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

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Busted
Patterns
Candles Chart
Patterns
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Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 03/24/2017
20,597 -59.86 -0.3%
8,929 -7.37 -0.1%
706 3.20 0.5%
5,829 11.05 0.2%
2,344 -1.98 -0.1%
YTD
4.2%
-1.3%
7.0%
8.3%
4.7%
Tom's Targets    Overview: 03/14/2017
21,250 or 20,600 by 04/15/2017
9,500 or 8,700 by 04/15/2017
675 or 715 by 04/01/2017
5,950 or 5,650 by 04/15/2017
2,425 or 2,325 by 04/15/2017
Mutt Losers: None YTD
Mutt Winners: None YTD

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May 2012 Headlines


Archives


Thursday 5/31/12. Trading Thursday: Nasdaq

The index dropped by -1.2% or -33.63 points. Since 02/05/1971 the index made 101 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 42 occasions.
     Average loss was -1.6% on 59 occasions.
Expect the index to close lower 58.4% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 18/29 or 62.1% of the time.
     The prediction of the index closing lower has been right 11/22 or 50.0% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

Points A and B form a double top that confirms when the index closes below the red line. However, the decline stopped and formed a head-and-shoulders bottom. This confirmed and fulfilled the measure rule when the index climbed to C.

Another double top at C and D has not confirmed because the index has not closed below the blue line.

Looking ahead, I expect the index to close lower tomorrow (Thursday). This is based mostly on the daily chart which shows the index easing lower in a type of measured move down.

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  2,588.12    
 Monthly S1  2,712.74  124.62   
 Weekly S2  2,733.91  21.17   
 Weekly S1  2,785.63  51.73   
 Daily S2  2,815.13  29.49   
 Low  2,825.64  10.51   
 Daily S1  2,826.24  0.60   Yes! The Daily S1 is close to the Low.
 Weekly Pivot  2,826.49  0.24   Yes! The Weekly Pivot is close to the Daily S1.
 61.8% Down from Intraday High  2,833.90  7.42   
 50% Down from Intraday High  2,836.46  2.55   
 Daily Pivot  2,836.76  0.30   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  2,837.36  0.60   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  2,839.01  1.65   Yes! The 38.2% Down from Intraday High is close to the Close.
 High  2,847.27  8.26   
 Open  2,847.27  0.00   Yes! The Open is close to the High.
 Daily R1  2,847.87  0.60   Yes! The Daily R1 is close to the Open.
 Daily R2  2,858.39  10.51   
 Weekly R1  2,878.21  19.83   
 Monthly Pivot  2,899.07  20.86   
 Weekly R2  2,919.07  20.00   
 Monthly R1  3,023.69  104.62   
 Monthly R2  3,210.02  186.33   

Tuesday 5/29/12. Trading Tuesday: Dow

The index dropped by -0.6% or -74.92 points. Since 10/01/1928 the index made 627 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 324 occasions.
     Average loss was -0.8% on 303 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 25/40 or 62.5% of the time.
     The prediction of the index closing lower has been right 6/7 or 85.7% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

A well-shaped symmetrical triangle (A) appears early in the session with a downward breakout. The height of the triangle projected downward from the breakout fulfilled the measure rule but it took a while for the index to drop that far.

Late in the session, a head-and-shoulders bottom makes an appearance. This is not a valid chart pattern yet because the index has not closed above the blue neckline (B).

Since I am writing this on Saturday morning, much can happen by Tuesday's open. I expect a higher close. I think that the index should pull back to the double top formed in March through May (daily scale), taking the index back to near 12,800 (over several days). A move up could start a multi-day rally, mirroring the straight-line drop from Wednesday through Friday a week ago (5 min scale).

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,674.64    
 Monthly S1  12,064.73  390.10   
 Weekly S2  12,183.10  118.37   
 Weekly S1  12,318.97  135.86   
 Daily S2  12,358.24  39.27   
 Daily S1  12,406.53  48.30   
 Low  12,421.53  15.00   
 Weekly Pivot  12,447.46  25.93   
 Close  12,454.83  7.37   Yes! The Close is close to the Weekly Pivot.
 61.8% Down from Intraday High  12,464.16  9.33   Yes! The 61.8% Down from Intraday High is close to the Close.
 Daily Pivot  12,469.83  5.67   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  12,477.33  7.50   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  12,490.49  13.17   
 Daily R1  12,518.12  27.63   
 Open  12,530.74  12.62   
 High  12,533.12  2.38   Yes! The High is close to the Open.
 Daily R2  12,581.42  48.30   
 Weekly R1  12,583.33  1.91   Yes! The Weekly R1 is close to the Daily R2.
 Monthly Pivot  12,701.70  118.37   
 Weekly R2  12,711.82  10.13   Yes! The Weekly R2 is close to the Monthly Pivot.
 Monthly R1  13,091.79  379.97   
 Monthly R2  13,728.76  636.96   

Thursday 5/24/12. Trading Thursday: Nasdaq

The index climbed by 0.4% or 11.04 points. Since 02/05/1971 the index made 507 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 328 occasions.
     Average loss was -0.8% on 179 occasions.
Expect the index to close higher 64.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 18/28 or 64.3% of the time.
     The prediction of the index closing lower has been right 11/22 or 50.0% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

A head-and-shoulders bottom appears at LS (left shoulder), head, and RS (right shoulder). The traditional buy signal occurs at A when price closes above the neckline (red line). When the neckline slopes upward, I prefer to enter at B, a close above the blue line.

Either way, the market moved far enough to reach the measure rule price target and then some.

Looking ahead to Thursday's close, what do I see? Just before the close, the index turned down. That is worrisome.

An important economic report comes out before the open which may influence the opening bias. Of course, events in Europe will likely take center stage until the June 17 meltdown of their financial system. Iran is playing chicken and hoping that Israel won't run them over with a flying tank.

These are interesting times.

The index is hanging on a small knot of support in January at 2800. Thus, I'm looking for the bounce to continue. Think of it as a pullback that could return the index to 2900 to 2950 in the coming weeks. I am expecting a higher close tomorrow (Thursday). That is in line with the probabilities above.

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  2,592.37    
 Weekly S2  2,695.52  103.15   
 Monthly S1  2,721.25  25.73   
 Weekly S1  2,772.82  51.57   
 Daily S2  2,773.81  0.99   Yes! The Daily S2 is close to the Weekly S1.
 Low  2,795.50  21.69   
 Daily S1  2,811.96  16.46   
 61.8% Down from Intraday High  2,818.36  6.40   
 50% Down from Intraday High  2,825.43  7.06   
 Open  2,832.17  6.74   
 38.2% Down from Intraday High  2,832.49  0.32   Yes! The 38.2% Down from Intraday High is close to the Open.
 Daily Pivot  2,833.66  1.17   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  2,850.12  16.46   
 Weekly Pivot  2,851.75  1.63   Yes! The Weekly Pivot is close to the Close.
 High  2,855.35  3.60   Yes! The High is close to the Weekly Pivot.
 Daily R1  2,871.81  16.46   
 Daily R2  2,893.51  21.69   
 Monthly Pivot  2,903.32  9.82   
 Weekly R1  2,929.05  25.73   
 Weekly R2  3,007.98  78.93   
 Monthly R1  3,032.20  24.22   
 Monthly R2  3,214.27  182.08   

Tuesday 5/22/12. Trading Tuesday: Dow

The index climbed by 1.1% or 135.1 points. Since 10/01/1928 the index made 334 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 194 occasions.
     Average loss was -0.8% on 140 occasions.
Expect the index to close higher 58.1% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 25/39 or 64.1% of the time.
     The prediction of the index closing lower has been right 6/7 or 85.7% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

An ascending triangle appears early in the session and extends into the afternoon (shown outlines by red lines). The downward breakout (A) was brief in the face of a bullish move today.

The height of the pattern, from B to C did not quite hold its promise of meeting the price target based on the measure rule (B + B-C).

Looking to Tuesday's trading, I think that the upward momentum still has legs since we have been trending lower for weeks now. I expect a higher close tomorrow.

$ $ $

For over three years now, I've been working on a new book. I turned the final manuscript into my publisher today. That manuscript will be split into three books, joining a fourth book that I wrote in January. All four books will be out by year's end, if the pub dates hold.

  • Bloomberg's Visual Guide to Chart Patterns. An introduction to chart patterns.
  • Evolution of a trader:
  • Trading the Stock Market. This covers the basics.
  • Value Investing. Covers fundamentals and position trading.
  • Swing and Day Trading. Covers swing and day trading.

The titles are subject to change.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  11,724.73    
 Weekly S2  12,071.27  346.53   
 Monthly S1  12,114.61  43.34   
 Weekly S1  12,287.87  173.27   
 Daily S2  12,319.71  31.84   
 Low  12,367.72  48.01   
 Open  12,369.15  1.43   Yes! The Open is close to the Low.
 Daily S1  12,412.10  42.95   
 61.8% Down from Intraday High  12,421.35  9.25   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  12,437.92  16.57   
 38.2% Down from Intraday High  12,454.48  16.57   
 Daily Pivot  12,460.10  5.62   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  12,504.48  44.38   
 High  12,508.11  3.63   Yes! The High is close to the Close.
 Daily R1  12,552.49  44.38   
 Weekly Pivot  12,553.37  0.88   Yes! The Weekly Pivot is close to the Daily R1.
 Daily R2  12,600.49  47.13   
 Monthly Pivot  12,726.63  126.14   
 Weekly R1  12,769.97  43.34   
 Weekly R2  13,035.47  265.49   
 Monthly R1  13,116.51  81.04   
 Monthly R2  13,728.53  612.03   

Monday 5/21/12. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

I show a daily chart of the Dow industrials with Fibonacci lines highlighted in red.

The index has dropped through the top red line, the 38% level. It is nearing the 50% line, which is the middle of the two. I expect a turn in the Dow at C, between the second and third red lines which would correspond to a 50% to 63% retrace of the move up from A to B.

The C area also shows support back in December. However, all of this hinges on whether Greece will begin to repay its debt in mid June, at least that is my understanding. If they do not, then that will likely pull Europe into a recession (banks will lose the money they loaned to Greece) and scare the willies out of the US markets.

Why would the index bounce, perhaps as soon as tomorrow (Monday)? Because the drop has lasted too long and a retrace is overdue. If the index does consolidate for a week or so, that could also be the corrective phase of a measured move down chart pattern. And that would mean that the decline is only half over.

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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 125.25 points.
Tuesday: Down 63.35 points.
Wednesday: Down 33.45 points.
Thursday: Down 156.06 points.
Friday: Down 73.11 points.

For the Week...

The Dow industrials were down 451.22 points or 3.5%.
The Nasdaq composite was down 155.03 points or 5.3%.
The S&P 500 index was down 58.17 points or 4.3%.

Year to Date...

Dow Industrials
     7.3% down from the high of 13,338.66 on 05/01/2012.
     1.2% up from the low of 12,221.19 on 01/03/2012.
Nasdaq
     11.3% down from the high of 3,134.17 on 03/27/2012.
     5.8% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     8.9% down from the high of 1,422.38 on 04/02/2012.
     2.9% 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
Existing home sales10:00 TCCounts sales of used homes.
New home sales10:00 WC+Shows sales of single-family homes.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Durable goods orders8:30 ThBMeasures orders, shipments of goods with lifespans >3 years.
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 05/18/2012, the CPI had:

45 bearish patterns,
1 bullish patterns,
130 patterns waiting for breakout.
The CPI signal is 2.2%, which is bearish (<= 35%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  12,243  12,306  12,400  12,463  12,556 
Weekly  12,026  12,198  12,508  12,680  12,990 
Monthly  11,680  12,025  12,682  13,026  13,684 
S&P 500 (^GSPC): Daily  1,280  1,287  1,300  1,308  1,320 
Weekly  1,253  1,274  1,313  1,334  1,373 
Monthly  1,211  1,253  1,334  1,376  1,458 
Nasdaq (^IXIC): Daily  2,741  2,760  2,794  2,813  2,846 
Weekly  2,672  2,725  2,828  2,881  2,984 
Monthly  2,569  2,674  2,880  2,985  3,190 
  • 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) 3 weeks down 15.3%  Expect a reversal soon.
 1 month down 20.7%  Expect a reversal soon.
 S & P 500 (^GSPC) 3 weeks down 12.0%  Expect a reversal soon.
 2 months down 12.5%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 3 weeks down 16.1%  Expect a reversal soon.
 2 months down 17.0%  Expect a reversal soon.

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

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

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

Buy-and-Hold: 12-Month SMA

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

Top

Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
16Pipe top
12Double Top, Adam and Adam
11Triangle, symmetrical
10Double Top, Adam and Eve
10Head-and-shoulders bottom
10Triangle, ascending
9Double Bottom, Adam and Adam
9Broadening top
8Triangle, descending
8Dead-cat bounce

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

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

 

 

 

 

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

This WeekLast Week
1. Homebuilding1. Homebuilding
2. Biotechnology2. Retail Building Supply
3. Retail Building Supply3. Biotechnology
4. Computers and Peripherals4. Computers and Peripherals
5. Chemical (Basic)5. Cement and Aggregates
48. Oilfield Svcs/Equipment48. Oilfield Svcs/Equipment
49. Petroleum (Producing)49. Metals and Mining (Div.)
50. Natural Gas (Diversified)50. Petroleum (Producing)
51. Short ETFs51. Natural Gas (Diversified)
52. Coal52. Coal

-- Thomas Bulkowski

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Thursday 5/17/12. Trading Thursday: Nasdaq

The index dropped by -0.7% or -19.72 points. Since 02/05/1971 the index made 235 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 108 occasions.
     Average loss was -1.2% on 127 occasions.
Expect the index to close lower 54.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 18/28 or 64.3% of the time.
     The prediction of the index closing lower has been right 10/21 or 47.6% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

The index formed a double top that confirmed when the index closed below the valley between the two tops, shown by the red line. A pullback forms at C. This is common behavior for double tops and many chart patterns with downward breakouts.

The height of the double top suggested the index would drop a minimum of about 10 points, which it did.

The index appears to have found support at 2875 but I do not place much value in intraday support and resistance because it rarely holds.

If you look on the daily scale, you will see that the index has pierced support setup by valleys going back to February. That tells me the index is going to close lower tomorrow, which is in agreement with the above probabilities.

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  2,767.83    
 Monthly S1  2,820.93  53.11   
 Weekly S2  2,844.63  23.69   
 Daily S2  2,845.08  0.45   Yes! The Daily S2 is close to the Weekly S2.
 Weekly S1  2,859.33  14.25   
 Daily S1  2,859.56  0.23   Yes! The Daily S1 is close to the Weekly S1.
 Low  2,872.25  12.69   
 Close  2,874.04  1.79   Yes! The Close is close to the Low.
 Daily Pivot  2,886.73  12.69   
 61.8% Down from Intraday High  2,888.16  1.43   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  2,893.07  4.91   
 38.2% Down from Intraday High  2,897.99  4.91   
 Daily R1  2,901.21  3.22   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Open  2,904.67  3.46   Yes! The Open is close to the Daily R1.
 High  2,913.90  9.23   
 Weekly Pivot  2,914.77  0.87   Yes! The Weekly Pivot is close to the High.
 Daily R2  2,928.38  13.61   
 Weekly R1  2,929.47  1.09   Yes! The Weekly R1 is close to the Daily R2.
 Monthly Pivot  2,953.17  23.69   
 Weekly R2  2,984.91  31.74   
 Monthly R1  3,006.27  21.37   
 Monthly R2  3,138.51  132.23   

Tuesday 5/15/12. Trading Tuesday: Dow

The index dropped by -1.0% or -125.25 points. Since 10/01/1928 the index made 352 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 172 occasions.
     Average loss was -1.0% on 180 occasions.
Expect the index to close lower 51.1% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 25/39 or 64.1% of the time.
     The prediction of the index closing lower has been right 5/6 or 83.3% 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.

After the steep opening drop, the Dow formed a double bottom that confirmed when the index closed above the horizontal red line. Taking a position in it led to a good move.

With the index easing lower from 2:00 onward, what does that mean for tomorrow's (Tuesday's) close?

We could form a double bottom with the index easing lower to B and then climbing. Short term, we could have a strong move down if things go wrong in China/Europe. The probabilities say it will close lower 83% of the time, so I am not going to argue with that. Look for a lower close tomorrow.

I still think that the drop is overdone, that 6 to 9 months down the road, things will look better. Thus, I'm looking for the index to rebound long term and expect a turn up soon.

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

-- Thomas Bulkowski

Top 

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  12,286.76    
 Monthly S1  12,491.05  204.30   
 Weekly S2  12,530.36  39.31   
 Daily S2  12,567.85  37.49   
 Weekly S1  12,612.86  45.01   
 Daily S1  12,631.60  18.74   
 Low  12,661.48  29.88   
 Close  12,695.35  33.87   
 61.8% Down from Intraday High  12,721.60  26.25   
 Daily Pivot  12,725.23  3.63   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  12,740.17  14.94   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  12,758.74  18.57   
 Daily R1  12,788.98  30.24   
 Open  12,818.49  29.51   
 High  12,818.86  0.37   Yes! The High is close to the Open.
 Weekly Pivot  12,830.97  12.11   Yes! The Weekly Pivot is close to the High.
 Daily R2  12,882.61  51.64   
 Weekly R1  12,913.47  30.86   
 Monthly Pivot  12,914.86  1.39   Yes! The Monthly Pivot is close to the Weekly R1.
 Monthly R1  13,119.15  204.30   
 Weekly R2  13,131.58  12.43   Yes! The Weekly R2 is close to the Monthly R1.
 Monthly R2  13,542.96  411.37   

Monday 5/14/12. Market Monday: The Week Ahead

My Prediction

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

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

A small double bottom appears at AB. It confirms when the index closes above C. As you can see, the index did not climb much after that. It failed to reach the target set by the measure rule (the height of the pattern added to C).

Instead, the index formed a double top (the two peaks in April and May). This has confirmed as a valid chart pattern since the index closed below A. That is a worrisome development.

The red line is a support layer upon which the index rests. If the index closes below this line (or area, really), it could lead to a significant drop. However, it appears that the index is still struggling to turn higher, here. I think that will happen this week. I believe that the events in Europe will settle down and with energy prices dropping, that should work its way into the economy and provide the boost. Of course, that won't happen this week, but the index looks ahead 6-9 months.

Tuesday might be the day for volatility since many economic reports come out then.

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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 29.74 points.
Tuesday: Down 76.44 points.
Wednesday: Down 97.03 points.
Thursday: Up 19.98 points.
Friday: Down 34.44 points.

For the Week...

The Dow industrials were down 217.67 points or 1.7%.
The Nasdaq composite was down 22.52 points or 0.8%.
The S&P 500 index was down 15.71 points or 1.1%.

Year to Date...

Dow Industrials
     3.9% down from the high of 13,338.66 on 05/01/2012.
     4.9% up from the low of 12,221.19 on 01/03/2012.
Nasdaq
     6.4% down from the high of 3,134.17 on 03/27/2012.
     11.7% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     4.9% down from the high of 1,422.38 on 04/02/2012.
     7.5% up from the low of 1,258.86 on 01/03/2012.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Retail sales8:30 TA-Reports total retail sales (not services). Are people spending?
Consumer price index8:30 TB+Inflation report. Measures cost of goods and services.
Business inventories10:00 TC-Reports manufacturing, wholesale, retail inventories.
Housing starts8:30 WB-Number of homes beginning construction.
Building permits8:30 WB-Measures building permits for new construction.
Industrial production9:15 WB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 WB-Gauges economic activity, hints of inflation.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Minutes2:00 W?Minutes of the prior Federal Reserve meeting.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Leading indicators10:00 ThD-Summary of already known reports.

Options Expiration

The following is courtesy of the Options Industry Council.

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

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

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Swing and Position Traders: Chart Pattern Indicator

As of 05/11/2012, the CPI had:

19 bearish patterns,
9 bullish patterns,
272 patterns waiting for breakout.
The CPI signal is 32.1%, which is bearish (<= 35%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  12,701  12,761  12,839  12,899  12,978 
Weekly  12,572  12,696  12,873  12,997  13,173 
Monthly  12,329  12,575  12,957  13,203  13,585 
S&P 500 (^GSPC): Daily  1,339  1,346  1,356  1,363  1,373 
Weekly  1,326  1,340  1,357  1,370  1,388 
Monthly  1,298  1,326  1,371  1,398  1,443 
Nasdaq (^IXIC): Daily  2,896  2,915  2,938  2,957  2,979 
Weekly  2,865  2,899  2,935  2,969  3,005 
Monthly  2,788  2,861  2,973  3,046  3,158 
  • 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 18.7%  Expect a reversal soon.
 1 month down 20.7%  Expect a reversal soon.
 S & P 500 (^GSPC) 2 weeks down 19.8%  Expect a reversal soon.
 2 months down 12.5%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 2 weeks down 22.7%  Expect a reversal soon.
 2 months down 17.0%  Expect a reversal soon.

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
12Head-and-shoulders bottom
11Double Bottom, Adam and Adam
10Dead-cat bounce
10Triangle, symmetrical
9Pipe top
8Triangle, ascending
8Pipe bottom
7Triangle, descending
6Rectangle top
6Horn 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. Biotechnology3. Biotechnology
4. Computers and Peripherals4. Computers and Peripherals
5. Cement and Aggregates5. Cement and Aggregates
48. Oilfield Svcs/Equipment48. Metals and Mining (Div.)
49. Metals and Mining (Div.)49. Shoe
50. Petroleum (Producing)50. Natural Gas (Diversified)
51. Natural Gas (Diversified)51. Short ETFs
52. Coal52. Coal

-- Thomas Bulkowski

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Thursday 5/10/12. Trading Thursday: Nasdaq

The index dropped by -0.4% or -11.56 points. Since 02/05/1971 the index made 366 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 180 occasions.
     Average loss was -1.2% on 186 occasions.
Expect the index to close lower 50.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 18/27 or 66.7% of the time.
     The prediction of the index closing lower has been right 9/20 or 45.0% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

Today was not a good day to trade chart patterns. If you went long when the index closed above the prior high at E, you could have made some money.

Going long at the double bottom AB, the move was not enough to fulfill the measure rule target (the height of the pattern added to the red line at the top of the pattern).

A double top at CD confirmed as valid when the index closed below the blue line, but again, the move didn't amount to much.

I think that the index will close higher tomorrow (Thursday). On the 5 min scale, the index has formed a double bottom with an extension (Tuesday's and Wednesday's trading forms the double bottom and the extension is the horizontal move after the twin bottoms). The index has been dropping long enough that a rebound is overdue.

The index also rests on the March low, a minor support area (daily chart). Thus, I expect a higher close tomorrow. That is at odds with the above probabilities but those have only been right 45% of the time.

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  2,820.79    
 Weekly S2  2,863.09  42.30   
 Monthly S1  2,877.75  14.66   
 Daily S2  2,879.30  1.55   Yes! The Daily S2 is close to the Monthly S1.
 Weekly S1  2,898.90  19.60   
 Low  2,900.18  1.28   Yes! The Low is close to the Weekly S1.
 Daily S1  2,907.00  6.82   
 Open  2,912.41  5.41   
 61.8% Down from Intraday High  2,918.74  6.33   
 50% Down from Intraday High  2,924.48  5.73   
 Daily Pivot  2,927.89  3.41   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  2,930.21  2.32   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  2,934.71  4.50   Yes! The Close is close to the 38.2% Down from Intraday High.
 High  2,948.77  14.06   
 Daily R1  2,955.59  6.82   
 Daily R2  2,976.48  20.88   
 Weekly Pivot  2,992.15  15.67   
 Monthly Pivot  3,003.00  10.85   
 Weekly R1  3,027.96  24.96   
 Monthly R1  3,059.96  32.00   
 Weekly R2  3,121.21  61.25   
 Monthly R2  3,185.21  64.00   

Tuesday 5/8/12. Trading Tuesday: Dow

The index dropped by -0.2% or -29.74 points. Since 10/01/1928 the index made 1089 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 539 occasions.
     Average loss was -0.7% on 550 occasions.
Expect the index to close lower 50.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 25/39 or 64.1% of the time.
     The prediction of the index closing lower has been right 4/5 or 80.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

Two chart patterns catch my eye. The first is a unconfirmed triple bottom at ABC. Before closing above the horizontal blue line, the index drops below the lowest low in the pattern, invalidating it.

Later in the day, a head-and-shoulders top forms. This one does confirm when the index closes below the red neckline. Despite confirming late in the day, the index reaches the measure rule target by the close.

Notice that the move down from the head comes in five stages, reminding me of an Elliott motive wave. That suggests an ABC correction tomorrow that should see price rise.

The 10-day, 5 min scale shows a large head-and-shoulders top in the middle of the chart. The index dropped far enough to fulfill the measure rule prediction, so it might be due for a move back up. Volume in today's decline seemed light. Thus, my guess is that the index will close higher tomorrow. The probabilities suggest otherwise. Let the futures before the open be your guide.

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  12,391.15    
 Monthly S1  12,699.84  308.69   
 Weekly S2  12,806.86  107.02   
 Weekly S1  12,907.69  100.84   
 Daily S2  12,930.12  22.42   
 Daily S1  12,969.32  39.21   
 Low  12,970.00  0.68   Yes! The Low is close to the Daily S1.
 61.8% Down from Intraday High  13,000.21  30.21   
 Close  13,008.53  8.32   
 Daily Pivot  13,009.21  0.68   Yes! The Daily Pivot is close to the Close.
 50% Down from Intraday High  13,009.54  0.34   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  13,018.88  9.33   
 Monthly Pivot  13,019.25  0.37   Yes! The Monthly Pivot is close to the 38.2% Down from Intraday High.
 Open  13,035.85  16.60   
 Daily R1  13,048.41  12.56   
 High  13,049.09  0.68   Yes! The High is close to the Daily R1.
 Daily R2  13,088.30  39.21   
 Weekly Pivot  13,123.18  34.88   
 Weekly R1  13,224.01  100.84   
 Monthly R1  13,327.94  103.93   
 Weekly R2  13,439.50  111.56   
 Monthly R2  13,647.35  207.85   

Monday 5/7/12. 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 it shows that the investment world has not ended, despite the gloom that pervades around us.

China is slowing down and many countries in Europe are in recession. Will the US follow? The US seems to be slowing down as well and that has spooked the market.

Having said all of that, the Dow transports show an ascending triangle. It's not a perfect one because I would prefer a third touch on the top line and not having the bottom trendline cut through price as I have drawn it. Ascending triangles breakout upward most often, so that is good news.

This triangle could breakout downward, but I guess when it occurs will depend on where the bottom trendline is drawn. As I have drawn it, the breakout could come as soon as Monday.

If you ignore the triangle, the pattern looks like a triple top. That pattern will not confirm until the index closes below the March low.

Top 

A Brief Look Back

Picture of a flower from my garden.

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

Monday: Down 14.68 points.
Tuesday: Up 65.69 points.
Wednesday: Down 10.75 points.
Thursday: Down 61.98 points.
Friday: Down 168.32 points.

For the Week...

The Dow industrials were down 190.04 points or 1.4%.
The Nasdaq composite was down 112.86 points or 3.7%.
The S&P 500 index was down 34.26 points or 2.4%.

Year to Date...

Dow Industrials
     2.3% down from the high of 13,338.66 on 05/01/2012.
     6.7% up from the low of 12,221.19 on 01/03/2012.
Nasdaq
     5.7% down from the high of 3,134.17 on 03/27/2012.
     12.5% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     3.7% down from the high of 1,422.38 on 04/02/2012.
     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
Consumer credit3:00 MD-Measures auto, credit card and other debt.
Wholesale inventories10:00 WD-Wholesale sales and inventory statistics.
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.
International trade8:30 ThC+Import/export prices, trade balance. US economy vs others.
Treasury budget2:00 ThDTracks budget deficit. Important in April (tax filing).
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 05/04/2012, the CPI had:

63 bearish patterns,
2 bullish patterns,
222 patterns waiting for breakout.
The CPI signal is 3.1%, which is bearish (<= 35%).

The chart pattern indicator is bearish with 3 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  12,906  12,972  13,089  13,155  13,271 
Weekly  12,817  12,928  13,133  13,244  13,449 
Monthly  12,401  12,720  13,029  13,348  13,657 
S&P 500 (^GSPC): Daily  1,353  1,361  1,376  1,384  1,400 
Weekly  1,337  1,353  1,384  1,400  1,431 
Monthly  1,318  1,344  1,383  1,409  1,448 
Nasdaq (^IXIC): Daily  2,926  2,941  2,971  2,986  3,017 
Weekly  2,870  2,913  2,999  3,042  3,128 
Monthly  2,828  2,892  3,010  3,074  3,192 
  • 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 30.6%  The trend may continue.
 1 month down 20.7%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week down 30.9%  The trend may continue.
 2 months down 12.5%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 1 week down 33.9%  The trend may continue.
 2 months down 17.0%  Expect a reversal soon.

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
10Pipe bottom
9Head-and-shoulders bottom
8Triangle, symmetrical
8Double Bottom, Adam and Adam
8Dead-cat bounce
6Triangle, descending
6Horn bottom
5Rectangle top
5Broadening top
5Triangle, ascending

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

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

 

 

 

 

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

This WeekLast Week
1. Homebuilding1. Homebuilding
2. Retail Building Supply2. Retail Building Supply
3. Biotechnology3. Computers and Peripherals
4. Computers and Peripherals4. Chemical (Basic)
5. Cement and Aggregates5. Biotechnology
48. Metals and Mining (Div.)48. Metals and Mining (Div.)
49. Shoe49. Shoe
50. Natural Gas (Diversified)50. Natural Gas (Diversified)
51. Short ETFs51. Short ETFs
52. Coal52. Coal

-- Thomas Bulkowski

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Thursday 5/3/12. Trading Thursday: Nasdaq

The index climbed by 0.3% or 9.41 points. Since 02/05/1971 the index made 548 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 304 occasions.
     Average loss was -0.7% on 244 occasions.
Expect the index to close higher 55.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 18/26 or 69.2% of the time.
     The prediction of the index closing lower has been right 9/20 or 45.0% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

I struggled to find a chart pattern worth trading in this chart until seeing the double bottom that formed in the morning. I show that as AB. It confirmed at C when price closed above the horizontal line. Although C was the entry signal, the index did not reach its measure rule target for the pattern (the height of the pattern projected upward from C).

Looking to Thursday's trading, the probabilities say it will close higher. I see overhead resistance on this chart from the 2:30 peak. On the 10-day chart, 5 min scale, the index has retraced about half of the move from yesterday's peak to this morning's low (Tuesday to Wednesday). That suggests the index will move down. Although I think the index will closer lower, the probabilities have done well recently. My vote nods toward the math, so I expect a higher close but have my doubts.

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  2,858.56    
 Weekly S2  2,897.04  38.49   
 Monthly S1  2,959.20  62.16   
 Weekly S1  2,978.45  19.24   
 Daily S2  3,017.56  39.11   
 Weekly Pivot  3,027.44  9.89   
 Low  3,028.94  1.50   Yes! The Low is close to the Weekly Pivot.
 Open  3,035.07  6.13   
 Daily S1  3,038.70  3.63   
 61.8% Down from Intraday High  3,041.37  2.66   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  3,045.21  3.84   
 Monthly Pivot  3,046.69  1.48   Yes! The Monthly Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  3,049.04  2.36   Yes! The 38.2% Down from Intraday High is close to the Monthly Pivot.
 Daily Pivot  3,050.09  1.04   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  3,059.85  9.76   
 High  3,061.47  1.62   Yes! The High is close to the Close.
 Daily R1  3,071.23  9.76   
 Daily R2  3,082.62  11.38   
 Weekly R1  3,108.85  26.23   
 Monthly R1  3,147.33  38.49   
 Weekly R2  3,157.84  10.51   
 Monthly R2  3,234.82  76.97   

Tuesday 5/1/12. Trading Tuesday: Dow

The index dropped by -0.1% or -14.68 points. Since 10/01/1928 the index made 1199 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 580 occasions.
Expect the index to close higher 51.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 24/38 or 63.2% of the time.
     The prediction of the index closing lower has been right 4/5 or 80.0% 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.

Midway through the session, a head-and-shoulders bottom appears but this one was a disaster. The index didn't climb far enough to make a profitable trade. The pattern confirmed at A, when price closed above the neckline.

The head-and-shoulders at 1, 2, 3 worked better but it was harder to see. Shoulder 3 wasn't much of a minor low. When price closed above the blue line, it said "Buy me!"

That would have been a good move since it resulted in a straight line run upward, fulfilling the measure rule and then some.

Looking to tomorrow, the daily charts show the index reaching overhead resistance. The 5 min chart suggests the upward move is over and that it will retrace. I am going against the probabilities this time and say that tomorrow the index will close lower.

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  12,487.22    
 Weekly S2  12,687.53  200.31   
 Monthly S1  12,850.42  162.89   
 Weekly S1  12,950.58  100.16   
 Monthly Pivot  13,073.77  123.19   
 Weekly Pivot  13,108.63  34.86   
 Daily S2  13,153.38  44.75   
 Low  13,176.01  22.63   
 Daily S1  13,183.51  7.50   
 61.8% Down from Intraday High  13,196.16  12.65   
 50% Down from Intraday High  13,202.38  6.22   
 Daily Pivot  13,206.13  3.75   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  13,208.61  2.48   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  13,213.63  5.02   Yes! The Close is close to the 38.2% Down from Intraday High.
 Open  13,228.31  14.68   
 High  13,228.76  0.45   Yes! The High is close to the Open.
 Daily R1  13,236.26  7.50   
 Daily R2  13,258.88  22.63   
 Weekly R1  13,371.68  112.80   
 Monthly R1  13,436.97  65.29   
 Weekly R2  13,529.73  92.76   
 Monthly R2  13,660.32  130.59   

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