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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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Fundamental Analysis and Position Trading: Evolution of a Trader book.
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Busted
Patterns
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Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 05/23/2017
20,938 43.08 0.2%
9,010 45.02 0.5%
711 1.33 0.2%
6,139 5.09 0.1%
2,398 4.40 0.2%
YTD
5.9%
-0.4%
7.7%
14.0%
7.1%
Tom's Targets    Overview: 05/15/2017
21,400 or 20,450 by 06/01/2017
9,500 or 8,700 by 06/01/2017
685 or 720 by 06/01/2017
6,350 or 6,000 by 06/01/2017
2,330 or 2,450 by 06/01/2017

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March 2014 Headlines


Archives


Monday 3/31/14. Market Monday: The Week Ahead

My Prediction

Picture of the nasdaq on the daily scale.

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

I picked this index because of the three horizontal red lines that I show. Those are retrace lines, drawn at 38%, 50%, and 62% of the rise between the two small green circles. Those circles mark the beginning and end of the rise.

I think that the retrace has finished and the market will begin to recover. That's based on the extent of the drop. It's overdone.

 

 

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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 26.08 points.
Tuesday: Up 91.19 points.
Wednesday: Down 98.89 points.
Thursday: Down 4.76 points.
Friday: Up 58.83 points.

For the Week...

The Dow industrials were up 20.29 points or 0.1%.
The Nasdaq composite was down 121.03 points or 2.8%.
The S&P 500 index was down 8.9 points or 0.5%.

Year to Date...

Dow Industrials
     1.5% down from the high of 16,573.07 on 01/02/2014.
     6.4% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     4.9% down from the high of 4,371.71 on 03/06/2014.
     4.7% up from the low of 3,968.19 on 02/05/2014.
S&P 500
     1.4% down from the high of 1,883.97 on 03/21/2014.
     6.9% 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
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.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Trade balance8:30 ThC+Signals balance of exports & imports.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

On 03/28/2014, the CPI had:

8 bearish patterns,
18 bullish patterns,
228 patterns waiting for breakout.
The CPI signal is 69.2%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,188  16,256  16,335  16,403  16,482 
Weekly  16,053  16,188  16,327  16,462  16,601 
Monthly  15,833  16,078  16,292  16,537  16,751 
S&P500 (^GSPC): Daily  1,842  1,850  1,858  1,866  1,875 
Weekly  1,825  1,841  1,859  1,875  1,892 
Monthly  1,809  1,833  1,859  1,883  1,908 
Nasdaq (^IXIC): Daily  4,109  4,132  4,168  4,191  4,227 
Weekly  4,035  4,095  4,192  4,253  4,350 
Monthly  3,980  4,068  4,220  4,308  4,460 
  • 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 29.3%   The trend may continue. 
 2 months up 39.6%   The trend may continue. 
 S & P 500 (^GSPC) 1 week down 28.4%   The trend may continue. 
 1 month down 20.8%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week down 31.0%   The trend may continue. 
 1 month down 25.4%   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 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
17Pipe top
13Triangle, symmetrical
10Head-and-shoulders top
10Scallop, ascending and inverted
6Rising wedge
6Double Top, Adam and Adam
6Broadening top
5Double Top, Eve and Eve
5Pipe bottom
5Double Top, Eve and Adam

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

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

 

 

 

 

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

This WeekLast Week
1. Cement and Aggregates1. Cement and Aggregates
2. Drug2. Internet
3. Internet3. Information Services
4. Chemical (Specialty)4. Biotechnology
5. Information Services5. Drug
50. Retail Building Supply50. Oilfield Svcs/Equipment
51. E-Commerce51. Investment Co. (Foreign)
52. Retail (Special Lines)52. Toiletries/Cosmetics
53. Toiletries/Cosmetics53. Retail (Special Lines)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Thursday 3/27/14. Trading Thursday: Nasdaq

The index dropped by -1.4% or -60.69 points. Since 02/05/1971 the index made 98 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 38 occasions.
     Average loss was -1.4% on 60 occasions.
Expect the index to close lower 61.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 58/97 or 59.8% of the time.
     The prediction of the index closing lower has been right 23/47 or 48.9% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

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

Yesterday, the index formed a chart pattern that I rarely discuss: a V-bottom with an extension. The V-bottom is the, well, v-shaped turn (A). The extension is the horizontal red line that continues from the V-bottom.

Today, trading followed a down-sloping channel (B). I show moves C and D appear similar. I think that's interesting but I don't know of any significance except to say that after D the index may follow the same behavior as it did after C. In other words, price at the open may slide downward in a tall congestion region before shooting to the other side of the channel.

$ $ $

I show a pic of my book, "Fundamental Analysis and Position Trading" which is part of the Evolution of a Trader series.

People have asked what do I look for when picking a stock to populate my database. The answer is on page five of the book and it includes seven items. Here they are

  1. Volatility
  2. Price
  3. PE ratio
  4. Price appreciation potential
  5. Industry
  6. Insider buying and selling
  7. Other fundamentals

For a detailed description of these items, buy the book.

$ $ $

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  4,112.39    
 Daily S2  4,113.92  1.53   Yes! The Daily S2 is close to the Monthly S2.
 Monthly S1  4,142.98  29.06   
 Daily S1  4,143.75  0.77   Yes! The Daily S1 is close to the Monthly S1.
 Low  4,173.58  29.83   
 Close  4,173.58  0.00   Yes! The Close is close to the Low.
 Weekly S1  4,179.82  6.24   Yes! The Weekly S1 is close to the Close.
 Weekly S2  4,186.05  6.24   Yes! The Weekly S2 is close to the Weekly S1.
 Daily Pivot  4,203.41  17.36   
 61.8% Down from Intraday High  4,207.77  4.35   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  4,218.33  10.56   
 38.2% Down from Intraday High  4,228.88  10.56   
 Daily R1  4,233.24  4.36   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Open  4,254.98  21.74   
 Weekly R1  4,255.87  0.89   Yes! The Weekly R1 is close to the Open.
 Monthly Pivot  4,257.35  1.48   Yes! The Monthly Pivot is close to the Weekly R1.
 Weekly Pivot  4,262.10  4.76   Yes! The Weekly Pivot is close to the Monthly Pivot.
 High  4,263.07  0.97   Yes! The High is close to the Weekly Pivot.
 Monthly R1  4,287.94  24.87   
 Daily R2  4,292.90  4.96   Yes! The Daily R2 is close to the Monthly R1.
 Weekly R2  4,338.15  45.25   
 Monthly R2  4,402.31  64.15   

Tuesday 3/25/14. Trading Tuesday: Dow

The index dropped by -0.2% or -26.08 points. Since 10/01/1928 the index made 1122 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 560 occasions.
     Average loss was -0.7% on 562 occasions.
Expect the index to close lower 50.1% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 67/104 or 64.4% of the time.
     The prediction of the index closing lower has been right 20/35 or 57.1% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

The chart shows a head-and-shoulders top on the far left of the chart. That led to an extended decline in the index.

At AB, the index made a double top that confirmed at C when the index closed below the red line. Then it climbed to D and busted the downward breakout accompanied by a throwback to E.

What does this mean? I would expect the index to recover tomorrow and close higher. That's at odds with the above probabilities, but they show a 50.1% probability of closing lower. Can you say random?

$ $ $

Here's a question answered by my Trading Basics book, pictured. Does a rising tide lift all boats?

See page 138, Table 6.1. Hint: The industry trend is more important than the market trend (which I prove...read the book). That's important to know if you are buying a new stock. Pay attention to the direction stocks in the industry are trending.

You can find more information about my book here.

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  15,763.88    
 Weekly S2  15,876.42  112.54   
 Monthly S1  16,020.29  143.86   
 Weekly S1  16,076.56  56.27   
 Daily S2  16,125.97  49.41   
 Daily S1  16,201.33  75.36   
 Low  16,215.56  14.23   Yes! The Low is close to the Daily S1.
 Monthly Pivot  16,262.99  47.43   
 Weekly Pivot  16,266.50  3.51   Yes! The Weekly Pivot is close to the Monthly Pivot.
 Close  16,276.69  10.19   Yes! The Close is close to the Weekly Pivot.
 61.8% Down from Intraday High  16,278.57  1.88   Yes! The 61.8% Down from Intraday High is close to the Close.
 Daily Pivot  16,290.92  12.35   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  16,298.04  7.12   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 Open  16,303.28  5.25   Yes! The Open is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  16,317.50  14.22   Yes! The 38.2% Down from Intraday High is close to the Open.
 Daily R1  16,366.28  48.78   
 High  16,380.51  14.23   Yes! The High is close to the Daily R1.
 Daily R2  16,455.87  75.36   
 Weekly R1  16,466.64  10.77   Yes! The Weekly R1 is close to the Daily R2.
 Monthly R1  16,519.40  52.76   
 Weekly R2  16,656.58  137.19   
 Monthly R2  16,762.10  105.52   

Monday 3/24/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow transports on the daily scale.

I show the Dow transports on the daily scale because of the interesting pattern shown here in red.

It's a symmetrical triangle (C). That chart pattern is bounded by two converging trendlines. Price touches each trendline plenty of times and covers the white space within the triangle with price movement.

Breakouts (sounds like acne, doesn't it?) from symmetrical triangles are upward 54% of the time, based on information from my book, Encyclopedia of Chart Patterns, Second Edition, shown in the picture.

I got that value by adding numbers from the two columns of upward breakouts (476+246) compared to the total number of symmetricals studied (1,347 -- see the book). The 54% number is for both bull and bear markets. For bull markets, only, the results is 476/(476+361) or 57%.

What does that all mean? The breakout direction is about random.

However, the chart does give a clue. Look at A and B. It reminds me of a weird looking cup with handle, the handle being C. This suggests the breakout will be upward. But again, that's only a guess. So much in technical analysis is like that: An educated guess, supported by probabilities.

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A Brief Look Back

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 181.55 points.
Tuesday: Up 88.97 points.
Wednesday: Down 114.02 points.
Thursday: Up 108.88 points.
Friday: Down 28.28 points.

For the Week...

The Dow industrials were up 237.1 points or 1.5%.
The Nasdaq composite was up 31.39 points or 0.7%.
The S&P 500 index was up 25.39 points or 1.4%.

Year to Date...

Dow Industrials
     1.6% down from the high of 16,573.07 on 01/02/2014.
     6.3% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     2.2% down from the high of 4,371.71 on 03/06/2014.
     7.8% up from the low of 3,968.19 on 02/05/2014.
S&P 500
     0.9% down from the high of 1,883.97 on 03/21/2014.
     7.4% 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
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
New home sales10:00 TC+Shows sales of single-family homes.
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.
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 03/21/2014, the CPI had:

34 bearish patterns,
22 bullish patterns,
317 patterns waiting for breakout.
The CPI signal is 39.3%, which is neutral (between 35% and 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,184  16,244  16,350  16,409  16,516 
Weekly  15,885  16,094  16,275  16,484  16,665 
Monthly  15,773  16,038  16,272  16,537  16,771 
S&P500 (^GSPC): Daily  1,851  1,859  1,871  1,879  1,892 
Weekly  1,823  1,845  1,864  1,886  1,906 
Monthly  1,799  1,833  1,858  1,892  1,918 
Nasdaq (^IXIC): Daily  4,220  4,249  4,297  4,325  4,373 
Weekly  4,220  4,249  4,297  4,325  4,373 
Monthly  4,147  4,212  4,292  4,357  4,437 
  • 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 43.3%   Expect a random direction. 
 1 month down 19.8%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week up 43.1%   Expect a random direction. 
 2 months up 41.6%   Expect a random direction. 
 Nasdaq composite (^IXIC) 1 week up 43.6%   Expect a random direction. 
 1 month down 25.4%   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 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
15Pipe top
10Triangle, symmetrical
8Scallop, ascending and inverted
8Broadening top
7Rising wedge
4Double Top, Adam and Adam
4Rectangle top
4Head-and-shoulders top
4Broadening top, right-angled and ascending
3Double Bottom, Adam and Adam

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

The 10 types of most frequently appearing chart patterns in the stocks, 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. Biotechnology
2. Internet2. Internet
3. Information Services3. Cement and Aggregates
4. Biotechnology4. Information Services
5. Drug5. Drug
50. Oilfield Svcs/Equipment50. Investment Co. (Foreign)
51. Investment Co. (Foreign)51. Oilfield Svcs/Equipment
52. Toiletries/Cosmetics52. Toiletries/Cosmetics
53. Retail (Special Lines)53. Retail (Special Lines)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Thursday 3/20/14. Trading Thursday: Nasdaq

The index dropped by -0.6% or -25.71 points. Since 02/05/1971 the index made 284 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 123 occasions.
     Average loss was -1.1% on 161 occasions.
Expect the index to close lower 56.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 58/97 or 59.8% of the time.
     The prediction of the index closing lower has been right 23/46 or 50.0% of the time.

Picture of the my Trading Basics book.

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.

$ $ $

Instead of the usual Thursday analysis of the Nasdaq composite, can you help me?

If you own a copy of Trading Basics and like the book, then please post a customer review on Amazon.com. You may need an account there, but you don't need to have purchased it there. Any help you can provide to support me will be much appreciated. Here's the backstory...

Today, I happened to look at the customer reviews of my Trading Basics book (pictured). It's part of the Evolution of a Trader trilogy. At that time, only one review was a good one (5 stars) with the other two being 2 stars (one more review has been added since).

One bad review says I reference my other books too often. Since this book is part of a trilogy, I didn't see any problem with telling the reader where to find a more in-depth explanation in my other books, but the reader disagreed and gave me two stars. In the electronic world in which we live, what I did is called hyperlinking (or the equivalent in the print world, which is what he's complaining about). To my way of thinking, too much information is better than too little. I also don't like to ask the reader to pay for information they may already have in my other books, hence the reference link and not a full discussion.

The second bad review says that "The presentation was poor and not well put together." After each section, I provide a bullet item of the most important lesson of the section. Then, at the end of the chapter, I collect the lessons as a checklist. It makes for an easy review and doubles as an index since each bullet item tells where to find the information. That makes it easy for the reader to understand the main points and where to find more information.

As to the "The information provide was about par," comment, I prove what I say, which is way more than most authors. My independent research is what sets my books apart from others.

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  4,018.21    
 Monthly S1  4,162.90  144.70   
 Weekly S2  4,188.83  25.93   
 Weekly S1  4,248.22  59.38   
 Daily S2  4,257.72  9.50   
 Monthly Pivot  4,267.31  9.59   
 Daily S1  4,282.66  15.35   
 Low  4,283.54  0.88   Yes! The Low is close to the Daily S1.
 Weekly Pivot  4,301.32  17.78   
 61.8% Down from Intraday High  4,302.93  1.61   Yes! The 61.8% Down from Intraday High is close to the Weekly Pivot.
 Close  4,307.60  4.67   Yes! The Close is close to the 61.8% Down from Intraday High.
 Daily Pivot  4,308.48  0.88   Yes! The Daily Pivot is close to the Close.
 50% Down from Intraday High  4,308.92  0.44   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  4,314.91  5.99   
 Open  4,331.46  16.55   
 Daily R1  4,333.42  1.96   Yes! The Daily R1 is close to the Open.
 High  4,334.30  0.88   Yes! The High is close to the Daily R1.
 Daily R2  4,359.24  24.94   
 Weekly R1  4,360.71  1.47   Yes! The Weekly R1 is close to the Daily R2.
 Monthly R1  4,412.00  51.30   
 Weekly R2  4,413.81  1.81   Yes! The Weekly R2 is close to the Monthly R1.
 Monthly R2  4,516.41  102.59   

Tuesday 3/18/14. Trading Tuesday: Dow

The index climbed by 1.1% or 181.55 points. Since 10/01/1928 the index made 340 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 197 occasions.
     Average loss was -0.8% on 143 occasions.
Expect the index to close higher 57.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 66/103 or 64.1% of the time.
     The prediction of the index closing lower has been right 20/35 or 57.1% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

On Friday, the index made a down-sloping channel (blue). The upside breakout from this channel happened quickly, in the opening minutes today (Monday). Then things settled down, eventually forming a rectangle top chart pattern that I show here in red. The index has yet to break out of this pattern (meaning a close either above or below the red trendlines).

What does this mean? The probabilities suggest a higher close on Tuesday, so I would expect an upward breakout. That might not be the case since Russia could burp and put the market into a tailspin.

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  15,390.19    
 Monthly S1  15,818.71  428.51   
 Weekly S2  15,838.17  19.47   Yes! The Weekly S2 is close to the Monthly S1.
 Daily S2  15,990.67  152.50   
 Weekly S1  16,042.70  52.02   
 Low  16,066.37  23.67   
 Open  16,066.37  0.00   Yes! The Open is close to the Low.
 Daily S1  16,118.95  52.58   
 61.8% Down from Intraday High  16,144.29  25.34   
 Monthly Pivot  16,162.20  17.92   Yes! The Monthly Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  16,168.36  6.15   Yes! The 50% Down from Intraday High is close to the Monthly Pivot.
 38.2% Down from Intraday High  16,192.42  24.07   
 Daily Pivot  16,194.64  2.22   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  16,247.22  52.58   
 Weekly Pivot  16,251.51  4.29   Yes! The Weekly Pivot is close to the Close.
 High  16,270.34  18.83   Yes! The High is close to the Weekly Pivot.
 Daily R1  16,322.92  52.58   
 Daily R2  16,398.61  75.70   
 Weekly R1  16,456.04  57.42   
 Monthly R1  16,590.72  134.68   
 Weekly R2  16,664.85  74.14   
 Monthly R2  16,934.21  269.36   

Monday 3/17/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

I am still infatuated with the Dow utilities index, shown. I added to a position in a utility stock and am reaping the rewards as the index climbs, following the stock higher. I am flush with cash, well, flush is perhaps too strong a word. I have too much cash earning almost nothing so why not buy a utility stock with a yield of nearly 5%? That's what I did.

Anyway, I think the index shows what is possible in the other indices if they stop worrying about transitory world affairs.

Looking at the chart, the index appears to form a cup with handle from A to B (cup) with a handle at C. Of course, the index probably doesn't meeting the guidelines of a 30% rise leading to the chart pattern. I didn't look.

I just like how the index is moving higher (D) and expect it to continue. There will be pauses along the way, of course but I like seeing sky. The index may pause when it reaches the level of B.

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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 34.04 points.
Tuesday: Down 67.43 points.
Wednesday: Down 11.17 points.
Thursday: Down 231.19 points.
Friday: Down 43.22 points.

For the Week...

The Dow industrials were down 387.05 points or 2.4%.
The Nasdaq composite was down 90.82 points or 2.1%.
The S&P 500 index was down 36.91 points or 2.0%.

Year to Date...

Dow Industrials
     3.1% down from the high of 16,573.07 on 01/02/2014.
     4.7% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     2.9% down from the high of 4,371.71 on 03/06/2014.
     7.0% up from the low of 3,968.19 on 02/05/2014.
S&P 500
     2.3% down from the high of 1,883.57 on 03/07/2014.
     5.9% 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
Capacity utilization9:15 MB-Gauges economic activity, hints of inflation.
Industrial production9:15 MB-Production of utilities, mines, and manufacturers.
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.
Existing home sales10:00 ThCCounts sales of used homes.
Leading indicators10:00 ThD-Summary of already known reports.

Options Expiration

The following is courtesy of the Options Industry Council.

OptionDate
VIX expiresTuesday
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 03/14/2014, the CPI had:

8 bearish patterns,
11 bullish patterns,
199 patterns waiting for breakout.
The CPI signal is 57.9%, which is neutral (between 35% and 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  15,975  16,020  16,093  16,138  16,211 
Weekly  15,778  15,922  16,191  16,335  16,604 
Monthly  15,330  15,698  16,102  16,470  16,874 
S&P500 (^GSPC): Daily  1,832  1,836  1,844  1,849  1,857 
Weekly  1,812  1,826  1,854  1,869  1,897 
Monthly  1,747  1,794  1,839  1,886  1,931 
Nasdaq (^IXIC): Daily  4,223  4,234  4,253  4,265  4,284 
Weekly  4,168  4,207  4,281  4,319  4,393 
Monthly  3,997  4,121  4,247  4,371  4,496 
  • 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 30.8%   The trend may continue. 
 1 month down 19.8%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week down 28.5%   The trend may continue. 
 1 month down 20.8%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week down 31.1%   The trend may continue. 
 1 month down 25.4%   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 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
12Pipe top
8Triangle, symmetrical
7Double Bottom, Adam and Adam
7Rising wedge
7Broadening top
6Head-and-shoulders bottom
5Scallop, ascending and inverted
4Rectangle top
4Scallop, descending
3Head-and-shoulders top

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

The 10 types of most frequently appearing chart patterns in the stocks, 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. Biotechnology1. Cement and Aggregates
2. Internet2. Internet
3. Cement and Aggregates3. Biotechnology
4. Information Services4. Information Services
5. Drug5. Furn/Home Furnishings
50. Investment Co. (Foreign)50. Petroleum (Integrated)
51. Oilfield Svcs/Equipment51. Oilfield Svcs/Equipment
52. Toiletries/Cosmetics52. Toiletries/Cosmetics
53. Retail (Special Lines)53. Retail (Special Lines)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 1/15/14. Saturday Supplement

Picture of my books

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

I've been asked how I was able to retire at 36. The process was easy. I worked and saved my disposable income. With those savings, I bought stocks and held them until they ripened enough to be sold. It's a process almost anyone can follow. For details, read my Trading Basics book, chapter 1. It explains the process.

In fact, the three books of the Evolution of a Trader series I wrote describe my journey from buy-and-hold investor to day trader and back, sharing my discoveries along the way. Those are the top three books in the picture.

The Visual Guide to Chart Patterns, the bottom book of the four, will help those new to chart patterns to identify them. It has quizzes which are fun to take, both on the content of each chapter, but also by presenting a blank chart and telling you to find x type of patterns.

If you DO decide to buy any of the books, then please do so through this website. How? By clicking on a picture of one of the books (not the image above, but from those on the far left of the page). Those will take you to Amazon.com. I receive a referral fee if you buy anything while there. That doesn't increase your cost at all, but it does help me subsidize this website and keep it free.

Thanks -- Thomas Bulkowski

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Thursday 3/13/14. Trading Thursday: Nasdaq

The index climbed by 0.4% or 16.14 points. Since 02/05/1971 the index made 526 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 191 occasions.
Expect the index to close higher 63.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 58/96 or 60.4% of the time.
     The prediction of the index closing lower has been right 23/46 or 50.0% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

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

The index recovered quickly this morning but then went horizontal throughout the afternoon. Just before the close, it broke out upward from a rectangle top. I show that highlighted by red lines.

The upward breakout I feel is encouraging. Based on that and on a measured move up chart pattern, I expect the index to rise in the morning and perhaps close higher as well. This also agrees with the above probabilities.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, calculated on the 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  3,817.56    
 Monthly S1  4,070.44  252.89   
 Weekly S2  4,179.50  109.06   
 Monthly Pivot  4,221.08  41.57   
 Weekly S1  4,251.42  30.34   
 Daily S2  4,252.52  1.10   Yes! The Daily S2 is close to the Weekly S1.
 Low  4,270.22  17.70   
 Daily S1  4,287.92  17.70   
 Open  4,288.60  0.68   Yes! The Open is close to the Daily S1.
 61.8% Down from Intraday High  4,290.51  1.91   Yes! The 61.8% Down from Intraday High is close to the Open.
 50% Down from Intraday High  4,296.77  6.27   
 38.2% Down from Intraday High  4,303.04  6.27   
 Daily Pivot  4,305.63  2.58   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Weekly Pivot  4,311.56  5.94   
 Close  4,323.33  11.77   
 High  4,323.33  0.00   Yes! The High is close to the Close.
 Daily R1  4,341.03  17.70   
 Daily R2  4,358.74  17.70   
 Weekly R1  4,383.48  24.74   
 Weekly R2  4,443.62  60.15   
 Monthly R1  4,473.96  30.34   
 Monthly R2  4,624.60  150.63   

Tuesday 3/11/14. Trading Tuesday: Dow

The index dropped by -0.2% or -34.04 points. Since 10/01/1928 the index made 1120 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 560 occasions.
     Average loss was -0.7% on 560 occasions.
Expect the index to close higher 50.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 66/102 or 64.7% of the time.
     The prediction of the index closing lower has been right 20/35 or 57.1% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

On Friday, late in the session, the Dow made a head-and-shoulders bottom chart pattern. I show that as LS, head, and RS, but it's not a textbook example because the left shoulder (LS) is too far from the head, making it look lopsided instead of symmetrical. This confirmed as a valid pattern when the index closed above the red neckline at C. Since it was late in the session, I would have ignored the buy signal.

At the open the next day, when the index dropped, it busted the pattern (a close below the lowest valley in the pattern, which is the head). When that happens, it can lead to a powerful move down, which it did.

Today, we had another head-and-shoulders, a top, and this one busted, too. Price closed above the top of the head, busting the pattern. That suggested a powerful move up. Price HAS climbed, but my guess is there's more to come at the open tomorrow. The above probabilities suggest a higher close, too.

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  14,923.35    
 Monthly S1  15,671.01  747.67   
 Weekly S2  15,897.43  226.41   
 Monthly Pivot  16,088.36  190.93   
 Weekly S1  16,158.05  69.70   
 Daily S2  16,283.09  125.04   
 Weekly Pivot  16,331.88  48.78   
 Low  16,334.20  2.32   Yes! The Low is close to the Weekly Pivot.
 Daily S1  16,350.89  16.69   
 61.8% Down from Intraday High  16,379.62  28.73   
 50% Down from Intraday High  16,393.65  14.03   
 Daily Pivot  16,401.99  8.34   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  16,407.68  5.69   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  16,418.68  11.00   Yes! The Close is close to the 38.2% Down from Intraday High.
 Open  16,453.10  34.42   
 High  16,453.10  0.00   Yes! The High is close to the Open.
 Daily R1  16,469.79  16.69   
 Daily R2  16,520.89  51.11   
 Weekly R1  16,592.50  71.61   
 Weekly R2  16,766.33  173.82   
 Monthly R1  16,836.02  69.70   
 Monthly R2  17,253.37  417.34   

Monday 3/10/14. Market Monday: The Week Ahead

My Prediction

Picture of the nasdaq composite on the daily scale.

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

A broadening top chart pattern appears outlined in red. It's not a perfect example, of course, because the bottom price action doesn't touch the lower trendline as it would in the ideal case.

A support area I show highlighted in blue connects peaks and valleys and it supports the index.

Now, the index has made a curving climb from the low in February. There's a thing called a Fibonacci extension and you can read about it in the link. It's mostly fantasy, but if it works in the minds of traders, maybe it'll work in reality. Surprisingly, that's what happens in technical analysis often. If you test the idea, it doesn't work. In the marketplace, it seems to work just fine. Go figure.

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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 153.68 points.
Tuesday: Up 227.85 points.
Wednesday: Down 35.7 points.
Thursday: Up 61.71 points.
Friday: Up 30.83 points.

For the Week...

The Dow industrials were up 131.01 points or 0.8%.
The Nasdaq composite was up 28.1 points or 0.7%.
The S&P 500 index was up 18.59 points or 1.0%.

Year to Date...

Dow Industrials
     0.7% down from the high of 16,573.07 on 01/02/2014.
     7.2% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     0.8% down from the high of 4,371.71 on 03/06/2014.
     9.3% up from the low of 3,968.19 on 02/05/2014.
S&P 500
     0.3% down from the high of 1,883.57 on 03/07/2014.
     8.1% 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 03/07/2014, the CPI had:

8 bearish patterns,
53 bullish patterns,
327 patterns waiting for breakout.
The CPI signal is 86.9%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,346  16,399  16,452  16,506  16,559 
Weekly  15,909  16,181  16,343  16,615  16,778 
Monthly  14,935  15,694  16,100  16,859  17,265 
S&P500 (^GSPC): Daily  1,864  1,871  1,877  1,884  1,890 
Weekly  1,816  1,847  1,865  1,896  1,914 
Monthly  1,688  1,783  1,833  1,928  1,979 
Nasdaq (^IXIC): Daily  4,290  4,313  4,342  4,365  4,394 
Weekly  4,184  4,260  4,316  4,392  4,448 
Monthly  3,822  4,079  4,225  4,483  4,629 
  • 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 29.5%   The trend may continue. 
 2 months up 39.6%   The trend may continue. 
 S & P 500 (^GSPC) 2 weeks up 30.1%   The trend may continue. 
 2 months up 41.6%   Expect a random direction. 
 Nasdaq composite (^IXIC) 5 weeks up 7.0%   Expect a reversal soon. 
 2 months up 41.6%   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
19Pipe bottom
12Head-and-shoulders bottom
7Triangle, symmetrical
7Broadening top
5Double Bottom, Adam and Adam
4Rising wedge
3Dead-cat bounce
3Broadening wedge, descending
2Rectangle top
2Pennant

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. Biotechnology
2. Internet2. Internet
3. Biotechnology3. Cement and Aggregates
4. Information Services4. Drug
5. Furn/Home Furnishings5. Homebuilding
50. Petroleum (Integrated)50. Petroleum (Integrated)
51. Oilfield Svcs/Equipment51. Food Processing
52. Toiletries/Cosmetics52. Toiletries/Cosmetics
53. Retail (Special Lines)53. Retail (Special Lines)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Thursday 3/6/14. Trading Thursday: Nasdaq

The index climbed by 0.1% or 6 points. Since 02/05/1971 the index made 615 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 342 occasions.
     Average loss was -0.8% on 273 occasions.
Expect the index to close higher 55.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 58/95 or 61.1% of the time.
     The prediction of the index closing lower has been right 23/46 or 50.0% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

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

Nothing much happens on the chart except for the index moving sideways to up. Toward the end of today's session, the index has formed a chart pattern that reminds me of a cup with handle.

The handle has not appeared yet and even if it did, it wouldn't be a cup with handle because it is missing the 30% rise leading to the left rim of the cup. That is impossible on the intraday charts, as you know, so I disregard that requirement. Price has climbed leading to the left cup rim then moved lower to form the cup, and up again to form the right cup lip. The red line shows the outline of this action. It's not clear if the right rim has formed yet, so tomorrow (Thursday) may continue the rise upward.

Based on this pattern, though, I would expect a rim to form then a slight retrace followed by an upward breakout tomorrow. A higher close matches the above probabilities, too.

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

-- Thomas Bulkowski

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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,848.52    
 Monthly S1  4,103.24  254.73   
 Monthly Pivot  4,222.92  119.67   
 Weekly S2  4,253.74  30.83   
 Weekly S1  4,305.86  52.11   
 Weekly Pivot  4,324.22  18.37   
 Daily S2  4,336.52  12.30   
 Low  4,344.15  7.63   
 Daily S1  4,347.25  3.10   
 61.8% Down from Intraday High  4,351.16  3.91   
 Open  4,352.76  1.60   Yes! The Open is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  4,353.33  0.57   Yes! The 50% Down from Intraday High is close to the Open.
 Daily Pivot  4,354.87  1.55   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  4,355.49  0.62   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  4,357.97  2.48   
 High  4,362.50  4.53   
 Daily R1  4,365.60  3.10   
 Daily R2  4,373.22  7.63   
 Weekly R1  4,376.34  3.11   
 Weekly R2  4,394.70  18.37   
 Monthly R1  4,477.64  82.94   
 Monthly R2  4,597.32  119.67   

Tuesday 3/4/14. Trading Tuesday: Dow

The index dropped by -0.9% or -153.68 points. Since 10/01/1928 the index made 407 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 192 occasions.
     Average loss was -0.8% on 215 occasions.
Expect the index to close lower 52.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 66/102 or 64.7% of the time.
     The prediction of the index closing lower has been right 20/34 or 58.8% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

Today's (Monday) trading shows the development of a head-and-shoulders bottom chart pattern. I show that outlined in red with the left shoulder (LS), head, and right shoulder (RS) highlighted. Clever labeling, yes?

The chart pattern suggests a move up tomorrow morning. By the way, the chart pattern confirms at A where the index closes above the neckline.

The blue line shows were overhead resistance is. It might not be real because I only show 2 days of trading and I think the daily charts give a better result where support or resistance are involved. So, price might just shoot right through.

Notice at the top of this page that the chart pattern indicator has turned bearish. That often happens when the index makes a big move. However, I expect the signal to disappear once the markets settle down. That would mean the bulls remain in control.

My guess is that world markets will recover quickly from the Ukraine situation. Buy the dip? Something to think about.

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  14,910.96    
 Monthly S1  15,539.50  628.53   
 Weekly S2  15,926.40  386.91   
 Daily S2  15,936.54  10.13   Yes! The Daily S2 is close to the Weekly S2.
 Monthly Pivot  15,969.22  32.69   
 Weekly S1  16,047.22  77.99   
 Daily S1  16,052.28  5.07   Yes! The Daily S1 is close to the Weekly S1.
 Low  16,071.25  18.97   Yes! The Low is close to the Daily S1.
 61.8% Down from Intraday High  16,166.93  95.68   
 Close  16,168.03  1.10   Yes! The Close is close to the 61.8% Down from Intraday High.
 Daily Pivot  16,187.00  18.97   Yes! The Daily Pivot is close to the Close.
 50% Down from Intraday High  16,196.48  9.48   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 Weekly Pivot  16,223.08  26.60   
 38.2% Down from Intraday High  16,226.03  2.95   Yes! The 38.2% Down from Intraday High is close to the Weekly Pivot.
 Daily R1  16,302.74  76.71   
 Open  16,321.71  18.97   Yes! The Open is close to the Daily R1.
 High  16,321.71  0.00   Yes! The High is close to the Open.
 Weekly R1  16,343.90  22.19   Yes! The Weekly R1 is close to the High.
 Daily R2  16,437.46  93.56   
 Weekly R2  16,519.76  82.31   
 Monthly R1  16,597.76  77.99   
 Monthly R2  17,027.48  429.73   

Monday 3/3/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

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

This is the best performing index in the group I follow. What can account for this?

The answer is unknown however, last year's performance gives a clue. The utilities made just 8.3%. Yuck. That compares to the top performer, the Dow transports, with a gain of 39.5%. Nice. Very nice.

The numbers do not include dividends, which the utility index has plenty of. Thus, it understates the actual results.

I have found that if a index performs poorly one year, it shines the next. I haven't researched that, so don't quote me on it, but I think it might be true. Then again, it might not... Certainly, so far this year, it is doing well.

The vertical red line shows where the year began, by the way.

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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 103.84 points.
Tuesday: Down 27.48 points.
Wednesday: Up 18.75 points.
Thursday: Up 74.24 points.
Friday: Up 49.06 points.

For the Week...

The Dow industrials were up 218.41 points or 1.4%.
The Nasdaq composite was up 44.71 points or 1.0%.
The S&P 500 index was up 23.2 points or 1.3%.

Year to Date...

Dow Industrials
     1.5% down from the high of 16,573.07 on 01/02/2014.
     6.4% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     0.8% down from the high of 4,342.59 on 02/28/2014.
     8.6% up from the low of 3,968.19 on 02/05/2014.
S&P 500
     0.5% down from the high of 1,867.92 on 02/28/2014.
     7.0% 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
Personal income & consumption8:30 MC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 MC+Covers durables, non-durables, and services.
Construction spending10:00 MDCovers residential/non-residential/public spending on new construction.
Auto & truck sales2:00 MC-Monthly sales of domestically produced vehicles.
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.
Productivity & costs8:30 ThD+Cost of producing a unit of output.
Factory orders10:00 ThD+Durable/non-durable goods orders w/factory inventories.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Trade balance8:30 FC+Signals balance of exports & imports.
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 02/28/2014, the CPI had:

10 bearish patterns,
27 bullish patterns,
285 patterns waiting for breakout.
The CPI signal is 73.0%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,143  16,232  16,316  16,405  16,488 
Weekly  15,978  16,150  16,274  16,446  16,571 
Monthly  14,962  15,642  16,020  16,700  17,079 
S&P500 (^GSPC): Daily  1,838  1,849  1,858  1,869  1,879 
Weekly  1,824  1,842  1,855  1,873  1,886 
Monthly  1,692  1,776  1,822  1,906  1,952 
Nasdaq (^IXIC): Daily  4,242  4,275  4,309  4,342  4,376 
Weekly  4,237  4,273  4,308  4,343  4,378 
Monthly  3,832  4,070  4,206  4,444  4,581 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week up 43.1%   Expect a random direction. 
 1 month up 53.0%   Expect a random direction. 
 S & P 500 (^GSPC) 1 week up 42.9%   Expect a random direction. 
 1 month up 53.6%   Expect a random direction. 
 Nasdaq composite (^IXIC) 4 weeks up 16.4%   Expect a reversal soon. 
 1 month up 49.0%   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
35Pipe bottom
9Triangle, symmetrical
9Head-and-shoulders bottom
8Broadening top
6Head-and-shoulders top
6Double Bottom, Adam and Adam
5Rectangle top
4Diamond top
4Triple bottom
4Broadening 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. Biotechnology1. Biotechnology
2. Internet2. Internet
3. Cement and Aggregates3. Drug
4. Drug4. Cement and Aggregates
5. Homebuilding5. Information Services
50. Petroleum (Integrated)50. Oilfield Svcs/Equipment
51. Food Processing51. Food Processing
52. Toiletries/Cosmetics52. Toiletries/Cosmetics
53. Retail (Special Lines)53. Retail (Special Lines)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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