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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
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 08/17/2017
21,751 -274.14 -1.2%
9,152 -224.77 -2.4%
734 -5.20 -0.7%
6,222 -123.20 -1.9%
2,430 -38.10 -1.5%
YTD
10.1%
1.2%
11.3%
15.6%
8.5%
Tom's Targets    Overview: 08/14/2017
22,250 or 21,500 by 09/01/2017
9,700 or 8,900 by 09/01/2017
750 or 710 by 09/01/2017
6,500 or 6,150 by 09/01/2017
2,525 or 2,425 by 09/01/2017

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November 2011 Headlines


Archives


Tuesday 11/29/11. Trading Tuesday: Dow

The index climbed by 2.6% or 291.23 points. Since 10/01/1928 the index made 37 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 19 occasions.
     Average loss was -1.0% on 18 occasions.
Look for the index to close higher 51.4% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 14/21 or 66.7% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

First, I released new research on a long-term forecast of what the Dow industrials will look in the coming decade. Click on the link to see that next year is going to be bumpy, but later years will turn into a buy-and-holder's dream.

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

The large move up in the morning compressed the picture. Looking at the chart pattern, I see three tops at A, B, and C (and another peak after 2:00, but who's counting?).

It's a triple top. The index confirmed the pattern when it closed below the red line, which is the lowest low between the valleys. Shorting the index then would work well. At D, the index came closest to completing the measure rule target (the height of the chart pattern projected downward).

Looking forward, the flat move at D and to the right suggests a support area. It's been my experience that these types of intraday support levels don't work well. So, the index could drop below it easily enough. Nevertheless, I expect the index to close higher. It might retrace the tall candle posted near the close and European news might sabotage things anyway, but I remain hopeful.

On a longer-term view (the next week or so), the pullback I've been waiting for appears to be underway. That's not entirely clear because we could see a massive down move tomorrow (Tuesday). In other words, the index could move horizontally and then down. However, I think this is just an example of a pullback to a symmetrical triangle.

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 

© 2011 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  10,626.88    
 Weekly S2  10,951.42  324.54   
 Monthly S1  11,074.94  123.53   
 Daily S2  11,109.15  34.21   
 Low  11,232.16  123.01   
 Open  11,232.47  0.31   Yes! The Open is close to the Low.
 Weekly S1  11,237.21  4.74   Yes! The Weekly S1 is close to the Open.
 Daily S1  11,316.08  78.87   
 61.8% Down from Intraday High  11,358.20  42.12   
 50% Down from Intraday High  11,397.13  38.93   
 38.2% Down from Intraday High  11,436.06  38.93   
 Daily Pivot  11,439.09  3.03   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Weekly Pivot  11,517.36  78.27   
 Close  11,523.01  5.65   Yes! The Close is close to the Weekly Pivot.
 High  11,562.10  39.09   
 Daily R1  11,646.02  83.92   
 Monthly Pivot  11,679.63  33.61   
 Daily R2  11,769.03  89.40   
 Weekly R1  11,803.15  34.12   
 Weekly R2  12,083.30  280.14   
 Monthly R1  12,127.69  44.40   
 Monthly R2  12,732.38  604.68   

Monday 11/28/11. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq composite on the daily scale.

I show the Nasdaq composite index on the daily scale. Price has been dropping for too long, and I think the markets are over sold. How can I prove this?

I can't. I applied the three Fibonacci retraces, 38%, 50%, and 62%, and found that the index had slipped below all three. Of course, there are other Fib ratios that traders use but that's like taking a number and dividing it in half and in half again and again until you get something close to what you want, and then yelling "Eureka! I found it!"

Instead I show a three point channel. Begin by drawing a trendline along two peaks, which I show as the top trendline. Then add a parallel line touching the first major bottom (the October low). That gives the bottom trendline. We have a little bit more of a down move ahead before we hit bottom.

Of course, this is just a guess. I have found that price will not return to the launch price very often. In other words, I feel it's unlikely that the index will drop all the way to 2300 (the October low).

Another view is to think of a mirror placed at the October low. A reflection across the mirror would show two valleys appear soon, at 2350, mirroring the two August lows.

Time will tell how this plays out. Clearly, Europe is going to be a thorn in our side for a while longer, keeping markets volatile.

# # #

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Each time you shop Amazon, you have to use this website as a gateway first or the referral fee does not apply.

Thanks for helping reduce the cost of running this site.!

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 248.85 points.
Tuesday: Down 53.59 points.
Wednesday: Down 236.17 points.
Friday: Down 25.77 points.
Saturday: Holiday or other weird event!

For the Week...

The Dow industrials were down 564.38 points or 4.8%.
The Nasdaq composite was down 130.99 points or 5.1%.
The S&P 500 index was down 56.98 points or 4.7%.

Year to Date...

Dow Industrials
     12.8% down from the high of 12,876.00 on 05/02/2011.
     8.0% up from the low of 10,404.49 on 10/04/2011.
Nasdaq
     15.5% down from the high of 2,887.75 on 05/02/2011.
     6.2% up from the low of 2,298.89 on 10/04/2011.
S&P 500
     15.5% down from the high of 1,370.58 on 05/02/2011.
     7.8% up from the low of 1,074.77 on 10/04/2011.

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
New home sales10:00 MC+Shows sales of single-family homes.
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Productivity & costs8:30 WD+Cost of producing a unit of output.
Chicago purchasing managers index9:45 WBMonitors regional manufacturing activity.
Crude inventories10:30 W?My guess: Measures oil inventory.
FEDs Beige book2:00 W?Reports on economic conditions.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Construction spending10:00 ThDCovers residential/non-residential/public spending on new construction.
Auto & truck sales3:00 ThC-Monthly sales of domestically produced vehicles.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.

Options Expiration

No options expire this week.

Top

Swing and Position Traders: Chart Pattern Indicator

As of 11/25/2011, the CPI had:

65 bearish patterns,
0 bullish patterns,
253 patterns waiting for breakout.
The CPI signal is 0.0%, which is bearish (<= 35%).

The chart pattern indicator is bearish with 1 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  11,145  11,188  11,275  11,318  11,405 
Weekly  10,854  11,043  11,420  11,609  11,986 
Monthly  10,530  10,881  11,583  11,934  12,635 
S&P 500 (^GSPC): Daily  1,149  1,154  1,163  1,168  1,177 
Weekly  1,121  1,140  1,178  1,197  1,235 
Monthly  1,069  1,114  1,203  1,248  1,337 
Nasdaq (^IXIC): Daily  2,418  2,430  2,453  2,465  2,489 
Weekly  2,376  2,409  2,474  2,507  2,573 
Monthly  2,234  2,338  2,545  2,649  2,857 
  • 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) 2 weeks down 19.7%  Expect a reversal soon.
 1 month down 20.3%  Expect a reversal soon.
 S & P 500 (^GSPC) 2 weeks down 20.2%  Expect a reversal soon.
 1 month down 21.2%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 4 weeks down 8.8%  Expect a reversal soon.
 1 month down 27.0%  The trend may continue.

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

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

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

Buy-and-Hold: 12-Month SMA

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

Top

Earnings, Chart Patterns & Industries

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

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

 Found Chart Pattern Name
7Triangle, symmetrical
1Diamond top
1Triangle, descending

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. Short ETFs1. Electric Utility (East)
2. Electric Utility (East)2. Household Products
3. Household Products3. Short ETFs
4. Electric Utility (Central)4. Electric Utility (Central)
5. Retail Store5. Retail Building Supply
48. Semiconductor48. Semiconductor
49. Precision Instrument49. Precision Instrument
50. Human Resources50. Human Resources
51. Securities Brokerage51. Securities Brokerage
52. Coal52. Coal

-- Thomas Bulkowski

Top


Thursday 11/24/11. Market Holiday: Stories!

Picture of a flower from my garden.

To Linda: Here's your pic...

I decided to post some of my fiction work here. The stories will take you less than 10 minutes to read if you're interest. It helps if you have a heart. Below are may favorites among the 14 posted. I especially like these *.

  • Green Soap. Reading time: 1 minute. This story is about getting a kid to wash his hands.
  • Red Truck. Reading time: 1 minute. This story is about what happens to a kid's toy truck.
  • Soul Ambulance. Reading time: 5 minutes. This is a Christmas story about something that happens at the airport.
  • * That which cannot be said. Reading time: 7 minutes. Lovers discover a common connection between them.
  • * The invitation. Reading time: 6 minutes. The prettiest girl in school gets bullied.
  • Twenty at a Time. Reading time: 5 minutes. A CEO steals money and has to repay it in an unusual way.
  • What Does Bequeath Mean? Reading time: 5 minutes. A little girls believes she's a princess.

Have a happy holiday!


Tuesday 11/22/11. Trading Tuesday: Dow

The index dropped by -2.1% or -248.85 points. Since 10/01/1928 the index made 60 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.1% on 34 occasions.
     Average loss was -0.7% on 26 occasions.
Look for the index to close higher 56.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 14/20 or 70.0% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

If you were paying attention to the futures values before today's (Monday's) open, you should have been positioned to the short side.

After that, it was a waiting game to see what type of reversal chart pattern would appear. In this case, it was a head-and-shoulders bottom. I show that as A, B, and C on the chart. From what I can see on this chart, the index didn't close above the right armpit until after bottom D. That bottom looked like a double bottom (CD) or triple bottom (BCD). Regardless, they were bullish patterns.

The close above the horizontal blue line after 2:00 was the buy signal with an exit near the close when the measure rule fulfilled.

Looking to Tuesday, I believe the drop in the indices has been too swift to continue for long. It's overdone. On the daily chart, the index is in the middle of a support zone that I highlighted on Monday (point B on that chart).

Look for the index to close higher tomorrow, which also agrees with the 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 

© 2011 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  10,721.06    
 Monthly S1  11,134.18  413.13   
 Daily S2  11,256.20  122.01   
 Weekly S2  11,303.86  47.67   
 Daily S1  11,401.75  97.89   
 Weekly S1  11,425.59  23.83   Yes! The Weekly S1 is close to the Daily S1.
 Low  11,454.07  28.48   Yes! The Low is close to the Weekly S1.
 Close  11,547.31  93.24   
 61.8% Down from Intraday High  11,585.26  37.95   
 Daily Pivot  11,599.63  14.37   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  11,625.79  26.16   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  11,666.31  40.52   
 Monthly Pivot  11,709.25  42.94   
 Daily R1  11,745.18  35.94   
 Open  11,795.55  50.37   
 High  11,797.50  1.95   Yes! The High is close to the Open.
 Weekly Pivot  11,798.07  0.57   Yes! The Weekly Pivot is close to the High.
 Weekly R1  11,919.80  121.72   
 Daily R2  11,943.06  23.26   Yes! The Daily R2 is close to the Weekly R1.
 Monthly R1  12,122.37  179.32   
 Weekly R2  12,292.28  169.91   
 Monthly R2  12,697.44  405.15   

Monday 11/21/11. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

I show a pic of the Dow industrials on the daily scale. Price at A has formed and broken out of a symmetrical triangle.

Immediately below A is a region of support (B) formed by a small knot of price congestion. Will this area hold and repulse the drop? That's a good question.

If the answer is "No," then worst-case, look for the index to drop to D. That matches the low at C. In most cases, it will stop short of actually returning to the launch price of C, so maybe 10,800 would be reasonable. If Europe melts down, then D is likely.

If the index goes higher, which I think it will, look for the index to climb to F, matching the resistance setup by the twin peaks near E.

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 73.7 points.
Tuesday: Up 16.18 points.
Wednesday: Down 190.57 points.
Thursday: Down 134.86 points.
Friday: Up 25.43 points.

For the Week...

The Dow industrials were down 357.52 points or 2.9%.
The Nasdaq composite was down 106.25 points or 4.0%.
The S&P 500 index was down 48.2 points or 3.8%.

Year to Date...

Dow Industrials
     8.4% down from the high of 12,876.00 on 05/02/2011.
     13.4% up from the low of 10,404.49 on 10/04/2011.
Nasdaq
     10.9% down from the high of 2,887.75 on 05/02/2011.
     11.9% up from the low of 2,298.89 on 10/04/2011.
S&P 500
     11.3% down from the high of 1,370.58 on 05/02/2011.
     13.1% up from the low of 1,074.77 on 10/04/2011.

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 MCCounts sales of used homes.
Gross domestic product8:30 TBMeasures economic activity; GDP deflator measures inflation.
FOMC Minutes2:00 T?Minutes of the prior Federal Reserve meeting.
Initial jobless claims8:30 WC+Counts people filing for state unemployment benefits.
Personal income & consumption8:30 WC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 WC+Covers durables, non-durables, and services.
Durable goods orders8:30 WBMeasures orders, shipments of goods with lifespans >3 years.
Michigan sentiment9:55 WB-Consumer sentiment: Measures strength of consumer spending.
Crude inventories10:30 W?My guess: Measures oil inventory.

Options Expiration

No options expire this week.

Thursday is a market holiday.

Top

Swing and Position Traders: Chart Pattern Indicator

As of 11/18/2011, the CPI had:

18 bearish patterns,
4 bullish patterns,
384 patterns waiting for breakout.
The CPI signal is 18.2%, which is bearish (<= 35%).

The chart pattern indicator is bearish with 1 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  11,703  11,750  11,802  11,849  11,901 
Weekly  11,387  11,591  11,881  12,086  12,375 
Monthly  10,804  11,300  11,792  12,288  12,780 
S&P 500 (^GSPC): Daily  1,205  1,210  1,217  1,222  1,229 
Weekly  1,175  1,195  1,230  1,250  1,285 
Monthly  1,132  1,174  1,233  1,275  1,334 
Nasdaq (^IXIC): Daily  2,550  2,561  2,578  2,590  2,607 
Weekly  2,483  2,528  2,612  2,657  2,741 
Monthly  2,431  2,502  2,628  2,698  2,824 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

Top

Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week down 30.6%  The trend may continue.
 1 month down 20.3%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week down 31.9%  The trend may continue.
 1 month down 21.2%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 3 weeks down 15.8%  Expect a reversal soon.
 1 month down 27.0%  The trend may continue.

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

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

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

Buy-and-Hold: 12-Month SMA

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

Top

Earnings, Chart Patterns & Industries

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

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

 Found Chart Pattern Name
30Triangle, symmetrical
26Pipe top
14Head-and-shoulders bottom
11Flag, high and tight
9Dead-cat bounce
5Triangle, ascending
5Head-and-shoulders top
4Head-and-shoulders complex bottom
4Triangle, descending
4Diamond top

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

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

 

 

 

 

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

This WeekLast Week
1. Electric Utility (East)1. Electric Utility (East)
2. Household Products2. Household Products
3. Short ETFs3. Internet
4. Electric Utility (Central)4. Natural Gas (Diversified)
5. Retail Building Supply5. Electric Utility (Central)
48. Semiconductor48. Semiconductor
49. Precision Instrument49. Cement and Aggregates
50. Human Resources50. Human Resources
51. Securities Brokerage51. Securities Brokerage
52. Coal52. Coal

-- Thomas Bulkowski

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Sunday 11/20/11. Confirmation Research Released

Just a quick note to say that I released a study on confirmation. This has nothing to do with religion. 

Rather, it tells how likely price is to confirm a chart pattern if you buy before the squiggles turn into a valid pattern.

-- Thomas Bulkowski

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Saturday 11/19/11. Saturday Supplement: New Throw/Pull Research.

Another throwback example Pullback details

I show two drawings. The first one is a throwback and the second is a pullback.

When I was working on busted chart patterns, I took the opportunity to redefine how I measured when a throwback or pullback ends. Instead of stopping at the first congestion area (such as a minor high or low), I extended it to the end of the primary trend. That redefinition, I believe, more accurately reflects what happens after a chart pattern ends.

With additional samples (about 10,000), the new throwback and pullback models appear in the above charts.

After price returns to the breakout price or trendline boundary in a throwback, price resumes the rise 65% of the time.

For pullbacks, the resumption of the downtrend happens less often. Only 47% of the time will price make a sustained move lower.


Thursday 11/17/11. Trading Thursday: Nasdaq

The index dropped by -1.7% or -46.59 points. Since 02/05/1971 the index made 71 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.3% on 32 occasions.
     Average loss was -1.3% on 39 occasions.
Look for the index to close lower 54.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 9/14 or 64.3% of the time.
     The prediction of the index closing lower has been right 6/9 or 66.7% 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 only pattern worth commenting on is the three falling peaks pattern, cleverly labeled 1, 2, and 3.

I hardly ever look for the three falling peaks because it occurs so frequently. The pattern confirms as valid when the index closes below the lowest valley in the chart pattern. I show that as a red line.

After confirmation, the index made a nice run down, offering plenty of opportunity to profit.

If you draw a trendline from Monday's trading (5 min scale, from about 1:00, not shown), it will approach today's close. Thus, it should act as support.

Going back a week ago, there was also support below where we currently are. Thus, the index might drop in the morning, but should find support. My guess is it will close higher but the probabilities disagree. It's been right 67% 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

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© 2011 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,335.76    
 Monthly S1  2,487.68  151.93   
 Weekly S2  2,528.66  40.98   
 Weekly S1  2,584.14  55.47   
 Daily S2  2,604.51  20.37   
 Monthly Pivot  2,620.53  16.02   
 Daily S1  2,622.06  1.53   Yes! The Daily S1 is close to the Monthly Pivot.
 Low  2,637.91  15.85   
 Close  2,639.61  1.70   Yes! The Close is close to the Low.
 Daily Pivot  2,655.46  15.85   
 Weekly Pivot  2,657.26  1.80   Yes! The Weekly Pivot is close to the Daily Pivot.
 61.8% Down from Intraday High  2,657.37  0.11   Yes! The 61.8% Down from Intraday High is close to the Weekly Pivot.
 Open  2,661.09  3.72   Yes! The Open is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  2,663.39  2.29   Yes! The 50% Down from Intraday High is close to the Open.
 38.2% Down from Intraday High  2,669.40  6.01   
 Daily R1  2,673.01  3.61   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 High  2,688.86  15.85   
 Daily R2  2,706.41  17.55   
 Weekly R1  2,712.74  6.33   
 Monthly R1  2,772.45  59.72   
 Weekly R2  2,785.86  13.41   
 Monthly R2  2,905.30  119.43   

Tuesday 11/15/11. Trading Tuesday: Dow

The index dropped by -0.6% or -73.7 points. Since 10/01/1928 the index made 619 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 320 occasions.
     Average loss was -0.8% on 299 occasions.
Look for 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 13/19 or 68.4% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

The chart shows a target rich environment. A double bottom appears first at DE, confirmed when the index closed above the peak between the two bottoms at F. The chart pattern didn't amount to much of a move after confirmation.

Following that, a double top at AB signaled a reversal when price confirmed at C. Another double top appeared later in the day, at GH, confirmed at I. The targets from the double tops (the height of the pattern) appears to have been fulfilled.

The index at the end of the day climbed up to a resistance level, about 12,080. If you look at the 10-day chart (not shown), you will see a big move up two trading days ago. That mirrored the big down move four days ago. Friday's and today's drop appears to be a retrace of the big move up at the open on Friday. I think that retrace is over. Thus, I look for the index to close higher tomorrow. Developments in Europe, can influence the outcome, of course. And I'm just guessing anyway. The probabilities are nearly even, too, with a slight edge to a higher close.

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

-- Thomas Bulkowski

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© 2011 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  10,571.96    
 Monthly S1  11,325.97  754.01   
 Weekly S2  11,550.89  224.92   
 Monthly Pivot  11,805.14  254.25   
 Weekly S1  11,815.44  10.30   Yes! The Weekly S1 is close to the Monthly Pivot.
 Daily S2  11,948.99  133.56   
 Weekly Pivot  12,001.47  52.48   
 Daily S1  12,014.49  13.01   Yes! The Daily S1 is close to the Weekly Pivot.
 Low  12,027.03  12.54   Yes! The Low is close to the Daily S1.
 Close  12,079.98  52.95   
 61.8% Down from Intraday High  12,081.86  1.88   Yes! The 61.8% Down from Intraday High is close to the Close.
 Daily Pivot  12,092.52  10.67   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  12,098.79  6.27   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  12,115.73  16.94   
 Open  12,153.00  37.27   
 Daily R1  12,158.02  5.02   Yes! The Daily R1 is close to the Open.
 High  12,170.56  12.54   Yes! The High is close to the Daily R1.
 Daily R2  12,236.05  65.49   
 Weekly R1  12,266.02  29.96   
 Weekly R2  12,452.05  186.04   
 Monthly R1  12,559.15  107.10   
 Monthly R2  13,038.32  479.17   

Monday 11/14/11. Market Monday: The Week Ahead

My Prediction

Picture of the S and P index on the weekly scale.

I show a chart of the S&P 500 index on the weekly scale.

I drew a red trendline along the peaks. It's been my experience that when a stock reaches such a trendline it reverses there. Whether that happens with indices, I guess we'll find out.

I think it will and I show that by the green bent arrow. That's my guess of what will happen in the coming weeks. And that means we have more up-moving to go before the index hits overhead resistance.

If the index performs as I expect, the chart pattern will resemble a descending broadening wedge.

Yes, it's going to be an exciting time.

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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 85.15 points.
Tuesday: Up 101.79 points.
Wednesday: Down 389.24 points.
Thursday: Up 112.85 points.
Friday: Up 259.89 points.

For the Week...

The Dow industrials were up 170.44 points or 1.4%.
The Nasdaq composite was down 7.4 points or 0.3%.
The S&P 500 index was up 10.62 points or 0.8%.

Year to Date...

Dow Industrials
     5.6% down from the high of 12,876.00 on 05/02/2011.
     16.8% up from the low of 10,404.49 on 10/04/2011.
Nasdaq
     7.2% down from the high of 2,887.75 on 05/02/2011.
     16.5% up from the low of 2,298.89 on 10/04/2011.
S&P 500
     7.8% down from the high of 1,370.58 on 05/02/2011.
     17.6% up from the low of 1,074.77 on 10/04/2011.

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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
Producer price index8:30 TB-Measures wholesale goods cost. An indication of future inflation.
Retail sales8:30 TA-Reports total retail sales (not services). Are people spending?
Business inventories10:00 TC-Reports manufacturing, wholesale, retail inventories.
Consumer price index8:30 WB+Inflation report. Measures cost of goods and services.
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.
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
2014 Equity LEAPS addedMonday
VIX expiresWednesday
A.M. settled index options cease trading.Thursday
Expiring equity, P.M. settled index options and treasury/interest rate options classes cease trading. Expiring cash-settled currency options cease trading at 12:00 P.M. EST.Friday
Equity, index, cash-settled currency and treasury/interest rate 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 11/11/2011, the CPI had:

1 bearish patterns,
45 bullish patterns,
538 patterns waiting for breakout.
The CPI signal is 97.8%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  11,793  11,973  12,077  12,257  12,360 
Weekly  11,575  11,865  12,026  12,315  12,477 
Monthly  10,597  11,375  11,830  12,608  13,063 
S&P 500 (^GSPC): Daily  1,230  1,247  1,257  1,274  1,284 
Weekly  1,205  1,234  1,256  1,285  1,307 
Monthly  1,093  1,179  1,236  1,321  1,378 
Nasdaq (^IXIC): Daily  2,636  2,658  2,671  2,692  2,706 
Weekly  2,542  2,610  2,670  2,739  2,799 
Monthly  2,349  2,514  2,634  2,799  2,918 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week up 43.4%  Expect a random direction.
 2 months up 35.0%  The trend may continue.
 S & P 500 (^GSPC) 1 week up 40.7%  Expect a random direction.
 2 months up 38.6%  The trend may continue.
 Nasdaq composite (^IXIC) 2 weeks down 21.7%  Expect a reversal soon.
 1 month down 27.0%  The trend may continue.

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

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

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

Buy-and-Hold: 12-Month SMA

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

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

 Found Chart Pattern Name
27Head-and-shoulders bottom
22Pipe top
14Dead-cat bounce
14Triangle, symmetrical
11Flag, high and tight
7Broadening bottom
6Horn bottom
5Head-and-shoulders complex bottom
4Head-and-shoulders top
4Triangle, 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. Electric Utility (East)1. Electric Utility (East)
2. Household Products2. Toiletries/Cosmetics
3. Internet3. Household Products
4. Natural Gas (Diversified)4. Electric Utility (Central)
5. Electric Utility (Central)5. Retail Store
48. Semiconductor48. Human Resources
49. Cement and Aggregates49. Cement and Aggregates
50. Human Resources50. Homebuilding
51. Securities Brokerage51. Securities Brokerage
52. Coal52. Coal

-- Thomas Bulkowski

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Thursday 11/10/11. Trading Thursday: Nasdaq

The index dropped by -3.9% or -105.84 points. Since 02/05/1971 the index made 14 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 2.4% on 9 occasions.
     Average loss was -2.3% on 5 occasions.
Look for the index to close higher 64.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 8/13 or 61.5% of the time.
     The prediction of the index closing lower has been right 6/9 or 66.7% 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 Nasdaq composite formed a head-and-shoulders top at ABC, confirmed when the index closed below the right armpit at D. I use the armpit as confirmation because the neckline slopes downward, resulting in a tardy or non-existent entry signal.

Selling short at D would have been profitable, as the chart shows. The index tumbled in a straight line run down and bounced when it reached support around 2620.

Looking ahead, I think that support will hold and I expect a strong move up in the morning. Today's drop (in the Dow industrials, at least) was on very low volume, suggesting the plunge was from buyers standing aside, and not strong selling. Of course, for every share sold there is one bought. I'm talking about selling pressure and buying demand.

Anyway, I expect the index to close higher tomorrow.

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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© 2011 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,103.49    
 Monthly S1  2,362.57  259.08   
 Weekly S2  2,525.63  163.06   
 Monthly Pivot  2,557.97  32.34   
 Weekly S1  2,573.64  15.67   
 Daily S2  2,582.90  9.26   
 Daily S1  2,602.27  19.38   
 Low  2,617.93  15.66   
 Close  2,621.65  3.72   Yes! The Close is close to the Low.
 Daily Pivot  2,637.31  15.66   
 61.8% Down from Intraday High  2,638.71  1.41   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  2,645.14  6.42   
 Weekly Pivot  2,645.17  0.03   Yes! The Weekly Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  2,651.56  6.39   
 Daily R1  2,656.68  5.13   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Open  2,662.56  5.88   
 High  2,672.34  9.78   
 Daily R2  2,691.72  19.38   
 Weekly R1  2,693.18  1.46   Yes! The Weekly R1 is close to the Daily R2.
 Weekly R2  2,764.71  71.53   
 Monthly R1  2,817.05  52.34   
 Monthly R2  3,012.45  195.40   

Tuesday 11/8/11. Trading Tuesday: Dow

The index climbed by 0.7% or 85.15 points. Since 10/01/1928 the index made 605 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 332 occasions.
     Average loss was -0.7% on 273 occasions.
Look for the index to close higher 54.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 12/18 or 66.7% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

Looking at this chart, you can see the large, rounding turn, or rounding bottom from A to B. Others will see a cup with handle. The cup begins on the left at A and the right cup lip is at B. The handle, at C, is short compared to the width of the cup.

In a true cup with handle, price is supposed to rise by 30% leading to the start of the cup. Price does rise, beginning last Tuesday. That, of course, is well short of a 30% gain.

I don't like cup with handles in stocks because price tends to rise by 10% to 15% (above the high at B) and then die. In an index, I'm not sure how a cup behaves after the breakout.

Looking at the 10-day chart, the index is at overhead resistance. That means the index may have trouble moving higher tomorrow (Tuesday). One clue I see today is a higher bottom to the cup from the low on Friday. Thus, even though Europe is now targeting another country (Italy) with financial problems, I look for the Dow to close higher tomorrow.

If Italy melts down or if the markets fear it will have debt problems, then the index is going down. A check of the news before the open, including the futures, will help determine market direction.

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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© 2011 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  9,705.91    
 Monthly S1  10,887.15  1,181.24   
 Weekly S2  11,376.64  489.49   
 Monthly Pivot  11,585.73  209.09   
 Weekly S1  11,722.52  136.79   
 Daily S2  11,814.09  91.57   
 Low  11,880.69  66.60   
 Daily S1  11,941.24  60.55   
 61.8% Down from Intraday High  11,954.70  13.46   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 Weekly Pivot  11,975.90  21.20   
 50% Down from Intraday High  11,977.57  1.66   Yes! The 50% Down from Intraday High is close to the Weekly Pivot.
 Open  11,983.02  5.45   Yes! The Open is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  12,000.43  17.41   Yes! The 38.2% Down from Intraday High is close to the Open.
 Daily Pivot  12,007.84  7.41   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  12,068.39  60.55   
 High  12,074.44  6.05   Yes! The High is close to the Close.
 Daily R1  12,134.99  60.55   
 Daily R2  12,201.59  66.60   
 Weekly R1  12,321.78  120.19   
 Weekly R2  12,575.16  253.39   
 Monthly R1  12,766.97  191.81   
 Monthly R2  13,465.55  698.58   

Monday 11/7/11. Market Monday: The Week Ahead

My Prediction

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

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

A head-and-shoulders top appears during the last few weeks. It is unconfirmed as yet and that means price has to close below the horizontal red line. In this situation, the neckline (shown in blue but it looks black) slopes downward. When that occurs, I prefer the red line to trigger an entry.

Anyway, if the pattern does not confirm, then it's just squiggles on the chart.

The word on the national news is that the Greek situation is calming down. Thus, I expect the markets to react to the news favorably tomorrow (Monday). And that means the head-and-shoulders will not act as a reversal pattern but as a continuation. In short, the index should climb higher over the coming week.

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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 276.07 points.
Tuesday: Down 297.08 points.
Wednesday: Up 178.08 points.
Thursday: Up 208.43 points.
Friday: Down 61.23 points.

For the Week...

The Dow industrials were down 247.87 points or 2.0%.
The Nasdaq composite was down 51 points or 1.9%.
The S&P 500 index was down 31.86 points or 2.5%.

Year to Date...

Dow Industrials
     6.9% down from the high of 12,876.00 on 05/02/2011.
     15.2% up from the low of 10,404.49 on 10/04/2011.
Nasdaq
     7.0% down from the high of 2,887.75 on 05/02/2011.
     16.8% up from the low of 2,298.89 on 10/04/2011.
S&P 500
     8.6% down from the high of 1,370.58 on 05/02/2011.
     16.6% up from the low of 1,074.77 on 10/04/2011.

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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.
International trade8:30 ThC+Import/export prices, trade balance. US economy vs others.
Trade balance8:30 ThC+Signals balance of exports & imports.
Treasury budget2:00 ThDTracks budget deficit. Important in April (tax filing).
Michigan sentiment9:55 FB-Consumer sentiment: Measures strength of consumer spending.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 11/04/2011, the CPI had:

5 bearish patterns,
5 bullish patterns,
443 patterns waiting for breakout.
The CPI signal is 50.0%, which is neutral (between 35% and 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  11,766  11,875  11,959  12,068  12,152 
Weekly  11,348  11,666  11,948  12,265  12,547 
Monthly  9,678  10,830  11,557  12,710  13,437 
S&P 500 (^GSPC): Daily  1,229  1,241  1,251  1,263  1,273 
Weekly  1,182  1,217  1,251  1,287  1,321 
Monthly  989  1,121  1,207  1,339  1,425 
Nasdaq (^IXIC): Daily  2,640  2,663  2,678  2,702  2,717 
Weekly  2,547  2,617  2,667  2,736  2,786 
Monthly  2,125  2,406  2,579  2,860  3,034 
  • 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 30.7%  The trend may continue.
 2 months up 35.0%  The trend may continue.
 S & P 500 (^GSPC) 1 week down 32.0%  The trend may continue.
 1 month down 21.2%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 1 week down 34.1%  The trend may continue.
 2 months up 39.9%  The trend may continue.

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

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

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

Buy-and-Hold: 12-Month SMA

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

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

 Found Chart Pattern Name
27Head-and-shoulders bottom
15Dead-cat bounce
10Flag, high and tight
10Broadening bottom
9Triangle, symmetrical
5Head-and-shoulders complex bottom
4Horn bottom
3Triangle, ascending
3Pipe bottom
3Broadening top

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

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

 

 

 

 

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

This WeekLast Week
1. Electric Utility (East)1. Electric Utility (East)
2. Toiletries/Cosmetics2. Household Products
3. Household Products3. Apparel
4. Electric Utility (Central)4. Electric Utility (Central)
5. Retail Store5. Retail Store
48. Human Resources48. Insurance (Life)
49. Cement and Aggregates49. Homebuilding
50. Homebuilding50. Securities Brokerage
51. Securities Brokerage51. Cement and Aggregates
52. Coal52. Coal

-- Thomas Bulkowski

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Thursday 11/3/11. Trading Thursday: Nasdaq

The index climbed by 1.3% or 33.02 points. Since 02/05/1971 the index made 114 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 72 occasions.
     Average loss was -1.5% on 42 occasions.
Look for the index to close higher 63.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 7/12 or 58.3% of the time.
     The prediction of the index closing lower has been right 6/9 or 66.7% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

A double bottom appears in early afternoon, at A and B. The pattern confirms as a valid chart pattern when the index closes above the peak between the two bottoms, at C. Taking a long position at that time would work well.

Now, the move from B to D with a retrace from D to E could mean a move beyond F (it's a measured move up chart pattern). The EF+ move, when it completes, might mimic the BD move. That means another big up move tomorrow.

What gives me pause in this prediction is the lack of follow through at F. Yes, the market closed at F, but the upward momentum seems to have petered out at overhead resistance.

On the daily scale, there is a big gap to fill and these "windows" are suspected resistance areas. They don't work well as resistance, as I recall. That's one of the discoveries I made and documented in my Encyclopedia of Candlestick Charts book (page 11).

I expect the index to close higher tomorrow but it might find weakness at the open.

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

-- Thomas Bulkowski

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© 2011 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,109.60    
 Monthly S1  2,374.79  265.19   
 Weekly S2  2,509.40  134.61   
 Monthly Pivot  2,564.08  54.68   
 Weekly S1  2,574.69  10.61   
 Daily S2  2,599.34  24.65   
 Low  2,613.74  14.40   
 Daily S1  2,619.66  5.92   
 61.8% Down from Intraday High  2,627.00  7.34   
 50% Down from Intraday High  2,631.10  4.10   
 Daily Pivot  2,634.06  2.96   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  2,635.20  1.14   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Open  2,637.56  2.36   Yes! The Open is close to the 38.2% Down from Intraday High.
 Close  2,639.98  2.42   Yes! The Close is close to the Open.
 High  2,648.46  8.48   
 Daily R1  2,654.38  5.92   
 Weekly Pivot  2,664.03  9.65   
 Daily R2  2,668.78  4.75   
 Weekly R1  2,729.32  60.54   
 Weekly R2  2,818.66  89.34   
 Monthly R1  2,829.27  10.61   
 Monthly R2  3,018.56  189.29   

Tuesday 11/1/11. Trading Tuesday: Dow

The index dropped by -2.3% or -276.07 points. Since 10/01/1928 the index made 45 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 23 occasions.
     Average loss was -1.2% on 22 occasions.
Look for the index to close higher 51.1% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 12/17 or 70.6% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

Today's Dow industrials shows a target rich environment. If you noticed a head-and-shoulders top in the morning, it confirmed when price closed below the red neckline just after 11:00. A pullback to A gave traders another opportunity to short the index.

If you missed that, then another opportunity came late in the session. An Eve & Eve double top, marked on the chart as A and B, confirmed just after 3:00, at C. That was another short signal. In both cases, the height of the chart pattern projected downward from the breakout price would have made a good exit price.

A strong down draft occurred in the closing 10 minutes, as the chart shows. Will this continue? To find out, I looked at the 10-day chart, 5 minute scale. When I've done this in the past, it always has been a lousy predictor of where support and resistance will be. From the chart, it looks like the index should continue down in the morning before finding support, dropping as far as 11,850. Then it should recover to 12,050 to 12,100. That would complete a measured move down chart pattern with a return to the corrective phase.

Picture of the Dow industrials on the 5 minute scale.

If you don't understand that, don't worry about it. I expect the index to drop but recover. I don't know if it will recover all of the drop by the close. My guess is no, it won't. That's different than the probabilities listed above. Also note that the FOMC meets on Wednesday, so this session might be unusually quiet as the markets wait for the announcement the next day.

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.

# # #

And yes, I voted early today. I had to wake up the workers, too. The good news is that IDs will be required next time. That should cut voter fraud.

-- Thomas Bulkowski

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© 2011 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  9,668.13    
 Monthly S1  10,811.58  1,143.46   
 Weekly S2  11,372.17  560.58   
 Monthly Pivot  11,547.95  175.78   
 Weekly S1  11,663.60  115.66   
 Daily S2  11,771.37  107.76   
 Daily S1  11,863.20  91.84   
 Low  11,954.41  91.21   
 Close  11,955.04  0.63   Yes! The Close is close to the Low.
 Weekly Pivot  11,973.96  18.92   Yes! The Weekly Pivot is close to the Close.
 Daily Pivot  12,046.25  72.29   
 61.8% Down from Intraday High  12,059.41  13.17   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  12,091.85  32.44   
 38.2% Down from Intraday High  12,124.29  32.44   
 Daily R1  12,138.08  13.80   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Open  12,229.22  91.14   
 High  12,229.29  0.07   Yes! The High is close to the Open.
 Weekly R1  12,265.39  36.10   
 Daily R2  12,321.13  55.73   
 Weekly R2  12,575.75  254.62   
 Monthly R1  12,691.40  115.66   
 Monthly R2  13,427.77  736.36   

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