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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
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Patterns
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 11/21/2017
23,591 160.50 0.7%
9,615 92.77 1.0%
758 2.01 0.3%
6,862 71.77 1.1%
2,599 16.89 0.7%
YTD
19.4%
6.3%
14.9%
27.5%
16.1%
Tom's Targets    Overview: 11/14/2017
23,700 or 22,800 by 12/01/2017
9,300 or 9,800 by 12/01/2017
800 or 750 by 12/01/2017
7,000 or 6,500 by 12/01/2017
2,625 or 2,540 by 12/01/2017

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May 2013 Headlines


Archives


Thursday 5/30/13. Trading Thursday: Nasdaq

The index dropped by -0.6% or -21.37 points. Since 02/05/1971 the index made 276 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.1% on 117 occasions.
     Average loss was -1.1% on 159 occasions.
Expect the index to close lower 57.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 38/66 or 57.6% of the time.
     The prediction of the index closing lower has been right 20/36 or 55.6% 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 Wednesday's trading.

One of the joys of looking at an intraday chart is to see a chart pattern become born and die all in one day.

That's the case here with the Big W. It's not a perfect example because B is higher than bottom A. However, you can see the tall sides at C and D. D rises above C a bit, but that' ok. C can be a target price if you buy in soon enough.

So many time with these patterns, the height added to the top just doesn't play out (the measure rule target isn't met).

The above probabilities suggest a lower close on Thursday. On the daily chart, it shows an area gap. Noise, in other words. I don't have a good feel about the direction for tomorrow. I thought the housing news was good and yet one of my housing stocks dropped. Sigh. I'll let you figure out whether tomorrow will close higher or lower.

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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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,066.14    
 Monthly S1  3,266.83  200.69   
 Weekly S2  3,364.50  97.67   
 Monthly Pivot  3,399.43  34.93   
 Weekly S1  3,416.01  16.58   
 Daily S2  3,436.69  20.68   
 Low  3,450.40  13.71   
 Daily S1  3,452.10  1.70   Yes! The Daily S1 is close to the Low.
 61.8% Down from Intraday High  3,461.53  9.42   
 50% Down from Intraday High  3,464.97  3.44   
 Daily Pivot  3,465.82  0.85   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  3,467.52  1.70   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  3,468.40  0.88   Yes! The 38.2% Down from Intraday High is close to the Close.
 Open  3,471.67  3.27   
 Weekly Pivot  3,474.02  2.35   Yes! The Weekly Pivot is close to the Open.
 High  3,479.53  5.51   
 Daily R1  3,481.23  1.70   Yes! The Daily R1 is close to the High.
 Daily R2  3,494.95  13.71   
 Weekly R1  3,525.53  30.59   
 Weekly R2  3,583.55  58.01   
 Monthly R1  3,600.12  16.58   
 Monthly R2  3,732.73  132.60   

Tuesday 5/28/13. Trading Tuesday: Dow

The index climbed by 0.1% or 8.6 points. Since 10/01/1928 the index made 1224 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 628 occasions.
     Average loss was -0.7% on 596 occasions.
Expect the index to close higher 51.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 51/74 or 68.9% of the time.
     The prediction of the index closing lower has been right 13/23 or 56.5% 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 trading.

Look first at tops B and C. Is that a double top? No. Why not? Because the pattern is not confirmed as a valid one. Confirmation occurs when the index closes below the valley between the two tops. That never happened before price closed above the top of the pattern.

Pattern A is a right-angled and descending broadening formation. This could also be a triple top, but it's also unconfirmed. By the close, the broadening pattern did not breakout yet, but it appears to be heading toward an upward one.

Will Tuesday close higher or lower? The daily chart suggests a lower close since the index has been trending down the last few days. The probabilities say it'll close higher. Candles show a hammer, but that candle acts as a bullish reversal 60% of the time. So, I'll vote for a higher close.

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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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,016.23    
 Monthly S1  14,659.67  643.43   
 Weekly S2  14,979.74  320.07   
 Monthly Pivot  15,101.03  121.29   
 Weekly S1  15,141.42  40.39   
 Daily S2  15,162.71  21.29   
 Low  15,199.63  36.92   
 Daily S1  15,232.91  33.28   
 61.8% Down from Intraday High  15,240.55  7.64   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  15,253.18  12.64   
 38.2% Down from Intraday High  15,265.82  12.64   
 Daily Pivot  15,269.82  4.00   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Open  15,290.74  20.92   
 Close  15,303.10  12.36   
 High  15,306.74  3.64   Yes! The High is close to the Close.
 Daily R1  15,340.02  33.28   
 Weekly Pivot  15,341.91  1.89   Yes! The Weekly Pivot is close to the Daily R1.
 Daily R2  15,376.93  35.02   
 Weekly R1  15,503.59  126.66   
 Weekly R2  15,704.08  200.49   
 Monthly R1  15,744.47  40.39   
 Monthly R2  16,185.83  441.37   

Saturday 5/25/13. Saturday Supplement

This is a reminder that I have four new books available this year, pictured above. From left to right, there's Trading Basics, Fundamental Analysis and Position Trading, and Swing and Day Trading. Those three books are part of the Evolution of a Trader series that covers the four trading styles: buy and hold, position, swing, and day trading.

The three books in the Evolution of a Trader series were written for people unfamiliar with the inner workings of the stock market, but will curl the toes of professionals, too.

Research is used to prove the ideas discussed, but is presented in an easy to understand and light-hearted manner. You will find the books to be as entertaining as they are informative and packed with moneymaking tips and ideas. Use the ideas presented here to hone your trading style and improve your success.

Whether you are a novice who has never purchased a stock but wants to, or a professional money manager who trades daily, these books are a necessary addition to any market enthusiast's bookshelf.

The book on the right is the Visual Guide to Chart Patterns.

Visual Guide to Chart Patterns is a concise and accessible visual guide to identifying, understanding, and using chart patterns to predict the direction and extent of price moves. Packed with visual learning enhancements and exercises, this innovative book helps savvy investors and professionals alike master the essential skills of chart pattern recognition.

Nearly 200 color charts assist in providing a step-by-step approach to finding chart patterns, interpreting them, and following them. Popular patterns such as head-and-shoulders, double tops and bottoms, triangles, gaps, flags, and pennants are just a few of the many patterns explored throughout the book.

For the sophisticated trader or investor, the book also provides statistical research to support the claims of pattern behavior, trading signals, and setups, in an easy to understand way.

For a detailed look at each book, visit my books page. Make my publisher happy and buy a dozen of each (it'll also help me repay the advance). Give them to your neighbors, friends, enemies...go crazy.

-- Thomas Bulkowski

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Thursday 5/23/13. Trading Thursday: Nasdaq

The index dropped by -1.1% or -38.82 points. Since 02/05/1971 the index made 141 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.5% on 73 occasions.
     Average loss was -1.3% on 68 occasions.
Expect the index to close higher 51.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 38/65 or 58.5% of the time.
     The prediction of the index closing lower has been right 20/36 or 55.6% of the time.

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

Instead of showing a picture of today's trading in the Nasdaq, let me share the results of a new study I haven't posted yet.

I was wondering how the length of this bull market compares with others. After spending a day trying to answer this question, I found that this bull market which started on March 6, 2009 is 1,536 days long (just over 4 years). That is longer than 86% of the other 36 bull markets in the Dow industrials since 1928. The longest ( starting in 1946) is nearly a decade long.

If 86% of them are behind us, how much upside is left? It could be another 6 years...or more. Or the bull market could end tomorrow.

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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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,028.24    
 Monthly S1  3,245.77  217.53   
 Monthly Pivot  3,372.49  126.72   
 Weekly S2  3,390.52  18.03   
 Daily S2  3,395.70  5.18   Yes! The Daily S2 is close to the Weekly S2.
 Weekly S1  3,426.91  31.21   
 Daily S1  3,429.50  2.59   Yes! The Daily S1 is close to the Weekly S1.
 Low  3,446.97  17.47   
 Weekly Pivot  3,463.06  16.09   
 Close  3,463.30  0.24   Yes! The Close is close to the Weekly Pivot.
 61.8% Down from Intraday High  3,479.46  16.16   
 Daily Pivot  3,480.77  1.30   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  3,489.50  8.73   
 Weekly R1  3,499.45  9.95   
 38.2% Down from Intraday High  3,499.54  0.09   Yes! The 38.2% Down from Intraday High is close to the Weekly R1.
 Open  3,503.48  3.94   Yes! The Open is close to the 38.2% Down from Intraday High.
 Daily R1  3,514.57  11.09   
 High  3,532.03  17.47   
 Weekly R2  3,535.60  3.57   Yes! The Weekly R2 is close to the High.
 Daily R2  3,565.83  30.23   
 Monthly R1  3,590.02  24.19   
 Monthly R2  3,716.74  126.72   

Tuesday 5/21/13. Trading Tuesday: Dow

The index dropped by -0.1% or -19.12 points. Since 10/01/1928 the index made 1218 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 633 occasions.
     Average loss was -0.8% on 585 occasions.
Expect the index to close higher 52.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 50/73 or 68.5% of the time.
     The prediction of the index closing lower has been right 13/23 or 56.5% 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 Monday's trading.

A potential double bottom appears at 1, 2. I write "potential" since it is only squiggles on the screen until the index closes above the red line.

Will it confirm this pattern tomorrow? The Dow industrials are composed of 30 companies and world events shape the open and tomorrow's trading, at least near the open. Since the average is a derivative, I don't think you can depend on this pattern today having much of an influence on what happens tomorrow.

Having written that, the probabilities suggest a higher close on Tuesday. I don't see anything on the chart to dissuade me from also expecting a higher close.

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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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,132.20    
 Monthly S1  14,733.74  601.54   
 Weekly S2  14,944.77  211.03   
 Monthly Pivot  15,045.57  100.80   
 Weekly S1  15,140.03  94.46   
 Weekly Pivot  15,248.71  108.69   
 Daily S2  15,269.40  20.69   
 Daily S1  15,302.34  32.94   
 Low  15,314.15  11.81   
 Close  15,335.28  21.13   
 61.8% Down from Intraday High  15,343.83  8.55   
 Daily Pivot  15,347.09  3.26   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 Open  15,348.33  1.24   Yes! The Open is close to the Daily Pivot.
 50% Down from Intraday High  15,353.00  4.67   Yes! The 50% Down from Intraday High is close to the Open.
 38.2% Down from Intraday High  15,362.16  9.17   
 Daily R1  15,380.03  17.87   
 High  15,391.84  11.81   
 Daily R2  15,424.78  32.94   
 Weekly R1  15,443.97  19.19   
 Weekly R2  15,552.65  108.69   
 Monthly R1  15,647.11  94.46   
 Monthly R2  15,958.94  311.83   

Monday 5/20/13. 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.

Two broadening chart patterns appear along the index as it rises. I show this not because of the two patterns, but because of the continued rise. It reminds me of the prediction of this year being a good one. It was wrong in 2012, but right so far this year.

The chart at the link says we'll continue higher until January 2014 and then go horizontal until November when another upward push takes us into mid 2017 before we see another drop. That's the time to pay attention since the decline will be a nasty one. Probably a bear market.

Until then, why worry?

 

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A Brief Look Back

Picture of my dog.

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

Monday: Down 26.81 points.
Tuesday: Up 123.57 points.
Wednesday: Up 60.44 points.
Thursday: Down 42.47 points.
Friday: Up 121.18 points.

For the Week...

The Dow industrials were up 235.91 points or 1.6%.
The Nasdaq composite was up 62.39 points or 1.8%.
The S&P 500 index was up 33.77 points or 2.1%.

Year to Date...

Dow Industrials
     0.0% down from the high of 15,357.40 on 05/17/2013.
     17.2% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     0.0% down from the high of 3,499.21 on 05/17/2013.
     13.7% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     0.0% down from the high of 1,667.47 on 05/17/2013.
     16.9% up from the low of 1,426.19 on 01/02/2013.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Existing home sales10:00 WCCounts sales of used homes.
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.
New home sales10:00 ThC+Shows sales of single-family homes.
Durable goods orders8:30 FBMeasures orders, shipments of goods with lifespans >3 years.

Options Expiration

VIX options expire on Wednesday.

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Swing and Position Traders: Chart Pattern Indicator

As of 05/17/2013, the CPI had:

4 bearish patterns,
47 bullish patterns,
239 patterns waiting for breakout.
The CPI signal is 92.2%, 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  15,193  15,274  15,316  15,396  15,438 
Weekly  14,951  15,153  15,255  15,457  15,559 
Monthly  14,139  14,746  15,052  15,660  15,965 
S&P 500 (^GSPC): Daily  1,647  1,657  1,662  1,672  1,677 
Weekly  1,613  1,640  1,654  1,681  1,695 
Monthly  1,492  1,580  1,624  1,711  1,755 
Nasdaq (^IXIC): Daily  3,465  3,482  3,491  3,508  3,516 
Weekly  3,402  3,451  3,475  3,523  3,547 
Monthly  3,040  3,270  3,384  3,614  3,729 
  • 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) 4 weeks up 15.3%  Expect a reversal soon.
 6 months up 7.2%  Expect a reversal soon.
 S & P 500 (^GSPC) 4 weeks up 17.3%  Expect a reversal soon.
 7 months up 7.9%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 4 weeks up 17.2%  Expect a reversal soon.
 7 months up 3.3%  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
69Pipe bottom
21Head-and-shoulders bottom
18Broadening top
13Wolfe wave, bull
10Wolfe wave, bear
10Double Bottom, Adam and Adam
8Triangle, symmetrical
7Rectangle top
7Double Bottom, Adam and Eve
7Triple 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. Shoe1. Shoe
2. Semiconductor2. Semiconductor
3. Insurance (Life)3. Biotechnology
4. Cement and Aggregates4. Insurance (Life)
5. Homebuilding5. Cement and Aggregates
48. Retail Store48. Electric Utility (East)
49. Electric Utility (East)49. Retail Store
50. Investment Co. (Foreign)50. Investment Co. (Foreign)
51. Medical Supplies51. Medical Supplies
52. Computers and Peripherals52. Computers and Peripherals
53. Metals and Mining (Div.)53. Metals and Mining (Div.)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 5/18/13. Saturday Supplement

Alan Battista of Stockineer.com has reviewed my Trading Basics book, which is pictured on the right.

He also reviewed my best selling book, Encyclopedia of Chart Patterns, Second Edition. You can find that review here. Notice that the publisher changed the cover art. Same book. Slightly different look from that pictured here.

The publisher contacted me about a problem with cover artwork rights to my Trading Classic Chart Patterns book. They chose a new cover for that book as well which is dramatically different from that shown at the link.

Visit Alan's website (Stockineer.com). It's worth a look. Here is part of his mission statement: "The purpose of this site is to create a community of not only experienced traders but also novices interested in using technical analysis to understand the stock market so that together we can all make wise financial decisions. Fundamental analysis is also welcome as I believe the blending of the two methods gives the best opportunities for success."

-- Thomas Bulkowski


Thursday 5/16/13. Trading Thursday: Nasdaq

The index climbed by 0.3% or 9.01 points. Since 02/05/1971 the index made 562 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 311 occasions.
     Average loss was -0.7% on 251 occasions.
Expect the index to close higher 55.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 38/64 or 59.4% of the time.
     The prediction of the index closing lower has been right 20/36 or 55.6% 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 Wednesday's trading.

The chart shows a target rich environment beginning with an ascending triangle (highlighted in red on the left of the chart). This broke out upward as most ascending triangles do and entered a rectangle top (C).

The upward breakout from the triangle was a false one since price collapsed and headed down to a head-and-shoulders bottom chart pattern with an upward breakout.

Notice that when the red neckline slopes upward it's best to use the right armpit (A) as the buy signal instead of price crossing the neckline (B).

The head-and-shoulders bottom suggests a further upward move tomorrow (Thursday). However, I don't think this type of behavior translates into price movement the next day. Events shape price movement more than the footprints of the smart money.

I prefer to look at the daily chart to direction clues. We've had a nice long run for a while now and I'll go with momentum. This might begin a retrace but until it actually does, it's best to look for a higher close.

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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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,072.75    
 Monthly S1  3,272.19  199.43   
 Monthly Pivot  3,354.39  82.21   
 Weekly S2  3,374.19  19.80   
 Weekly S1  3,422.91  48.71   
 Weekly Pivot  3,429.75  6.85   
 Daily S2  3,443.30  13.55   
 Low  3,452.31  9.01   
 Open  3,455.67  3.36   
 Daily S1  3,457.46  1.79   Yes! The Daily S1 is close to the Open.
 61.8% Down from Intraday High  3,461.16  3.70   
 50% Down from Intraday High  3,463.90  2.73   
 Daily Pivot  3,466.47  2.57   
 38.2% Down from Intraday High  3,466.63  0.16   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  3,471.62  4.99   
 High  3,475.48  3.86   
 Weekly R1  3,478.47  2.99   
 Daily R1  3,480.63  2.16   Yes! The Daily R1 is close to the Weekly R1.
 Weekly R2  3,485.31  4.68   
 Daily R2  3,489.64  4.33   
 Monthly R1  3,553.83  64.19   
 Monthly R2  3,636.03  82.21   

Tuesday 5/14/13. Trading Tuesday: Dow

The index dropped by -0.2% or -26.81 points. Since 10/01/1928 the index made 1107 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 550 occasions.
     Average loss was -0.7% on 557 occasions.
Expect the index to close lower 50.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 50/73 or 68.5% of the time.
     The prediction of the index closing lower has been right 13/22 or 59.1% 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 Monday's trading.

What strikes me first is the long descending triangle, highlighted here in red. One study I authored and used in my Encyclopedia of Chart Patterns, second edition book is that they breakout downward 64% of the time.

That suggests a downward move tomorrow which is in agreement with the above probabilities for a lower close. That sounds reasonable to me.

$ $ $

I released a new article on the bearish Wolve wave chart pattern and redid the statistics on the bullish one, also.

$ $ $

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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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,192.71    
 Monthly S1  14,642.20  449.48   
 Weekly S2  14,855.46  213.26   
 Monthly Pivot  14,893.51  38.05   
 Weekly S1  14,973.57  80.06   
 Daily S2  15,026.23  52.66   
 Low  15,053.46  27.23   
 Daily S1  15,058.95  5.49   Yes! The Daily S1 is close to the Low.
 Weekly Pivot  15,059.20  0.25   Yes! The Weekly Pivot is close to the Daily S1.
 61.8% Down from Intraday High  15,076.36  17.16   
 50% Down from Intraday High  15,083.44  7.08   
 Daily Pivot  15,086.19  2.75   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  15,090.52  4.33   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  15,091.68  1.16   Yes! The Close is close to the 38.2% Down from Intraday High.
 Open  15,113.41  21.73   
 High  15,113.42  0.01   Yes! The High is close to the Open.
 Daily R1  15,118.91  5.49   Yes! The Daily R1 is close to the High.
 Daily R2  15,146.15  27.23   
 Weekly R1  15,177.31  31.16   
 Weekly R2  15,262.94  85.63   
 Monthly R1  15,343.00  80.06   
 Monthly R2  15,594.31  251.32   

Monday 5/13/13. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

I show the Dow utilities index on the daily chart only because it shows a steep decline. Why is that important?

Because it could happen to the major indices, too.

What are the chances of that happening? I feel they are quite good. What goes up must come down. As that saying pertains to the stock market, the drop need not take us back to 0, of course. But the indices are moving up again and sooner or later they will retrace. That retrace may be a swift one like you see here. Perhaps how the utility index plays out in the coming weeks will give us guidance as to how the other indices will perform.

Until a retrace begins, I'm still bullish.

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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 5.07 points.
Tuesday: Up 87.31 points.
Wednesday: Up 48.92 points.
Thursday: Down 22.5 points.
Friday: Up 35.87 points.

For the Week...

The Dow industrials were up 144.53 points or 1.0%.
The Nasdaq composite was up 57.95 points or 1.7%.
The S&P 500 index was up 19.28 points or 1.2%.

Year to Date...

Dow Industrials
     0.2% down from the high of 15,144.83 on 05/09/2013.
     15.4% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     0.0% down from the high of 3,436.60 on 05/10/2013.
     11.7% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     0.1% down from the high of 1,635.01 on 05/09/2013.
     14.5% up from the low of 1,426.19 on 01/02/2013.

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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 MA-Reports total retail sales (not services). Are people spending?
Business inventories10:00 MC-Reports manufacturing, wholesale, retail inventories.
International trade8:30 TC+Import/export prices, trade balance. US economy vs others.
Producer price index8:30 WB-Measures wholesale goods cost. An indication of future inflation.
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.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Consumer price index8:30 ThB+Inflation report. Measures cost of goods and services.
Housing starts8:30 ThB-Number of homes beginning construction.
Building permits8:30 ThB-Measures building permits for new construction.
Leading indicators10:00 FD-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 05/10/2013, the CPI had:

1 bearish patterns,
66 bullish patterns,
356 patterns waiting for breakout.
The CPI signal is 98.5%, 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  15,011  15,065  15,092  15,145  15,172 
Weekly  14,864  14,991  15,068  15,195  15,272 
Monthly  14,202  14,660  14,902  15,361  15,603 
S&P 500 (^GSPC): Daily  1,620  1,627  1,630  1,637  1,640 
Weekly  1,607  1,620  1,628  1,641  1,648 
Monthly  1,503  1,568  1,602  1,667  1,701 
Nasdaq (^IXIC): Daily  3,403  3,420  3,428  3,445  3,453 
Weekly  3,363  3,400  3,418  3,455  3,474 
Monthly  3,061  3,249  3,343  3,530  3,624 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 3 weeks up 21.3%  Expect a reversal soon.
 6 months up 7.2%  Expect a reversal soon.
 S & P 500 (^GSPC) 3 weeks up 21.8%  Expect a reversal soon.
 7 months up 7.9%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 3 weeks up 21.6%  Expect a reversal soon.
 7 months up 3.3%  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
55Pipe bottom
19Head-and-shoulders top
18Broadening top
18Head-and-shoulders bottom
17Wolfe wave, bull
12Wolfe wave, bear
9Double Bottom, Adam and Adam
8Horn bottom
8Double Top, Eve and Adam
8Double Bottom, Adam and Eve

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

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

 

 

 

 

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

This WeekLast Week
1. Shoe1. Shoe
2. Semiconductor2. Biotechnology
3. Biotechnology3. Semiconductor
4. Insurance (Life)4. Cement and Aggregates
5. Cement and Aggregates5. Retail (Special Lines)
48. Electric Utility (East)48. Investment Co. (Foreign)
49. Retail Store49. Telecom. Equipment
50. Investment Co. (Foreign)50. Medical Supplies
51. Medical Supplies51. Chemical (Specialty)
52. Computers and Peripherals52. Metals and Mining (Div.)
53. Metals and Mining (Div.)53. Computers and Peripherals
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 5/11/13. Saturday Supplement

The following picture is a snapshot sent to me by Charles Kirk of The Kirk Report and posted her by permission. Many of you problem know who he is.

Charles Kirk has been blogging about the market since September 2003 and thousands read his website daily. Throughout the trading week Charles shares his views about the market along with interesting tidbits, charts, stock screens, and links that focus on helping the "little guy" investor/trader.

If you have the time, visit his website.

-- Thomas Bulkowski

Picture of the Kirk's review.

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Thursday 5/9/13. Trading Thursday: Nasdaq

The index climbed by 0.5% or 16.65 points. Since 02/05/1971 the index made 495 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 348 occasions.
     Average loss was -0.9% on 147 occasions.
Expect the index to close higher 70.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 38/63 or 60.3% of the time.
     The prediction of the index closing lower has been right 20/36 or 55.6% of the time.

Picture of the ABFS on the 5 minute scale.

Instead of discussing how the Nasdaq is going to close tomorrow, let's talk about a trade I closed out yesterday. I show that in the chart.

After the start of the year, the market was going up and I had too much cash, so I shopped around for a stock to buy and found this one: ABFS.

I saw the symmetrical triangle (shown in blue) and watched it breakout upward. After a small throwback completed (the day before I bought), I purchased the stock as shown.

The timing was excellent because price climbed after buying but then it turned sour. The stock dropped.

Since this was a volatile stock, I didn't have much money in it (my computer calculates the position sizing by adjusting for stock and market volatility and phase of the market (bull or bear). For details, read my Trading Basics: Evolution of a Trader book -- shown).

I hung on as the stock dropped because I was shooting for a cloud bank pattern at 18. That's still a valid target. Anyway, I felt that the trucking company would recover as the economy recovered and I was in no hurry to sell.

The stock bottomed in April and made a second bottom in May, forming a potential double bottom that confirmed only when price gapped up.

On Monday, the stock soared on news of a tentative deal between the company and teamsters.

I saw this after the close and decided to sell. Why? The stock made an event pattern called an inverted dead-cat bounce. I learned that when a stock soars by at least 5%, it's wise to take profits and look elsewhere. Premarket, the stock was up 3% or so, gapping higher, and I toyed with day trading the exit for a few minutes while the stock coasted higher. But I reasoned that it could fall just as easily as it climbed, so I decided to leave my sell order alone. I sold at the open as shown on the chart.

For a hold time of 60 days, I made 28%.

I expect that the stock may coast higher for about 7 to 14 days and then turn down. When it bottoms, I may establish another position and wait for it to reach the bottom of the cloud bank at 18.

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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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,085.62    
 Monthly S1  3,249.45  163.82   
 Weekly S2  3,264.90  15.46   
 Monthly Pivot  3,318.78  53.88   
 Weekly S1  3,339.09  20.30   
 Weekly Pivot  3,363.60  24.52   
 Daily S2  3,381.98  18.37   
 Low  3,389.80  7.82   
 Open  3,394.89  5.09   
 Daily S1  3,397.62  2.73   
 61.8% Down from Intraday High  3,398.77  1.14   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  3,401.53  2.77   
 38.2% Down from Intraday High  3,404.30  2.77   
 Daily Pivot  3,405.45  1.14   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  3,413.27  7.82   
 High  3,413.27  0.00   Yes! The High is close to the Close.
 Daily R1  3,421.09  7.82   
 Daily R2  3,428.92  7.82   
 Weekly R1  3,437.79  8.87   
 Weekly R2  3,462.30  24.52   
 Monthly R1  3,482.61  20.30   
 Monthly R2  3,551.94  69.34   

Tuesday 5/7/13. Trading Tuesday: Dow

The index dropped by 0.0% or -5.07 points. Since 10/01/1928 the index made 1179 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 622 occasions.
     Average loss was -0.7% on 557 occasions.
Expect the index to close higher 52.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 49/72 or 68.1% of the time.
     The prediction of the index closing lower has been right 13/22 or 59.1% 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 Monday's trading.

Two double bottoms appear at AB and DE, confirmed when the index closed above the horizontal red lines (such as at C). The chart patterns pointed the way higher in a very choppy session.

I'm concerned about what happened in the Dow utility index today. It plummeted. Does that suggest coming weakness in the other indices? Maybe. Or perhaps it's just a typical correction to a strong up move since November.

On the daily chart, we see a bearish harami cross, which, oddly, isn't bearish at all. Price closes above the top of the pattern 57% of the time. Thus, I'm looking for a higher close tomorrow. That 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 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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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,229.14    
 Weekly S2  14,565.97  336.83   
 Monthly S1  14,599.02  33.05   
 Weekly S1  14,767.43  168.41   
 Monthly Pivot  14,804.30  36.87   
 Weekly Pivot  14,888.51  84.21   
 Daily S2  14,918.50  29.99   
 Low  14,941.09  22.59   
 Daily S1  14,943.70  2.61   Yes! The Daily S1 is close to the Low.
 61.8% Down from Intraday High  14,959.34  15.65   
 50% Down from Intraday High  14,964.98  5.64   
 Daily Pivot  14,966.28  1.30   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  14,968.89  2.61   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  14,970.62  1.73   Yes! The 38.2% Down from Intraday High is close to the Close.
 Open  14,973.96  3.34   Yes! The Open is close to the 38.2% Down from Intraday High.
 High  14,988.87  14.91   
 Daily R1  14,991.48  2.61   Yes! The Daily R1 is close to the High.
 Daily R2  15,014.06  22.59   
 Weekly R1  15,089.97  75.91   
 Monthly R1  15,174.18  84.21   
 Weekly R2  15,211.05  36.87   
 Monthly R2  15,379.46  168.41   

Monday 5/6/13. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

Point AB marks the boundaries of a chart pattern. Can you name it?

Answer: it's a double bottom but one that has price enter the pattern from the bottom and not the top, as is traditional. Some, including myself until recently, would argue that it's not a double bottom at all.

Price needs something to reverse and in this case, there is no reversal.

When you add in the third bottom, C, it becomes a triple bottom, that acts not as a reversal but as a continuation pattern. Both patterns confirm when the index closes above the red line.

What does this mean for the week ahead? I expect a continued move up. The indices are breaking out of a consolidation area, so we may throw back in the next few days, say, up to a week, but then resume the upward move.

Poor earnings or political events here or abroad could change that analysis, of course. But I'm still bullish.

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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 106.2 points.
Tuesday: Up 21.05 points.
Wednesday: Down 138.85 points.
Thursday: Up 130.63 points.
Friday: Up 142.38 points.

For the Week...

The Dow industrials were up 261.41 points or 1.8%.
The Nasdaq composite was up 99.37 points or 3.0%.
The S&P 500 index was up 32.18 points or 2.0%.

Year to Date...

Dow Industrials
     0.2% down from the high of 15,009.59 on 05/03/2013.
     14.3% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     0.3% down from the high of 3,388.12 on 05/03/2013.
     9.8% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     0.2% down from the high of 1,618.46 on 05/03/2013.
     13.2% up from the low of 1,426.19 on 01/02/2013.

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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 TD-Measures auto, credit card and other debt.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Wholesale inventories10:00 ThD-Wholesale sales and inventory statistics.
Treasury budget2:00 FDTracks budget deficit. Important in April (tax filing).

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 05/03/2013, the CPI had:

1 bearish patterns,
86 bullish patterns,
254 patterns waiting for breakout.
The CPI signal is 98.9%, 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  14,760  14,867  14,938  15,045  15,116 
Weekly  14,568  14,771  14,890  15,093  15,213 
Monthly  14,231  14,602  14,806  15,178  15,381 
S&P 500 (^GSPC): Daily  1,589  1,602  1,610  1,623  1,631 
Weekly  1,568  1,591  1,605  1,628  1,642 
Monthly  1,507  1,561  1,590  1,643  1,672 
Nasdaq (^IXIC): Daily  3,361  3,370  3,379  3,388  3,397 
Weekly  3,253  3,316  3,352  3,415  3,451 
Monthly  3,074  3,226  3,307  3,460  3,540 
  • 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 30.2%  The trend may continue.
 6 months up 7.2%  Expect a reversal soon.
 S & P 500 (^GSPC) 2 weeks up 30.2%  The trend may continue.
 7 months up 7.9%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 2 weeks up 28.3%  The trend may continue.
 7 months up 3.3%  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
21Head-and-shoulders top
21Broadening top
19Pipe bottom
17Wolfe wave, bull
11Double Top, Eve and Adam
9Triangle, symmetrical
7Head-and-shoulders complex top
7Double Top, Adam and Adam
6Head-and-shoulders bottom
6Scallop, 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. Shoe1. Shoe
2. Biotechnology2. Biotechnology
3. Semiconductor3. Semiconductor
4. Cement and Aggregates4. Retail Building Supply
5. Retail (Special Lines)5. Advertising
48. Investment Co. (Foreign)48. Investment Co. (Foreign)
49. Telecom. Equipment49. Telecom. Equipment
50. Medical Supplies50. Oilfield Svcs/Equipment
51. Chemical (Specialty)51. Medical Supplies
52. Metals and Mining (Div.)52. Metals and Mining (Div.)
53. Computers and Peripherals53. Computers and Peripherals
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Thursday 5/2/13. Trading Thursday: Nasdaq

The index dropped by -0.9% or -29.66 points. Since 02/05/1971 the index made 174 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.1% on 81 occasions.
     Average loss was -1.4% on 93 occasions.
Expect the index to close lower 53.4% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 38/63 or 60.3% of the time.
     The prediction of the index closing lower has been right 20/35 or 57.1% 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 Wednesday's trading.

Early in the session, a descending scallop formed (E). That gave way to a weird looking double bottom (AB) that confirmed when the index closed above the red line.

Following that, a head-and-shoulders top formed on the chart. If you obeyed the traditional sell signal, you would sell following the red neckline at C when the index closed below it. When the neckline slopes downward, I prefer to use the right armpit as the sell signal. That's shown with the blue line at D. Steep necklines won't trigger using the traditional method.

The probabilities suggest a lower close tomorrow (Thursday). Looking at the daily chart, we could be forming the head of a head-and-shoulders top, so I'll also vote for a lower close tomorrow. The chart pattern indicator also turned bearish today. That could disappear for up to a week, so don't get too alarmed.

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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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,101.69    
 Weekly S2  3,163.84  62.15   
 Monthly S1  3,200.41  36.57   
 Weekly S1  3,231.49  31.08   
 Monthly Pivot  3,253.68  22.19   
 Weekly Pivot  3,266.38  12.70   
 Daily S2  3,275.04  8.66   
 Daily S1  3,287.09  12.04   
 Low  3,296.51  9.42   
 Close  3,299.13  2.62   Yes! The Close is close to the Low.
 Daily Pivot  3,308.55  9.42   
 61.8% Down from Intraday High  3,309.31  0.76   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  3,313.26  3.95   
 38.2% Down from Intraday High  3,317.22  3.95   
 Daily R1  3,320.60  3.38   
 Open  3,325.35  4.75   
 High  3,330.02  4.67   
 Weekly R1  3,334.03  4.01   
 Daily R2  3,342.06  8.04   
 Monthly R1  3,352.40  10.34   
 Weekly R2  3,368.92  16.52   
 Monthly R2  3,405.67  36.75   

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