Written and copyright © 2012-2013 by Thomas N. Bulkowski. All rights reserved.

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Thursday 5/31/12. Trading Thursday: Nasdaq

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

Tuesday 5/29/12. Trading Tuesday: Dow

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

Thursday 5/24/12. Trading Thursday: Nasdaq

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

Tuesday 5/22/12. Trading Tuesday: Dow

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

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

• My Prediction
• A Brief Look Back
• Economic Reports
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Buy-and-Hold: 12-Month SMA
• Earnings, Chart Patterns & Industries

My Prediction

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.

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.

For the Week...

Year to Date...

Economic Reports

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

Report	Time	A-F Rating	Description
Existing home sales	10:00 T	C	Counts sales of used homes.
New home sales	10:00 W	C+	Shows sales of single-family homes.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
Durable goods orders	8:30 Th	B	Measures orders, shipments of goods with lifespans >3 years.
Michigan sentiment	9:55 F	B-	Consumer sentiment: Measures strength of consumer spending.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 05/18/2012, the CPI had:

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.

• 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:

Consecutive Price Trends

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

Earnings, Chart Patterns & Industries

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

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.

-- Thomas Bulkowski

Thursday 5/17/12. Trading Thursday: Nasdaq

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

Tuesday 5/15/12. Trading Tuesday: Dow

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

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

• My Prediction
• A Brief Look Back
• Economic Reports
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Buy-and-Hold: 12-Month SMA
• Earnings, Chart Patterns & Industries

My Prediction

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.

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.

For the Week...

Year to Date...

Economic Reports

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

Report	Time	A-F Rating	Description
Retail sales	8:30 T	A-	Reports total retail sales (not services). Are people spending?
Consumer price index	8:30 T	B+	Inflation report. Measures cost of goods and services.
Business inventories	10:00 T	C-	Reports manufacturing, wholesale, retail inventories.
Housing starts	8:30 W	B-	Number of homes beginning construction.
Building permits	8:30 W	B-	Measures building permits for new construction.
Industrial production	9:15 W	B-	Production of utilities, mines, and manufacturers.
Capacity utilization	9:15 W	B-	Gauges economic activity, hints of inflation.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
FOMC Minutes	2:00 W	?	Minutes of the prior Federal Reserve meeting.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
Leading indicators	10:00 Th	D-	Summary of already known reports.

Options Expiration

The following is courtesy of the Options Industry Council.

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).

Swing and Position Traders: Chart Pattern Indicator

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

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.

• 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:

Consecutive Price Trends

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

Earnings, Chart Patterns & Industries

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

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.

-- Thomas Bulkowski

Thursday 5/10/12. Trading Thursday: Nasdaq

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

Tuesday 5/8/12. Trading Tuesday: Dow

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

Monday 5/7/12. Market Monday: The Week Ahead

• My Prediction
• A Brief Look Back
• Economic Reports
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Buy-and-Hold: 12-Month SMA
• Earnings, Chart Patterns & Industries

My Prediction

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.

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.

For the Week...

Year to Date...

Economic Reports

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

Report	Time	A-F Rating	Description
Consumer credit	3:00 M	D-	Measures auto, credit card and other debt.
Wholesale inventories	10:00 W	D-	Wholesale sales and inventory statistics.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
Trade balance	8:30 Th	C+	Signals balance of exports & imports.
International trade	8:30 Th	C+	Import/export prices, trade balance. US economy vs others.
Treasury budget	2:00 Th	D	Tracks budget deficit. Important in April (tax filing).
Producer price index	8:30 F	B-	Measures wholesale goods cost. An indication of future inflation.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 05/04/2012, the CPI had:

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.

• 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:

Consecutive Price Trends

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

Earnings, Chart Patterns & Industries

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

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.

-- Thomas Bulkowski

Thursday 5/3/12. Trading Thursday: Nasdaq

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

Tuesday 5/1/12. Trading Tuesday: Dow

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

Written and copyright © 2012-2013 by Thomas N. Bulkowski. All rights reserved.