute scale.

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

On Friday, in blue, the index makes a symmetrical triangle. Those breakout upward 54% of the time, so the direction is about random. This one has a downward breakout when price closed outside of the lower trendline boundary.

That led to a rounding bottom, which I show here in red. This is not a cup with handle since there is no handle yet and also because price must rise leading to the start of the cup. It does not.

However, it does suggest that price will line sideways at the open on Tuesday to form a handle. I don't think that will happen because the open intraday is often a violent affair as today's opening half hour suggest.

Still, a rounding turn with a handle is something to plan for.

If you are having problems identifying symmetrical triangles, then buy a copy of my book, Visual Guide to Chart Patterns.

If you already have a copy, you can find a chapter on symmetrical triangles starting on page 93. Happy hunting.

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

-- Thomas Bulkowski

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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  16,115.47    
 Monthly S1  16,526.37  410.89   
 Weekly S2  16,624.22  97.85   
 Monthly Pivot  16,752.19  127.97   
 Weekly S1  16,780.74  28.55   
 Daily S2  16,871.03  90.29   
 Weekly Pivot  16,879.38  8.35   
 Low  16,896.09  16.71   
 Daily S1  16,904.14  8.05   
 61.8% Down from Intraday High  16,918.31  14.17   
 50% Down from Intraday High  16,925.18  6.87   
 Daily Pivot  16,929.21  4.03   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  16,932.04  2.84   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  16,937.26  5.21   Yes! The Close is close to the 38.2% Down from Intraday High.
 Open  16,946.50  9.24   
 High  16,954.27  7.77   
 Daily R1  16,962.32  8.05   
 Daily R2  16,987.39  25.06   
 Weekly R1  17,035.90  48.51   
 Weekly R2  17,134.54  98.64   
 Monthly R1  17,163.09  28.55   
 Monthly R2  17,388.91  225.83   

Monday 6/23/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

I show a picture of the Dow utility index on the daily scale.

I picked this one because it shows how well the index has done year-to-date. The first price bar on the chart is the last trading day of 2013.

Recently, the index has been on a tear, marching higher almost daily. On Friday, it paused and my guess is it will retrace some of those gains it accumulated during the past week.

Clearly, the sharp move up cannot continue but I still believe the utility stocks will provide a good return this year.

As of the close on Friday, the index is up 15.5%, beating the other indices I follow by almost 50% (the transports are the closest, up 10.9%).

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A Brief Look Back

Picture of a flower from my garden.

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

Monday: Up 5.27 points.
Tuesday: Up 27.48 points.
Wednesday: Up 98.13 points.
Thursday: Up 14.84 points.
Friday: Up 25.62 points.

For the Week...

The Dow industrials were up 171.34 points or 1.0%.
The Nasdaq composite was up 57.39 points or 1.3%.
The S&P 500 index was up 26.71 points or 1.4%.

Year to Date...

Dow Industrials
     0.2% down from the high of 16,978.02 on 06/20/2014.
     10.5% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     0.1% down from the high of 4,372.18 on 06/19/2014.
     10.7% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     0.1% down from the high of 1,963.91 on 06/20/2014.
     12.9% up from the low of 1,737.92 on 02/05/2014.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Existing home sales10:00 MCCounts sales of used homes.
New home sales10:00 TC+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.
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.
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 06/20/2014, the CPI had:

8 bearish patterns,
39 bullish patterns,
294 patterns waiting for breakout.
The CPI signal is 83.0%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,891  16,919  16,949  16,977  17,006 
Weekly  16,627  16,787  16,883  17,042  17,138 
Monthly  16,119  16,533  16,755  17,170  17,392 
S&P500 (^GSPC): Daily  1,957  1,960  1,962  1,965  1,967 
Weekly  1,920  1,941  1,953  1,974  1,986 
Monthly  1,831  1,897  1,931  1,996  2,030 
Nasdaq (^IXIC): Daily  4,349  4,358  4,364  4,373  4,378 
Weekly  4,270  4,319  4,345  4,395  4,421 
Monthly  3,934  4,151  4,261  4,479  4,589 
  • 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 43.7%   Expect a random direction. 
 5 months up 13.1%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week up 42.6%   Expect a random direction. 
 5 months up 20.9%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week up 43.3%   Expect a random direction. 
 2 months up 41.2%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
36Triangle, symmetrical
12Rising wedge
10Triangle, ascending
9Head-and-shoulders bottom
7Channel
5Double Bottom, Adam and Adam
5Falling wedge
5Double Bottom, Eve and Adam
3Flag
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, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

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

This WeekLast Week
1. Cement and Aggregates1. Cement and Aggregates
2. Petroleum (Producing)2. Petroleum (Producing)
3. Natural Gas (Distributor)3. Natural Gas (Distributor)
4. Natural Gas (Diversified)4. Natural Gas (Diversified)
5. Biotechnology5. Trucking/Transp. Leasing
50. Household Products50. Retail Building Supply
51. Toiletries/Cosmetics51. Household Products
52. Retail Building Supply52. Toiletries/Cosmetics
53. Retail (Special Lines)53. Retail (Special Lines)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 6/21/14. Anyone for Fundamentals?

When I started trading the markets, I used fundamental analysis exclusively. I didn't even know what technical analysis was.

That's why I still use it along with technical analysis, but does fundamental analysis work?

In my book, Fundamental Analysis and Position Trading I looked at fundamentals like book value, capital spending, cash flow, dividends, debt, P/E ratio, PSR, and so on.

I mixed them together like I was making a soup and tested them for hold times of 1, 3, and 5 years. Page 96 shows a table of the performance for the 1 year hold time. It says that a falling price to book value, rising return on equity, small cap stock with a price below $15.80 gave the best performance.

Tables in Chapter 12 discuss other combinations of fundamentals and how they perform over the 1 to 3 year period.

If you use fundamental analysis or would like to, this book is a must-have. Buy a copy and tell 'em Tom sent yah.

-- Thomas Bulkowski


Thursday 6/19/14. Trading Thursday: Nasdaq

The index climbed by 0.6% or 25.61 points. Since 02/05/1971 the index made 450 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 280 occasions.
     Average loss was -0.9% on 170 occasions.
Expect the index to close higher 62.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 64/107 or 59.8% of the time.
     The prediction of the index closing lower has been right 25/50 or 50.0% of the time.

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

Picture of the Nasdaq composite on the 5 minute scale.

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

This chart shows a chart pattern that I have had success with. It's a rounding top (AB).

I show two ways to play this. The traditional way is to wait for price to close above the top of the chart pattern. I show that as blue line D.

The second way is to draw a line from the top of the chart pattern tangent to the pattern like I show here with red line C. When price closes above the line, buy. For more information on the rounding top, read the chapter on them in my book, Encyclopedia of Chart Patterns, Second Edition. I show a picture of the book on the right.

You'll find rounding tops on pages 608-623. Surprisingly, the pattern breaks out upward 53% of the time in a bull market.

$ $ $

I released a new article titled, "How does leverage affect profitability in Forex?"

$ $ $

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

-- Thomas Bulkowski

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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,923.44    
 Monthly S1  4,143.14  219.70   
 Monthly Pivot  4,244.94  101.80   
 Weekly S2  4,269.16  24.22   
 Daily S2  4,304.93  35.77   
 Weekly S1  4,316.00  11.07   
 Low  4,320.54  4.54   
 Weekly Pivot  4,331.37  10.83   
 Daily S1  4,333.89  2.52   Yes! The Daily S1 is close to the Weekly Pivot.
 61.8% Down from Intraday High  4,337.56  3.68   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 Open  4,341.18  3.62   Yes! The Open is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  4,342.82  1.64   Yes! The 50% Down from Intraday High is close to the Open.
 38.2% Down from Intraday High  4,348.08  5.26   
 Daily Pivot  4,349.49  1.42   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  4,362.84  13.35   
 High  4,365.10  2.26   Yes! The High is close to the Close.
 Weekly R1  4,378.21  13.11   
 Daily R1  4,378.45  0.24   Yes! The Daily R1 is close to the Weekly R1.
 Weekly R2  4,393.58  15.13   
 Daily R2  4,394.05  0.47   Yes! The Daily R2 is close to the Weekly R2.
 Monthly R1  4,464.64  70.59   
 Monthly R2  4,566.44  101.80   

Tuesday 6/17/14. Trading Tuesday: Dow

The index climbed by 0.0% or 5.27 points. Since 10/01/1928 the index made 1201 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 636 occasions.
     Average loss was -0.7% on 565 occasions.
Expect the index to close higher 53.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 75/115 or 65.2% of the time.
     The prediction of the index closing lower has been right 20/37 or 54.1% of the time.

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

Picture of the Dow industrials on the 5 minute scale.

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

A rare triple top chart pattern appears on this chart as 123. Notice how tall it is. That height suggested that there was little chance that the index would tumble far enough to meet the measure rule target.

The target is the height subtracted from the breakout price. The breakout price is the price of the lowest valley in the chart pattern (shown here as a red line).

Another chart pattern that I don't talk about much is an extended V-bottom. I show that in blue as pattern A. If you can recognize a V-bottom and it forms a handle, then buy on the breakout from the handle, or sooner if you're that lucky. The move from this one looks fully played out.

You can read more about triple tops in my latest book, Visual Guide to Chart Patterns, Second Edition . It begins on page 174. Do me a favor and make my publisher happy. Buy a dozen copies of the book and pass them out to your friends.

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

-- Thomas Bulkowski

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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  16,068.62    
 Monthly S1  16,424.82  356.19   
 Weekly S2  16,551.86  127.05   
 Weekly S1  16,666.44  114.57   
 Daily S2  16,689.39  22.95   
 Monthly Pivot  16,697.49  8.10   
 Low  16,722.86  25.37   
 Daily S1  16,735.20  12.34   
 61.8% Down from Intraday High  16,753.14  17.95   
 50% Down from Intraday High  16,762.50  9.36   
 Open  16,765.56  3.06   Yes! The Open is close to the 50% Down from Intraday High.
 Daily Pivot  16,768.67  3.11   Yes! The Daily Pivot is close to the Open.
 38.2% Down from Intraday High  16,771.86  3.19   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  16,781.01  9.15   
 High  16,802.14  21.13   
 Daily R1  16,814.48  12.34   
 Weekly Pivot  16,818.30  3.82   Yes! The Weekly Pivot is close to the Daily R1.
 Daily R2  16,847.95  29.65   
 Weekly R1  16,932.88  84.93   
 Monthly R1  17,053.69  120.81   
 Weekly R2  17,084.74  31.06   
 Monthly R2  17,326.36  241.62   

Monday 6/16/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

I show a picture of the Dow industrials again this week. That's because this index best shows what I expect the markets to do in the coming two weeks.

Let's begin with the ascending broadening wedge. I show that highlighted in red.

The pattern had an upward breakout. That happens only 27% of the time, but the samples on this chart pattern are few. My guess is the upward breakout occurs more frequently than the statistics indicate.

What is intriguing is what's happening now. The index has thrown back to the top of the chart pattern. My belief is that the index will begin a recovery from here.

Over the next two weeks, I expect the Dow to make new highs.

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A Brief Look Back

Picture of a flower from my garden.

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

Monday: Up 18.82 points.
Tuesday: Up 2.82 points.
Wednesday: Down 102.04 points.
Thursday: Down 109.69 points.
Friday: Up 41.55 points.

For the Week...

The Dow industrials were down 148.54 points or 0.9%.
The Nasdaq composite was down 10.75 points or 0.2%.
The S&P 500 index was down 13.28 points or 0.7%.

Year to Date...

Dow Industrials
     1.1% down from the high of 16,970.17 on 06/09/2014.
     9.4% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     1.4% down from the high of 4,371.71 on 03/06/2014.
     9.2% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     1.0% down from the high of 1,955.55 on 06/09/2014.
     11.4% up from the low of 1,737.92 on 02/05/2014.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Industrial production9:15 MB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 MB-Gauges economic activity, hints of inflation.
Housing starts8:30 TB-Number of homes beginning construction.
Building permits8:30 TB-Measures building permits for new construction.
Consumer price index8:30 TB+Inflation report. Measures cost of goods and services.
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.
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 06/13/2014, the CPI had:

8 bearish patterns,
16 bullish patterns,
331 patterns waiting for breakout.
The CPI signal is 66.7%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,691  16,734  16,761  16,803  16,830 
Weekly  16,550  16,663  16,817  16,929  17,083 
Monthly  16,067  16,421  16,696  17,050  17,325 
S&P500 (^GSPC): Daily  1,924  1,930  1,934  1,940  1,943 
Weekly  1,909  1,923  1,939  1,953  1,969 
Monthly  1,825  1,880  1,918  1,974  2,011 
Nasdaq (^IXIC): Daily  4,276  4,293  4,306  4,323  4,335 
Weekly  4,252  4,281  4,314  4,343  4,376 
Monthly  3,906  4,108  4,228  4,430  4,549 
  • 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 30.0%   The trend may continue. 
 5 months up 13.1%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week down 28.2%   The trend may continue. 
 5 months up 20.9%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week down 31.0%   The trend may continue. 
 2 months up 41.2%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
38Triangle, symmetrical
10Head-and-shoulders bottom
10Rising wedge
9Triangle, ascending
7Channel
5Flag
5Double Bottom, Adam and Adam
5Triple bottom
5Triangle, descending
4Falling wedge

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

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

 

 

 

 

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

This WeekLast Week
1. Cement and Aggregates1. Cement and Aggregates
2. Petroleum (Producing)2. Natural Gas (Distributor)
3. Natural Gas (Distributor)3. Natural Gas (Diversified)
4. Natural Gas (Diversified)4. Biotechnology
5. Trucking/Transp. Leasing5. Trucking/Transp. Leasing
50. Retail Building Supply50. Apparel
51. Household Products51. Household Products
52. Toiletries/Cosmetics52. Retail (Special Lines)
53. Retail (Special Lines)53. Toiletries/Cosmetics
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 6/14/14. A Look at Gaps

I show a picture of my book, Visual Guide to Chart Patterns

Chapter 5 discusses four types of gaps. Can you name them?

The area, common or pattern gap often occurs on high volume, but need not. The gap closes in a day or two.

The breakaway gaps leaves a congestion region and begins a new trend.

A continuation, measuring, or runaway gap occurs in the middle of a trend. Thus, you can use its location to determine when the trend will end.

An exhaustion gap happens at the end of the trend. Often these gaps are quite tall.

Want more information on gaps? Then turn to page 39 in the book and start reading. You'll learn about the gap measure rule and how to use gaps to improve your trading.

-- Thomas Bulkowski


Thursday 6/12/14. Trading Thursday: Nasdaq

The index dropped by -0.1% or -6.07 points. Since 02/05/1971 the index made 525 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 287 occasions.
     Average loss was -0.9% on 238 occasions.
Expect the index to close higher 54.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 64/106 or 60.4% of the time.
     The prediction of the index closing lower has been right 25/50 or 50.0% of the time.

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

Picture of the Nasdaq composite on the 5 minute scale.

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

Yesterday, a head-and-shoulders bottom appears as LS, H, and RS (left and right shoulder, head). The next day, a double top appears at AB. The double top saw the index drop precipitously. A pullback occurred and the index recovered going into the close. Where it goes from here is anyone's guess.

You can find more information on the head-and-shoulders bottom pattern in my book, Getting Started in Chart Patterns pictured, starting on page 106.

You can find double bottoms on page 92.

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

-- Thomas Bulkowski

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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,923.70    
 Monthly S1  4,127.82  204.11   
 Weekly S2  4,172.45  44.63   
 Monthly Pivot  4,225.16  52.71   
 Weekly S1  4,252.19  27.03   
 Weekly Pivot  4,287.35  35.16   
 Daily S2  4,305.82  18.47   
 Low  4,315.49  9.67   
 Daily S1  4,318.88  3.39   
 Open  4,322.92  4.04   
 61.8% Down from Intraday High  4,324.17  1.25   Yes! The 61.8% Down from Intraday High is close to the Open.
 50% Down from Intraday High  4,326.85  2.68   
 Daily Pivot  4,328.54  1.69   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  4,329.53  0.99   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  4,331.93  2.40   
 High  4,338.21  6.28   
 Daily R1  4,341.60  3.39   
 Daily R2  4,351.26  9.67   
 Weekly R1  4,367.09  15.83   
 Weekly R2  4,402.25  35.16   
 Monthly R1  4,429.28  27.03   
 Monthly R2  4,526.62  97.35   

Tuesday 6/10/14. Trading Tuesday: Dow

The index climbed by 0.1% or 18.82 points. Since 10/01/1928 the index made 1243 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 638 occasions.
     Average loss was -0.7% on 605 occasions.
Expect the index to close higher 51.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 74/114 or 64.9% of the time.
     The prediction of the index closing lower has been right 20/37 or 54.1% of the time.

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

Picture of the Dow industrials on the 5 minute scale.

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

At A, an ascending triangle appears, but that was on Friday. Price found support late in the session near the price of the triangle's apex.

Today, Monday, the index made a small double bottom at B. This proved profitable if you bought in at the right time (at the breakout) and sold when it reached the height of the pattern projected upward from the breakout price (the so-called "measure rule").

Finally, a difficult-to-trade chart pattern appears at C. Do you know what it is? It's a V-top. I didn't include it in my book, Encyclopedia of Chart Patterns, Second Edition because I hadn't found a good way to trade it.

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

-- Thomas Bulkowski

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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  16,153.25    
 Monthly S1  16,548.17  394.93   
 Weekly S2  16,596.38  48.21   
 Monthly Pivot  16,736.23  139.85   
 Weekly S1  16,769.74  33.51   
 Weekly Pivot  16,847.01  77.27   
 Daily S2  16,884.81  37.80   
 Low  16,912.92  28.11   
 Daily S1  16,913.96  1.04   Yes! The Daily S1 is close to the Low.
 Open  16,926.08  12.12   
 61.8% Down from Intraday High  16,934.79  8.71   
 50% Down from Intraday High  16,941.54  6.76   
 Daily Pivot  16,942.06  0.52   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  16,943.10  1.04   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  16,948.30  5.20   Yes! The 38.2% Down from Intraday High is close to the Close.
 High  16,970.17  21.87   
 Daily R1  16,971.21  1.04   Yes! The Daily R1 is close to the High.
 Daily R2  16,999.31  28.11   
 Weekly R1  17,020.37  21.06   
 Weekly R2  17,097.64  77.27   
 Monthly R1  17,131.15  33.51   
 Monthly R2  17,319.21  188.05   

Monday 6/9/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

This is a picture of the Dow industrials on the daily scale.

I chose this chart because of the strong breakout upward, shown at A. I've been waiting and predicting that for weeks now (incorrectly, until now...sigh). The index has finally broken out upward from a congestion region.

The red lines outline a chart pattern. Do you know what it is?

The name for it is a long one, perhaps the longest in the inventory of chart patterns. It's a broadening formation, right-angled and ascending. Accord to my book, Encyclopedia of Chart Patterns, Second Edition, breakouts from this pattern in a bull market occur 34% upward.

That makes me concerned that this upward breakout from the Dow is fake.

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A Brief Look Back

Picture of a flower from my garden.

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

Monday: Up 26.46 points.
Tuesday: Down 21.29 points.
Wednesday: Up 15.19 points.
Thursday: Up 98.58 points.
Friday: Up 88.17 points.

For the Week...

The Dow industrials were up 207.11 points or 1.2%.
The Nasdaq composite was up 78.78 points or 1.9%.
The S&P 500 index was up 25.87 points or 1.3%.

Year to Date...

Dow Industrials
     0.0% down from the high of 16,924.28 on 06/06/2014.
     10.3% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     1.2% down from the high of 4,371.71 on 03/06/2014.
     9.5% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     0.0% down from the high of 1,949.44 on 06/06/2014.
     12.2% up from the low of 1,737.92 on 02/05/2014.

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Economic Reports

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

ReportTimeA-F
Rating
Description
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.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 06/06/2014, the CPI had:

3 bearish patterns,
47 bullish patterns,
203 patterns waiting for breakout.
The CPI signal is 94.0%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,811  16,868  16,896  16,952  16,981 
Weekly  16,590  16,757  16,841  17,008  17,091 
Monthly  16,147  16,536  16,730  17,119  17,313 
S&P500 (^GSPC): Daily  1,940  1,945  1,947  1,952  1,954 
Weekly  1,905  1,927  1,938  1,961  1,972 
Monthly  1,830  1,890  1,920  1,979  2,009 
Nasdaq (^IXIC): Daily  4,300  4,311  4,317  4,327  4,333 
Weekly  4,169  4,245  4,284  4,360  4,399 
Monthly  3,920  4,121  4,222  4,422  4,523 
  • 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) 3 weeks up 20.6%   Expect a reversal soon. 
 5 months up 13.1%   Expect a reversal soon. 
 S & P 500 (^GSPC) 3 weeks up 20.6%   Expect a reversal soon. 
 5 months up 20.9%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 4 weeks up 16.9%   Expect a reversal soon. 
 2 months up 41.2%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
42Triangle, symmetrical
10Head-and-shoulders bottom
9Triangle, ascending
8Head-and-shoulders top
8Rising wedge
7Triple bottom
6Double Top, Eve and Adam
5Triangle, descending
5Double Bottom, Adam and Eve
5Flag

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

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

 

 

 

 

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

This WeekLast Week
1. Cement and Aggregates1. Cement and Aggregates
2. Natural Gas (Distributor)2. Natural Gas (Diversified)
3. Natural Gas (Diversified)3. Natural Gas (Distributor)
4. Biotechnology4. Trucking/Transp. Leasing
5. Trucking/Transp. Leasing5. Chemical (Basic)
50. Apparel50. Apparel
51. Household Products51. Household Products
52. Retail (Special Lines)52. Retail (Special Lines)
53. Toiletries/Cosmetics53. Toiletries/Cosmetics
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 6/7/14. Support/Resistance Quiz

I was looking through my book, Visual Guide to Chart Patterns (pictured) and read the quiz section. At the end of most chapters, I have a small quiz, which I feel makes the book a fun read. But the questions are tricky.

Here is an example.

Question: Which of the following do not usually show support or resistance?

1.Trendlines
2. Gaps
3. Chart Patterns
4. Horizontal consolidation regions
5. Peaks
6. Valleys
7. Whole numbers
8. The kitchen sink

My eye went to number 8 and I chuckled, so that was my answer. The real answer: 8 AND 7. Round numbers show support or resistance, not whole numbers. I get confused on those, too.

-- Thomas Bulkowski


Thursday 6/5/14. Trading Thursday: Nasdaq

The index climbed by 0.4% or 17.56 points. Since 02/05/1971 the index made 527 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 335 occasions.
     Average loss was -0.8% on 192 occasions.
Expect the index to close higher 63.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 62/104 or 59.6% of the time.
     The prediction of the index closing lower has been right 25/50 or 50.0% of the time.

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

Picture of the Nasdaq composite on the 5 minute scale.

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

Spanning today's trading was a chart pattern traders might never have seen if they didn't include two days worth of trading. The double bottom at AB appeared across the two days. The pattern confirms as a valid one when the index closes above C.

A similar situation appears at DEF. That's a double top. It confirms as valid when the index closes below the blue line (F).

The ABC pattern almost meets its measure rule target. The DEF pattern does. Calculate the height of the chart pattern and add/subtract the value from the breakout price to get a target.

To learn more about the measure rule, see my book, Getting Started in Chart Patterns, Second Edition, page 138. I show a picture of that book. What I like best about it, is the cost. The list price is 22.95. Amazon has it on sale for less than $17 and it's cheaper on kindle ($15).

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

-- Thomas Bulkowski

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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,934.72    
 Monthly S1  4,093.18  158.46   
 Monthly Pivot  4,172.63  79.45   
 Weekly S2  4,188.79  16.16   
 Daily S2  4,201.39  12.61   
 Low  4,216.23  14.84   
 Weekly S1  4,220.21  3.98   Yes! The Weekly S1 is close to the Low.
 Open  4,222.21  2.00   Yes! The Open is close to the Weekly S1.
 Daily S1  4,226.52  4.31   
 61.8% Down from Intraday High  4,231.49  4.98   
 Weekly Pivot  4,236.15  4.65   
 50% Down from Intraday High  4,236.21  0.06   Yes! The 50% Down from Intraday High is close to the Weekly Pivot.
 38.2% Down from Intraday High  4,240.93  4.72   
 Daily Pivot  4,241.35  0.43   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  4,251.64  10.29   
 High  4,256.19  4.55   
 Daily R1  4,266.48  10.29   
 Weekly R1  4,267.57  1.10   Yes! The Weekly R1 is close to the Daily R1.
 Daily R2  4,281.31  13.74   
 Weekly R2  4,283.51  2.19   Yes! The Weekly R2 is close to the Daily R2.
 Monthly R1  4,331.09  47.58   
 Monthly R2  4,410.54  79.45   

Tuesday 6/3/14. Trading Tuesday: Dow

The index climbed by 0.2% or 26.46 points. Since 10/01/1928 the index made 1231 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 672 occasions.
     Average loss was -0.6% on 559 occasions.
Expect the index to close higher 54.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 74/113 or 65.5% of the time.
     The prediction of the index closing lower has been right 20/37 or 54.1% of the time.

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

Picture of the Dow industrials on the 5 minute scale.

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

A long support and resistance area I show between the red lines formed as a rectangle top chart pattern. Price bounces between two essentially horizontal trendlines before staging an upward breakout at A.

The breakout didn't last long, however, and the index threw back to the rectangle top. My guess is the index will recover tomorrow (Tuesday) to finish rising after the breakout.

If you would like more up to date information on rectangles including trading setups, then read my book, Swing and Day Trading, starting on page 150. The book is pictured.

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

-- Thomas Bulkowski

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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  16,174.42    
 Monthly S1  16,459.02  284.61   
 Weekly S2  16,576.96  117.93   
 Monthly Pivot  16,597.27  20.31   
 Daily S2  16,652.88  55.61   
 Weekly S1  16,660.29  7.42   Yes! The Weekly S1 is close to the Daily S2.
 Low  16,682.07  21.78   
 Weekly Pivot  16,690.76  8.69   
 Daily S1  16,698.25  7.50   
 61.8% Down from Intraday High  16,710.56  12.30   
 Open  16,716.85  6.29   Yes! The Open is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  16,719.36  2.51   Yes! The 50% Down from Intraday High is close to the Open.
 Daily Pivot  16,727.45  8.09   
 38.2% Down from Intraday High  16,728.15  0.71   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  16,743.63  15.48   
 High  16,756.64  13.01   
 Daily R1  16,772.82  16.18   
 Weekly R1  16,774.09  1.27   Yes! The Weekly R1 is close to the Daily R1.
 Daily R2  16,802.02  27.92   
 Weekly R2  16,804.56  2.54   Yes! The Weekly R2 is close to the Daily R2.
 Monthly R1  16,881.87  77.32   
 Monthly R2  17,020.12  138.24   

Monday 6/2/14. Market Monday: The Week Ahead

My Prediction

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

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

I haven't shown this index for over a month, so it's about time.

The reason I haven't talked about it is that the index hasn't done much. For months now -- since March -- the index has moved in a line. Yes, it blipped up a bit and sank down some but overall, it has moved sideways with a slight upward tilt. Roughly, it's followed the outline of a channel.

Now, the index has clearly pushed above the top of the channel. It's about time. I have been expecting this for weeks now. Will it continue? Sure. How much longer? I have no idea. Sorry.  

 

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A Brief Look Back

Picture of a flower from my garden.

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

Tuesday: Up 69.23 points.
Wednesday: Down 42.32 points.
Thursday: Up 65.56 points.
Friday: Up 18.43 points.
Saturday: Holiday or other weird event!

For the Week...

The Dow industrials were up 110.9 points or 0.7%.
The Nasdaq composite was up 56.81 points or 1.4%.
The S&P 500 index was up 23.04 points or 1.2%.

Year to Date...

Dow Industrials
     0.1% down from the high of 16,735.51 on 05/13/2014.
     9.0% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     3.0% down from the high of 4,371.71 on 03/06/2014.
     7.5% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     0.0% down from the high of 1,924.03 on 05/30/2014.
     10.7% up from the low of 1,737.92 on 02/05/2014.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Construction spending10:00 MDCovers residential/non-residential/public spending on new construction.
Factory orders10:00 TD+Durable/non-durable goods orders w/factory inventories.
Auto & truck sales2:00 TC-Monthly sales of domestically produced vehicles.
Trade balance8:30 WC+Signals balance of exports & imports.
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.
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 05/30/2014, the CPI had:

5 bearish patterns,
17 bullish patterns,
412 patterns waiting for breakout.
The CPI signal is 77.3%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,623  16,670  16,696  16,743  16,768 
Weekly  16,568  16,643  16,682  16,756  16,796 
Monthly  16,166  16,441  16,588  16,864  17,011 
S&P500 (^GSPC): Daily  1,914  1,919  1,921  1,926  1,929 
Weekly  1,895  1,909  1,917  1,931  1,939 
Monthly  1,826  1,875  1,899  1,948  1,973 
Nasdaq (^IXIC): Daily  4,209  4,226  4,239  4,256  4,269 
Weekly  4,186  4,214  4,233  4,262  4,281 
Monthly  3,932  4,087  4,170  4,325  4,408 
  • 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 29.4%   The trend may continue. 
 4 months up 19.7%   Expect a reversal soon. 
 S & P 500 (^GSPC) 2 weeks up 29.4%   The trend may continue. 
 4 months up 27.5%   The trend may continue. 
 Nasdaq composite (^IXIC) 3 weeks up 22.1%   Expect a reversal soon. 
 1 month up 48.5%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
32Triangle, symmetrical
8Head-and-shoulders top
8Head-and-shoulders bottom
7Dead-cat bounce
6Double Top, Eve and Adam
6Triple bottom
5Rising wedge
5Triangle, ascending
4Double Top, Adam and Adam
4Triangle, 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, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

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

This WeekLast Week
1. Cement and Aggregates1. Cement and Aggregates
2. Natural Gas (Diversified)2. Biotechnology
3. Natural Gas (Distributor)3. Telecom. Equipment
4. Trucking/Transp. Leasing4. Trucking/Transp. Leasing
5. Chemical (Basic)5. Natural Gas (Diversified)
50. Apparel50. Household Products
51. Household Products51. Retail Building Supply
52. Retail (Special Lines)52. Toiletries/Cosmetics
53. Toiletries/Cosmetics53. Short ETFs
54. Short ETFs54. Retail (Special Lines)

-- Thomas Bulkowski

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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.