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

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Busted
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 06/22/2017
21,397 -12.74 -0.1%
9,320 27.23 0.3%
727 -2.42 -0.3%
6,237 2.74 0.0%
2,435 -1.11 0.0%
YTD
8.3%
3.1%
10.3%
15.9%
8.7%
Tom's Targets    Overview: 06/15/2017
21,600 or 21,000 by 07/01/2017
9,100 or 9,600 by 07/01/2017
720 or 745 by 07/01/2017
6,300 or 6,000 by 07/01/2017
2,525 or 2,390 by 07/01/2017

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March 2012 Headlines


Archives


Thursday 3/29/12. Trading Thursday: Nasdaq

The index dropped by -0.5% or -15.39 points. Since 02/05/1971 the index made 298 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 142 occasions.
     Average loss was -1.0% on 156 occasions.
Expect the index to close lower 52.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 16/24 or 66.7% of the time.
     The prediction of the index closing lower has been right 7/17 or 41.2% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

Not much in the way of chart patterns appear on the chart. I had to ponder this picture to find anything interesting. The only thing I could come up with is a double top that appeared mid session. When the index reversed and closed above the highest peak (A) in the pattern, it signaled a buy. That didn't leave much profit opportunity going into the close.

Looking to tomorrow, the probabilities say the index will close lower but that prediction has only been right 41% of the time. Ignoring that, I think that the index will close higher tomorrow. There is minor support by the gap underneath where the index is now and since the index was trending higher into the close, an up close is my guess.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,841.97    
 Monthly S1  2,973.47  131.49   
 Monthly Pivot  3,031.77  58.31   
 Weekly S2  3,034.49  2.72   Yes! The Weekly S2 is close to the Monthly Pivot.
 Daily S2  3,063.85  29.36   
 Weekly S1  3,069.73  5.87   
 Weekly Pivot  3,079.90  10.18   
 Daily S1  3,084.41  4.50   
 Low  3,086.93  2.52   Yes! The Low is close to the Daily S1.
 61.8% Down from Intraday High  3,103.60  16.67   
 Close  3,104.96  1.36   Yes! The Close is close to the 61.8% Down from Intraday High.
 Daily Pivot  3,107.48  2.52   Yes! The Daily Pivot is close to the Close.
 50% Down from Intraday High  3,108.75  1.26   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  3,113.89  5.15   
 Weekly R1  3,115.14  1.24   Yes! The Weekly R1 is close to the 38.2% Down from Intraday High.
 Open  3,123.84  8.70   
 Weekly R2  3,125.31  1.47   Yes! The Weekly R2 is close to the Open.
 Daily R1  3,128.04  2.72   Yes! The Daily R1 is close to the Weekly R2.
 High  3,130.56  2.52   Yes! The High is close to the Daily R1.
 Daily R2  3,151.11  20.55   
 Monthly R1  3,163.27  12.15   
 Monthly R2  3,221.57  58.31   

Tuesday 3/27/12. Trading Tuesday: Dow

The index climbed by 1.2% or 160.9 points. Since 10/01/1928 the index made 284 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 156 occasions.
     Average loss was -0.8% on 128 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 22/34 or 64.7% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

A small double top appears at A and B. This did not fulfill its measure rule promise, which has been a problem for the index over the last 6 weeks or so. It's as if the smart play is to watch for the turn at the bottom and go long until near the close instead of shorting and hoping it will drop to its full-height target.

The index moved sideways during the last hour of the day, potentially forming an unconfirmed double top. The probabilities suggest a higher close tomorrow. I am going to say that is what will happen, but deep down, I expect a retrace of today's move. I will not be surprised if we give back 50 points on Tuesday at the open and coast upward from there.

All of this is a guess, of course. Look at the futures before the open for a better gauge of market direction at the open.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  12,534.30    
 Monthly S1  12,887.97  353.66   
 Weekly S2  12,904.43  16.46   
 Daily S2  13,027.82  123.39   
 Weekly S1  13,073.03  45.21   
 Low  13,082.39  9.36   Yes! The Low is close to the Weekly S1.
 Open  13,082.62  0.23   Yes! The Open is close to the Low.
 Monthly Pivot  13,088.52  5.90   Yes! The Monthly Pivot is close to the Open.
 Daily S1  13,134.73  46.20   
 61.8% Down from Intraday High  13,144.07  9.34   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  13,163.13  19.05   
 Weekly Pivot  13,171.37  8.25   Yes! The Weekly Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  13,182.18  10.81   Yes! The 38.2% Down from Intraday High is close to the Weekly Pivot.
 Daily Pivot  13,189.29  7.11   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  13,241.63  52.34   
 High  13,243.86  2.23   Yes! The High is close to the Close.
 Daily R1  13,296.20  52.34   
 Weekly R1  13,339.97  43.77   
 Daily R2  13,350.76  10.79   Yes! The Daily R2 is close to the Weekly R1.
 Weekly R2  13,438.31  87.55   
 Monthly R1  13,442.19  3.88   Yes! The Monthly R1 is close to the Weekly R2.
 Monthly R2  13,642.74  200.56   

Monday 3/26/12. Market Monday: The Week Ahead

My Prediction

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

I show the S&P 500 index on the daily scale. To the right of the blue line is a guess as to what the index may do. It is simply a copy of the left side, flipped horizontally across the blue line.

If the reflection is correct, the index will form a head-and-shoulders top chart pattern. That is bearish, of course, but it doesn't necessarily mean price will make an extended move down.

An alternative hypothesis is that the index will resume the upward trend when it bounces off an up-sloping trendline. I show that line as a thick green line. It is not a pretty trendline since it has few touches, especially in the middle of the line.

You could draw others that hug price better, but they will be shorter. Even so, this looks a bit too weird for my taste. I favor the head-and-shoulders interpretation of where the index is headed. That's my guess for the coming weeks.

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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 6.51 points.
Tuesday: Down 68.94 points.
Wednesday: Down 45.57 points.
Thursday: Down 78.48 points.
Friday: Up 34.59 points.

For the Week...

The Dow industrials were down 151.89 points or 1.1%.
The Nasdaq composite was up 12.66 points or 0.4%.
The S&P 500 index was down 7.06 points or 0.5%.

Year to Date...

Dow Industrials
     1.6% down from the high of 13,289.08 on 03/16/2012.
     7.0% up from the low of 12,221.19 on 01/03/2012.
Nasdaq
     0.7% down from the high of 3,090.08 on 03/21/2012.
     16.8% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     1.2% down from the high of 1,414.00 on 03/19/2012.
     11.0% up from the low of 1,258.86 on 01/03/2012.

Top

Economic Reports

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

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

Options Expiration

No options expire this week.

Top

Swing and Position Traders: Chart Pattern Indicator

As of 03/23/2012, the CPI had:

14 bearish patterns,
11 bullish patterns,
390 patterns waiting for breakout.
The CPI signal is 44.0%, which is neutral (between 35% and 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  12,964  13,022  13,061  13,120  13,158 
Weekly  12,851  12,966  13,118  13,233  13,385 
Monthly  12,481  12,781  13,035  13,335  13,589 
S&P 500 (^GSPC): Daily  1,382  1,390  1,394  1,402  1,407 
Weekly  1,372  1,385  1,399  1,412  1,426 
Monthly  1,310  1,353  1,384  1,427  1,458 
Nasdaq (^IXIC): Daily  3,035  3,051  3,061  3,078  3,087 
Weekly  3,022  3,045  3,068  3,090  3,113 
Monthly  2,830  2,949  3,019  3,139  3,209 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

Top

Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week down 30.5%  The trend may continue.
 6 months up 5.0%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week down 30.9%  The trend may continue.
 4 months up 25.4%  The trend may continue.
 Nasdaq composite (^IXIC) 6 weeks up 4.5%  Expect a reversal soon.
 3 months up 28.4%  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 indexes, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

Top

Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
15Triangle, symmetrical
13Head-and-shoulders top
11Pipe bottom
10Rectangle top
8Rectangle bottom
7Double Bottom, Adam and Adam
7Broadening top
6Triangle, ascending
6Triangle, descending
5Head-and-shoulders bottom

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

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

 

 

 

 

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

This WeekLast Week
1. Homebuilding1. Homebuilding
2. Insurance (Life)2. Retail Building Supply
3. Human Resources3. Insurance (Life)
4. Furn/Home Furnishings4. Computers and Peripherals
5. Retail Building Supply5. Furn/Home Furnishings
48. Metals and Mining (Div.)48. Shoe
49. Natural Gas (Diversified)49. Metals and Mining (Div.)
50. Shoe50. Natural Gas (Diversified)
51. Coal51. Short ETFs
52. Short ETFs52. Coal

-- Thomas Bulkowski

Top


Thursday 3/22/12. Trading Thursday: Nasdaq

The index climbed by 0.0% or 1.17 points. Since 02/05/1971 the index made 556 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 312 occasions.
     Average loss was -1.0% on 244 occasions.
Expect the index to close higher 56.1% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 16/23 or 69.6% of the time.
     The prediction of the index closing lower has been right 7/17 or 41.2% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

Early in the day, the index formed a down-sloping channel (shown in blue). The breakout upward from this channel was the buy signal. That lasted until price closed below the red trendline.

What surprises me about this picture is the strength of the drop after the trendline pierce. Price didn't just fall, it tumbled like a skydiver without a parachute.

The probabilities say that the index will closer higher tomorrow, but I have my doubts. The tumble was just too strong to ignore. The index has reached overhead resistance and is now backing off from it. Although it has pierced a two-day long trendline beneath the lows, we could see a pullback on Thursday to that line. That would mean a higher close.

On the daily chart, it looks like it is time for the index to form the head of a head-and-shoulders top. So, I am going to vote for a lower close on Thursday.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,851.60    
 Weekly S2  2,949.43  97.83   
 Monthly S1  2,963.46  14.03   
 Monthly Pivot  3,012.14  48.68   
 Weekly S1  3,012.37  0.23   Yes! The Weekly S1 is close to the Monthly Pivot.
 Weekly Pivot  3,036.60  24.22   
 Daily S2  3,057.17  20.58   
 Daily S1  3,066.25  9.07   
 Low  3,069.09  2.84   
 Close  3,075.32  6.23   
 61.8% Down from Intraday High  3,077.11  1.79   Yes! The 61.8% Down from Intraday High is close to the Close.
 Open  3,077.44  0.33   Yes! The Open is close to the 61.8% Down from Intraday High.
 Daily Pivot  3,078.16  0.72   Yes! The Daily Pivot is close to the Open.
 50% Down from Intraday High  3,079.58  1.42   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  3,082.06  2.48   
 Daily R1  3,087.24  5.17   
 High  3,090.08  2.84   
 Daily R2  3,099.15  9.07   
 Weekly R1  3,099.54  0.39   Yes! The Weekly R1 is close to the Daily R2.
 Weekly R2  3,123.77  24.22   
 Monthly R1  3,124.00  0.23   Yes! The Monthly R1 is close to the Weekly R2.
 Monthly R2  3,172.68  48.68   

Tuesday 3/20/12. Trading Tuesday: Dow

The index climbed by 0.0% or 6.51 points. Since 10/01/1928 the index made 1160 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 617 occasions.
     Average loss was -0.7% on 543 occasions.
Expect the index to close higher 53.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 22/33 or 66.7% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

A double top appears in early afternoon, suggesting a drop in the index when price closes below the horizontal line at C.

In this case, the drop fulfills the measure rule prediction (the height of the chart pattern subtracted from the breakout price) with some to spare.

Looking ahead, the probabilities suggest a move higher and that has been right two-thirds of the time. I am inclined to agree. The index ended the day bouncing off support. Although I have found that intraday support and resistance is very weak, it hints that the index will move up at the open on Tuesday.

Looking at the 10-day picture, intraday, I see a large rounding turn. That suggests the index will close lower tomorrow.

One indicator says the index will climb and the other says it will drop. Go figure. I will stick with the probabilities this time and look for a higher close.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  12,533.47    
 Weekly S2  12,780.30  246.83   
 Monthly S1  12,886.30  106.00   
 Weekly S1  13,009.71  123.41   
 Monthly Pivot  13,087.69  77.98   
 Weekly Pivot  13,149.40  61.71   
 Daily S2  13,178.08  28.68   
 Daily S1  13,208.60  30.53   
 Low  13,208.63  0.03   Yes! The Low is close to the Daily S1.
 Open  13,231.94  23.31   
 61.8% Down from Intraday High  13,231.96  0.02   Yes! The 61.8% Down from Intraday High is close to the Open.
 Close  13,239.13  7.17   
 Daily Pivot  13,239.16  0.03   Yes! The Daily Pivot is close to the Close.
 50% Down from Intraday High  13,239.17  0.01   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  13,246.38  7.21   
 Daily R1  13,269.68  23.31   
 High  13,269.71  0.03   Yes! The High is close to the Daily R1.
 Daily R2  13,300.24  30.53   
 Weekly R1  13,378.81  78.58   
 Monthly R1  13,440.52  61.71   
 Weekly R2  13,518.50  77.98   
 Monthly R2  13,641.91  123.41   

Monday 3/19/12. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

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

An upward trend began in most of the indices back in mid December and the Dow shows an example of it. What is surprising about the red upward trend is that the retrace that ended the trend did not send the index lower much. It was like hitting a speed bump in your car instead of a brick wall.

Now, the trend is marching upward again.

What you can say is that the market looks tired. What does that mean? I think it means that the candlesticks are short, lacking a convincing move higher. The three candles ending at A are examples.

I still think that the trend is going to end, but am enjoying the ride upward. When will it end? I have no idea. I have been expecting it for a month, perhaps longer, and it still hasn't occurred.

In other words, the trend will end but I don't know when. That rhymes.

Top 

A Brief Look Back

Picture of a flower from my garden.

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

Monday: Up 37.69 points.
Tuesday: Up 217.97 points.
Wednesday: Up 16.42 points.
Thursday: Up 58.66 points.
Friday: Down 20.14 points.

For the Week...

The Dow industrials were up 310.6 points or 2.4%.
The Nasdaq composite was up 66.92 points or 2.2%.
The S&P 500 index was up 33.3 points or 2.4%.

Year to Date...

Dow Industrials
     0.4% down from the high of 13,289.08 on 03/16/2012.
     8.3% up from the low of 12,221.19 on 01/03/2012.
Nasdaq
     0.2% down from the high of 3,060.82 on 03/16/2012.
     16.3% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     0.1% down from the high of 1,405.88 on 03/16/2012.
     11.5% up from the low of 1,258.86 on 01/03/2012.

Top

Economic Reports

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

ReportTimeA-F
Rating
Description
Housing starts8:30 TB-Number of homes beginning construction.
Building permits8:30 TB-Measures building permits for new construction.
Existing home sales10:00 WCCounts sales of used homes.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Leading indicators10:00 ThD-Summary of already known reports.
New home sales10:00 FC+Shows sales of single-family homes.

Options Expiration

VIX expires on Wednesday

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Swing and Position Traders: Chart Pattern Indicator

As of 03/16/2012, the CPI had:

6 bearish patterns,
22 bullish patterns,
285 patterns waiting for breakout.
The CPI signal is 78.6%, 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  13,193  13,213  13,251  13,271  13,309 
Weekly  12,778  13,005  13,147  13,374  13,516 
Monthly  12,531  12,882  13,086  13,436  13,640 
S&P 500 (^GSPC): Daily  1,399  1,402  1,404  1,406  1,408 
Weekly  1,353  1,379  1,392  1,418  1,431 
Monthly  1,318  1,361  1,383  1,427  1,449 
Nasdaq (^IXIC): Daily  3,041  3,048  3,055  3,061  3,068 
Weekly  2,943  2,999  3,030  3,086  3,117 
Monthly  2,845  2,950  3,005  3,111  3,166 
  • 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.
 6 months up 5.0%  Expect a reversal soon.
 S & P 500 (^GSPC) 5 weeks up 7.7%  Expect a reversal soon.
 4 months up 25.4%  The trend may continue.
 Nasdaq composite (^IXIC) 5 weeks up 5.6%  Expect a reversal soon.
 3 months up 28.4%  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 indexes, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
17Head-and-shoulders top
13Triangle, symmetrical
9Pipe bottom
9Rectangle top
7Head-and-shoulders bottom
7Rectangle bottom
6Double Bottom, Adam and Adam
6Triangle, descending
6Triangle, ascending
6Pipe 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. Homebuilding1. Homebuilding
2. Retail Building Supply2. Retail Building Supply
3. Insurance (Life)3. Insurance (Life)
4. Computers and Peripherals4. Furn/Home Furnishings
5. Furn/Home Furnishings5. Computers and Peripherals
48. Shoe48. Shoe
49. Metals and Mining (Div.)49. Natural Gas (Diversified)
50. Natural Gas (Diversified)50. Metals and Mining (Div.)
51. Short ETFs51. Short ETFs
52. Coal52. Coal

-- Thomas Bulkowski

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Thursday 3/15/12. Trading Thursday: Nasdaq

The index climbed by 0.0% or 0.85 points. Since 02/05/1971 the index made 554 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 310 occasions.
     Average loss was -1.0% on 244 occasions.
Expect the index to close higher 56.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 15/22 or 68.2% of the time.
     The prediction of the index closing lower has been right 7/17 or 41.2% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

A large double top appears at A and B but this one did not live up to expectations when price failed to drop as far as it should have. That means it did not fulfill the measure rule. You had to wait for price to close below the red line, confirming the double top as a valid pattern before risking taking a position.

A small rising wedge appears in the last 40 minutes of the trading session (C). That suggests price is going to move lower tomorrow.

Today's chart looks to me like a pullback to the double top. Thus, I expect a lower close. However, the probabilities suggest that I am wrong, and giving my track record over the last two weeks or so, be skeptical.

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

-- Thomas Bulkowski

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,860.40    
 Weekly S2  2,884.63  24.23   
 Monthly S1  2,950.56  65.93   
 Weekly S1  2,962.68  12.12   
 Monthly Pivot  2,975.34  12.66   
 Weekly Pivot  2,978.33  2.99   
 Daily S2  3,012.30  33.97   
 Low  3,024.73  12.43   
 Daily S1  3,026.52  1.79   Yes! The Daily S1 is close to the Low.
 61.8% Down from Intraday High  3,034.91  8.39   
 50% Down from Intraday High  3,038.05  3.14   
 Daily Pivot  3,038.94  0.89   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  3,040.73  1.79   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  3,041.19  0.46   Yes! The 38.2% Down from Intraday High is close to the Close.
 Open  3,042.21  1.02   Yes! The Open is close to the 38.2% Down from Intraday High.
 High  3,051.37  9.16   
 Daily R1  3,053.16  1.79   Yes! The Daily R1 is close to the High.
 Weekly R1  3,056.38  3.22   
 Monthly R1  3,065.50  9.12   
 Daily R2  3,065.58  0.08   Yes! The Daily R2 is close to the Monthly R1.
 Weekly R2  3,072.03  6.45   
 Monthly R2  3,090.28  18.25   

Tuesday 3/13/12. Trading Tuesday: Dow

The index climbed by 0.3% or 37.69 points. Since 10/01/1928 the index made 1002 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 554 occasions.
     Average loss was -0.8% on 448 occasions.
Expect the index to close higher 55.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 21/32 or 65.6% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

Two symmetrical triangles appear in the index, although both have flaws (mostly due to few touches).

Neither of the triangles fulfilled their measure rule predictions so I would caution you about depending on the chart pattern height to make a target prediction. It appears that in a trendless market like we have been seeing over the last few weeks, the predictions are failing to lead to profitable moves.

What I highlight in this chart is the triangle apex -- where the two trendlines join. Directly above or below the apex is where price often turns, just as it does here at A and B.

You can read more about that behavior here.

As for the index on Tuesday, the probabilities suggest a higher close. I'm not sold. I think it will close lower based on overhead resistance. It is a trendless market, so that makes it hard to predict.

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

-- Thomas Bulkowski

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  12,595.88    
 Weekly S2  12,648.16  52.27   
 Monthly S1  12,777.80  129.64   
 Weekly S1  12,803.93  26.14   
 Weekly Pivot  12,890.64  86.70   
 Daily S2  12,895.64  5.00   Yes! The Daily S2 is close to the Weekly Pivot.
 Monthly Pivot  12,916.77  21.14   
 Low  12,919.98  3.21   Yes! The Low is close to the Monthly Pivot.
 Open  12,920.58  0.60   Yes! The Open is close to the Low.
 Daily S1  12,927.67  7.09   
 61.8% Down from Intraday High  12,941.52  13.84   
 50% Down from Intraday High  12,948.17  6.65   
 Daily Pivot  12,952.02  3.85   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  12,954.82  2.81   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  12,959.71  4.89   Yes! The Close is close to the 38.2% Down from Intraday High.
 High  12,976.36  16.65   
 Daily R1  12,984.05  7.69   
 Daily R2  13,008.40  24.34   
 Weekly R1  13,046.41  38.02   
 Monthly R1  13,098.69  52.27   
 Weekly R2  13,133.12  34.43   
 Monthly R2  13,237.66  104.55   

Monday 3/12/12. Market Monday: The Week Ahead

My Prediction

Picture of the Dow transports on the daily scale.

The transports continue to show the way lower, as the chart shows. The figure is on the daily scale, starting in December 2011.

Looking ahead, the index should reach the top of the channel and if it continues to follow the channel lower, the index should turn down this week.

However, the drop in the index has retraced between 50% and 62% of the move up from the December low. That suggests that the down move is over and it will push through the top of the channel.

What does all of this mean? The index will either break out of the channel or it won't.   Yes, I thought you'd like that.

My guess is that the decline is over and it will close above the top of the channel this week. As for the other indices, who knows? I expected a retrace a lot larger than the one we saw in the last two weeks or so. However, the economy is humming along so maybe there is more upside ahead.

# # #

If you forgot to turn your clock ahead, then come back in an hour and read this again.   Is it just me or is turning the clock ahead/behind one hour a pain in the ass? Speaking of pains, I did my taxes this weekend. Yuck. But they were easier than last year.

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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 14.76 points.
Tuesday: Down 203.66 points.
Wednesday: Up 78.18 points.
Thursday: Up 70.61 points.
Friday: Up 14.08 points.

For the Week...

The Dow industrials were down 55.55 points or 0.4%.
The Nasdaq composite was up 12.15 points or 0.4%.
The S&P 500 index was up 1.24 points or 0.1%.

Year to Date...

Dow Industrials
     1.0% down from the high of 13,055.75 on 02/29/2012.
     5.7% up from the low of 12,221.19 on 01/03/2012.
Nasdaq
     0.4% down from the high of 3,000.11 on 02/29/2012.
     13.7% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     0.5% down from the high of 1,378.04 on 02/29/2012.
     8.9% up from the low of 1,258.86 on 01/03/2012.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Treasury budget2:00 MDTracks budget deficit. Important in April (tax filing).
Retail sales8:30 TA-Reports total retail sales (not services). Are people spending?
Business inventories10:00 TC-Reports manufacturing, wholesale, retail inventories.
FOMC Rate decision2:15 T?The Federal Reserves reports on interest rate changes.
International trade8:30 WC+Import/export prices, trade balance. US economy vs others.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Producer price index8:30 ThB-Measures wholesale goods cost. An indication of future inflation.
Consumer price index8:30 FB+Inflation report. Measures cost of goods and services.
Industrial production9:15 FB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 FB-Gauges economic activity, hints of inflation.

Options Expiration

The following is courtesy of the Options Industry Council.

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

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

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Swing and Position Traders: Chart Pattern Indicator

As of 03/09/2012, the CPI had:

4 bearish patterns,
43 bullish patterns,
363 patterns waiting for breakout.
The CPI signal is 91.5%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  12,870  12,896  12,932  12,958  12,995 
Weekly  12,636  12,779  12,878  13,021  13,121 
Monthly  12,583  12,753  12,904  13,074  13,225 
S&P 500 (^GSPC): Daily  1,362  1,366  1,371  1,375  1,379 
Weekly  1,327  1,349  1,362  1,384  1,397 
Monthly  1,319  1,345  1,362  1,387  1,404 
Nasdaq (^IXIC): Daily  2,965  2,977  2,985  2,997  3,005 
Weekly  2,867  2,928  2,961  3,021  3,055 
Monthly  2,843  2,916  2,958  3,031  3,073 
  • 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 19.0%  Expect a reversal soon.
 1 month down 20.8%  Expect a reversal soon.
 S & P 500 (^GSPC) 4 weeks up 15.2%  Expect a reversal soon.
 4 months up 25.4%  The trend may continue.
 Nasdaq composite (^IXIC) 4 weeks up 13.2%  Expect a reversal soon.
 3 months up 28.4%  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 indexes, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
17Head-and-shoulders top
13Triangle, symmetrical
9Rectangle top
9Double Top, Adam and Adam
8Triangle, descending
7Rectangle bottom
7Head-and-shoulders bottom
7Triangle, ascending
5Rising wedge
5Double Top, Eve and Eve

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

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

 

 

 

 

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

This WeekLast Week
1. Homebuilding1. Homebuilding
2. Retail Building Supply2. Retail Building Supply
3. Insurance (Life)3. Insurance (Life)
4. Furn/Home Furnishings4. Computers and Peripherals
5. Computers and Peripherals5. Semiconductor Cap Equip.
48. Shoe48. Shoe
49. Natural Gas (Diversified)49. Metals and Mining (Div.)
50. Metals and Mining (Div.)50. Natural Gas (Diversified)
51. Short ETFs51. Short ETFs
52. Coal52. Coal

-- Thomas Bulkowski

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Thursday 3/8/12. Trading Thursday: Nasdaq

The index climbed by 0.9% or 25.37 points. Since 02/05/1971 the index made 244 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 168 occasions.
     Average loss was -1.2% on 76 occasions.
Expect the index to close higher 68.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 14/21 or 66.7% of the time.
     The prediction of the index closing lower has been right 7/17 or 41.2% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

A head-and-shoulders top chart pattern appears on the chart in the early afternoon. It confirmed as a valid chart pattern when price closed below the red line. Those of you that know about head-and-shoulders also know that this is not the neckline. When the neckline slopes downward, as in this case (blue line), price may never close below the line. So, I use the right armpit low as the sell short price.

A trade based on this pattern turned into a mistake when price failed to drop much. After such a large drop yesterday, I expected an upward retrace, so going against that up move would have been a low probability setup.

Looking to tomorrow's (Thursday's) close, I expect the index to close higher. Why? Mostly because of the straight-line run up starting just after 3:00. That suggests a strong move up tomorrow but first, it has to retrace, which it has already started. That move, when finished, would complete a measured move up.

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

-- Thomas Bulkowski

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,688.41    
 Monthly S1  2,812.05  123.64   
 Weekly S2  2,889.56  77.51   
 Monthly Pivot  2,906.08  16.52   
 Daily S2  2,912.43  6.35   
 Weekly S1  2,912.62  0.19   Yes! The Weekly S1 is close to the Daily S2.
 Low  2,920.54  7.92   
 Open  2,922.57  2.03   
 Daily S1  2,924.06  1.49   Yes! The Daily S1 is close to the Open.
 61.8% Down from Intraday High  2,928.08  4.02   
 50% Down from Intraday High  2,930.41  2.33   
 Daily Pivot  2,932.17  1.76   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  2,932.74  0.57   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  2,935.69  2.95   
 High  2,940.28  4.59   
 Daily R1  2,943.80  3.52   
 Daily R2  2,951.91  8.11   
 Weekly Pivot  2,956.37  4.46   
 Weekly R1  2,979.43  23.07   
 Weekly R2  3,023.18  43.74   
 Monthly R1  3,029.72  6.54   
 Monthly R2  3,123.75  94.03   

Tuesday 3/6/12. Trading Tuesday: Dow

The index dropped by -0.1% or -14.76 points. Since 10/01/1928 the index made 1197 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 619 occasions.
     Average loss was -0.8% on 578 occasions.
Expect the index to close higher 51.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 21/31 or 67.7% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

The index formed an ugly double bottom at AB. This confirmed when the index closed above the peak between A and B, shown by the red line C. This led to a good gain that fulfilled the measure rule prediction despite the pattern being tall.

The probabilities above say that the index should close higher on Tuesday. Looking at the last 10 trading days, intraday, the index will be bumping up against a ceiling of overhead resistance. rising up to 13,000. The chart pattern indicator has turned bearish. The index, longer term, is at overhead resistance. I find it difficult to believe that the index will close higher but I will defer to the probabilities. I still believe that we are heading toward an extended downward move. The transports could signal that on Tuesday, in which case I will flip my target for that index.

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

-- Thomas Bulkowski

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  12,322.98    
 Monthly S1  12,642.90  319.91   
 Weekly S2  12,793.89  150.99   
 Daily S2  12,847.92  54.03   
 Monthly Pivot  12,849.32  1.40   Yes! The Monthly Pivot is close to the Daily S2.
 Weekly S1  12,878.35  29.03   
 Low  12,883.91  5.56   Yes! The Low is close to the Weekly S1.
 Daily S1  12,905.37  21.46   
 61.8% Down from Intraday High  12,919.60  14.23   
 50% Down from Intraday High  12,930.63  11.02   
 Daily Pivot  12,941.35  10.73   
 38.2% Down from Intraday High  12,941.65  0.30   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  12,962.81  21.16   
 Weekly Pivot  12,967.05  4.24   Yes! The Weekly Pivot is close to the Close.
 Open  12,977.34  10.29   
 High  12,977.34  0.00   Yes! The High is close to the Open.
 Daily R1  12,998.80  21.46   
 Daily R2  13,034.78  35.99   
 Weekly R1  13,051.51  16.73   
 Weekly R2  13,140.21  88.70   
 Monthly R1  13,169.24  29.03   
 Monthly R2  13,375.66  206.43   

Monday 3/5/12. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

Even as I continue to expect the markets to make a significant drop (the chart pattern indicator is bearish and showing bearish divergence -- as of Friday's close, the markets haven't retraced since mid December, and the indices are bumping up against a ceiling of overhead resistance) and yet we see a chart like this one.

At B, the pattern is a broadening formation, right-angled and descending. That mutated into an ascending triangle at A. The two patterns combined look like an inverted roof, C.

Ascending triangles breakout upward 70% of the time, according to my book, Encyclopedia of Chart Patterns. That is what I expect to happen. So even as I expect the markets to tumble, the utilities show hope for gains.

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A Brief Look Back

Picture of my dog.

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 1.44 points.
Tuesday: Up 23.61 points.
Wednesday: Down 53.05 points.
Thursday: Up 28.23 points.
Friday: Down 2.73 points.

For the Week...

The Dow industrials were down 5.38 points or 0.0%.
The Nasdaq composite was up 12.44 points or 0.4%.
The S&P 500 index was up 3.89 points or 0.3%.

Year to Date...

Dow Industrials
     0.6% down from the high of 13,055.75 on 02/29/2012.
     6.2% up from the low of 12,221.19 on 01/03/2012.
Nasdaq
     0.8% down from the high of 3,000.11 on 02/29/2012.
     13.3% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     0.6% down from the high of 1,378.04 on 02/29/2012.
     8.8% up from the low of 1,258.86 on 01/03/2012.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Factory orders10:00 MD+Durable/non-durable goods orders w/factory inventories.
Productivity & costs8:30 WD+Cost of producing a unit of output.
Crude inventories10:30 W?My guess: Measures oil inventory.
Consumer credit3:00 WD-Measures auto, credit card and other debt.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Trade balance8:30 FC+Signals balance of exports & imports.
Wholesale inventories10:00 FD-Wholesale sales and inventory statistics.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 03/02/2012, the CPI had:

31 bearish patterns,
10 bullish patterns,
290 patterns waiting for breakout.
The CPI signal is 24.4%, which is bearish (<= 35%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  12,898  12,938  12,968  13,007  13,037 
Weekly  12,799  12,888  12,972  13,061  13,145 
Monthly  12,328  12,653  12,854  13,179  13,381 
S&P 500 (^GSPC): Daily  1,362  1,366  1,370  1,374  1,378 
Weekly  1,344  1,357  1,368  1,380  1,391 
Monthly  1,272  1,321  1,349  1,398  1,427 
Nasdaq (^IXIC): Daily  2,952  2,964  2,980  2,992  3,008 
Weekly  2,903  2,940  2,970  3,006  3,037 
Monthly  2,702  2,839  2,920  3,057  3,137 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week down 30.3%  The trend may continue.
 6 months up 5.0%  Expect a reversal soon.
 S & P 500 (^GSPC) 3 weeks up 20.5%  Expect a reversal soon.
 4 months up 25.4%  The trend may continue.
 Nasdaq composite (^IXIC) 3 weeks up 18.5%  Expect a reversal soon.
 3 months up 28.4%  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 indexes, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
15Triangle, symmetrical
8Rectangle top
7Pipe top
6Triangle, ascending
5Rising wedge
5Triangle, descending
5Rectangle bottom
5Head-and-shoulders top
5Pipe bottom
4Head-and-shoulders bottom

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

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

 

 

 

 

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

This WeekLast Week
1. Homebuilding1. Homebuilding
2. Retail Building Supply2. Retail Building Supply
3. Insurance (Life)3. Insurance (Life)
4. Computers and Peripherals4. Furn/Home Furnishings
5. Semiconductor Cap Equip.5. Machinery
48. Shoe48. Electric Utility (East)
49. Metals and Mining (Div.)49. Metals and Mining (Div.)
50. Natural Gas (Diversified)50. Natural Gas (Diversified)
51. Short ETFs51. Coal
52. Coal52. Short ETFs

-- Thomas Bulkowski

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Saturday 3/3/12. Saturday Supplement: Horror Stories

Picture of a flower from my garden.

First, thanks to all of you that voted for my articles in Technical Analysis of Stocks & Commodities magazine's reader choice awards. My article, "Top 10 candles that work" (June 2011) took first place and "What you don't know about candlesticks" (March 2011) and "The eight best-performing candles" (November 2011) tied for second.

Second, I'm about to finish writing a new book and the last chapter is about trading horror stories. I asked you to send my your horror stories a year ago and this coming week, I'll begin working on them.

If you have already sent me your story, I have it. If not, then I'm looking for stories about blowing out your account (large loss), a big win, or even a trade that you're especially proud of. Tell me your story. I'm looking for stories or anecdotes that will spice up an otherwise boring read.

Maybe you decided to leave the business. Why? I'm interested in hearing about trades that had an emotional impact. Tell me what happened and about how you feel.

Send the details to me at the below address. I make no guarantees about publication or anything else, and I will change the names to assure anonymity. Thanks.

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Thursday 3/1/12. Trading Thursday: Nasdaq

The index dropped by -0.7% or -19.87 points. Since 02/05/1971 the index made 233 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 106 occasions.
     Average loss was -1.2% on 127 occasions.
Expect the index to close lower 54.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 14/21 or 66.7% of the time.
     The prediction of the index closing lower has been right 7/16 or 43.8% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

A double bottom at DE did not live up to expectations since the index did not rise far enough to fulfill the measure rule.

A triple top appears at ABC which confirmed when the index closed below the red line. The index decline far enough to exceed the measure rule.

Looking forward, the probabilities suggest a downward close on Thursday. Looking at the last two days action, intraday, there is a head-and-shoulders top which confirmed and the index has declined below. Will that drop continue?

Unfortunately, for the index to drop far, it has to pierce support. That support over the last 10 days seems wide and perhaps strong. Thus, I expect that the index will close lower tomorrow, but not show a significant drop. In other words, it should stall when it reaches that support.

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

-- Thomas Bulkowski

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,696.83    
 Monthly S1  2,831.86  135.03   
 Monthly Pivot  2,901.37  69.51   
 Weekly S2  2,905.66  4.29   
 Weekly S1  2,936.27  30.62   
 Daily S2  2,937.92  1.64   Yes! The Daily S2 is close to the Weekly S1.
 Daily S1  2,952.40  14.49   
 Weekly Pivot  2,953.58  1.17   Yes! The Weekly Pivot is close to the Daily S1.
 Low  2,961.77  8.19   
 Close  2,966.89  5.12   
 Daily Pivot  2,976.26  9.37   
 61.8% Down from Intraday High  2,976.42  0.16   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  2,980.94  4.52   
 Weekly R1  2,984.19  3.25   Yes! The Weekly R1 is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  2,985.46  1.27   Yes! The 38.2% Down from Intraday High is close to the Weekly R1.
 Daily R1  2,990.74  5.28   
 Open  2,991.67  0.93   Yes! The Open is close to the Daily R1.
 High  3,000.11  8.44   
 Weekly R2  3,001.50  1.39   Yes! The Weekly R2 is close to the High.
 Daily R2  3,014.60  13.10   
 Monthly R1  3,036.40  21.80   
 Monthly R2  3,105.91  69.51   

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