Subscribe to RSS feeds Bulkowski Blog via RSS

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

Support this site! Clicking the links (below) takes you to Amazon.com. If you buy ANYTHING, they pay for the referral.

Picture of the head's law.
Kindle
Paperback
Nook
Chart Patterns: After the Buy
Getting Started in Chart Patterns, Second Edition book.
Trading Basics: Evolution of a Trader book.
Fundamental Analysis and Position Trading: Evolution of a Trader book.
Swing and Day Trading: Evolution of a Trader book.
Visual Guide to Chart Patterns book.
Encyclopedia of Chart Patterns 2nd Edition book.
Bulkowski's Blog: ThePatternSite.com
Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 03/24/2017
20,597 -59.86 -0.3%
8,929 -7.37 -0.1%
706 3.20 0.5%
5,829 11.05 0.2%
2,344 -1.98 -0.1%
YTD
4.2%
-1.3%
7.0%
8.3%
4.7%
Tom's Targets    Overview: 03/14/2017
21,250 or 20,600 by 04/15/2017
9,500 or 8,700 by 04/15/2017
675 or 715 by 04/01/2017
5,950 or 5,650 by 04/15/2017
2,425 or 2,325 by 04/15/2017
Mutt Losers: None YTD
Mutt Winners: None YTD

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

October 2011 Headlines


Archives


Monday 10/31/11. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

I show the Dow industrials on the daily scale. The long awaited for run up has begun. I started expecting that back in late August. The link shows the blog entry.

I expect the Dow to continue rising as the green arrow shows. It might not happen this week, given that the Federal Reserve will scare investors more than Halloween with their announcement on Wednesday.

I do expect a retrace of price. These straight-line runs don't last forever. Indeed, this one has moved higher in fits-and-starts, whatever that means. It appears that the recent double top in July is an easy target. Look for the index to stall within that high-low range (about 12,744 to 12,276 from this chart).

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: Up 104.83 points.
Tuesday: Down 207 points.
Wednesday: Up 162.42 points.
Thursday: Up 339.51 points.
Friday: Up 22.56 points.

For the Week...

The Dow industrials were up 422.32 points or 3.6%.
The Nasdaq composite was up 99.69 points or 3.8%.
The S&P 500 index was up 46.84 points or 3.8%.

Year to Date...

Dow Industrials
     5.0% down from the high of 12,876.00 on 05/02/2011.
     17.6% up from the low of 10,404.49 on 10/04/2011.
Nasdaq
     5.2% down from the high of 2,887.75 on 05/02/2011.
     19.1% up from the low of 2,298.89 on 10/04/2011.
S&P 500
     6.2% down from the high of 1,370.58 on 05/02/2011.
     19.6% 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
Chicago purchasing managers index9:45 MBMonitors regional manufacturing activity.
Construction spending10:00 TDCovers residential/non-residential/public spending on new construction.
Auto & truck sales3:00? TC-Monthly sales of domestically produced vehicles.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Rate decision12:30 W?The Federal Reserves reports on interest rate changes.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Productivity & costs8:30 ThD+Cost of producing a unit of output.
Factory orders10:00 ThD+Durable/non-durable goods orders w/factory inventories.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.

Options Expiration

No options expire this week.

Top

Swing and Position Traders: Chart Pattern Indicator

As of 10/28/2011, the CPI had:

3 bearish patterns,
12 bullish patterns,
180 patterns waiting for breakout.
The CPI signal is 80.0%, which is bullish (>= 65%).

The chart pattern indicator is bullish 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  12,128  12,180  12,216  12,267  12,303 
Weekly  11,464  11,848  12,066  12,449  12,668 
Monthly  9,760  10,996  11,640  12,875  13,520 
S&P 500 (^GSPC): Daily  1,273  1,279  1,283  1,289  1,293 
Weekly  1,195  1,240  1,266  1,311  1,338 
Monthly  1,000  1,142  1,218  1,360  1,435 
Nasdaq (^IXIC): Daily  2,715  2,726  2,734  2,745  2,753 
Weekly  2,542  2,639  2,696  2,794  2,851 
Monthly  2,142  2,440  2,596  2,894  3,051 
  • 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) 5 weeks up 8.0%  Expect a reversal soon.
 1 month up 51.3%  Expect a random direction.
 S & P 500 (^GSPC) 4 weeks up 13.5%  Expect a reversal soon.
 1 month up 53.5%  Expect a random direction.
 Nasdaq composite (^IXIC) 1 week up 39.8%  The trend may continue.
 1 month up 47.7%  Expect a random direction.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the 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: bearish.
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.

 Found Chart Pattern Name
67Double Bottom, Adam and Adam
38Horn bottom
38Pipe bottom
33Head-and-shoulders bottom
11Triple bottom
11Broadening bottom
9Triangle, symmetrical
9Dead-cat bounce
6Big W
6Flag, high and tight

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. Apparel3. Electric Utility (Central)
4. Electric Utility (Central)4. Retail Store
5. Retail Store5. Electric Utility (West)
48. Insurance (Life)48. Homebuilding
49. Homebuilding49. Human Resources
50. Securities Brokerage50. Cement and Aggregates
51. Cement and Aggregates51. Securities Brokerage
52. Coal52. Coal

-- Thomas Bulkowski

Top


Saturday 10/29/11. Saturday Supplement.

Picture of my dog.

I finished researching busted chart patterns. A busted chart pattern is one in which price breaks out in one direction from a chart pattern, but moves less than 10% before reversing and breaking out in the new direction. Since few traders/investors know to search for these chart patterns, they may show stronger performance...or not.

For a numerical comparison of busted patterns to their non-busted counterparts, click here.

Here's a list of the busted patterns.

# # #

Referral fees to Amazon.com support this site. When shopping for books or other good/services from Amazon.com, just click one of the pictures of my books (see far left). When you buy anything while there, it generates a referral fee. That fee does not increase your cost in any way.

Also, ad revenue for the site have plunged 60% from the high-water mark this past year. If you see an ad that interests you, then click on it. That click generates a referral fee which also helps support this website.

I like free and don't want to start a subscription-based service. Thanks for helping defray the cost of running this site!


Thursday 10/27/11. Trading Thursday: Nasdaq

The index climbed by 0.5% or 12.25 points. Since 02/05/1971 the index made 479 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 338 occasions.
     Average loss was -0.9% on 141 occasions.
Look for the index to close higher 70.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 6/11 or 54.5% 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 two bottoms in red marked A and B form what I call an ugly double bottom. B is supposed to be higher than A by at least 5% but for an index, I'll overlook that guideline.

When the index closes above the horizontal red line it confirms the pattern and means the trend has changed from down to up. That occurs at C. Buying a position then would have worked well.

In late afternoon, a right-angled and ascending broadening formation appeared. I show that outlined in blue. The breakout from this pattern is downward 66% of the time. Despite that, I'll go with the probabilities and say that the index will close higher tomorrow. Expect the index to drop to the bottom blue trendline at the open (but check the futures before the open for a better gauge of direction and strength). After that, there appears to be overhead resistance that will pose a challenge at 2660. Perhaps the index will move horizontally?

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  2,170.18    
 Monthly S1  2,410.42  240.25   
 Weekly S2  2,514.74  104.31   
 Monthly Pivot  2,539.14  24.40   
 Daily S2  2,571.02  31.88   
 Weekly S1  2,582.70  11.69   
 Low  2,598.74  16.04   
 Daily S1  2,610.84  12.10   
 61.8% Down from Intraday High  2,624.54  13.70   
 Weekly Pivot  2,625.14  0.59   Yes! The Weekly Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  2,632.51  7.38   
 Daily Pivot  2,638.57  6.05   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  2,640.49  1.92   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  2,650.67  10.18   
 Open  2,660.42  9.75   
 High  2,666.29  5.87   Yes! The High is close to the Open.
 Daily R1  2,678.39  12.10   
 Weekly R1  2,693.10  14.71   
 Daily R2  2,706.12  13.01   
 Weekly R2  2,735.54  29.42   
 Monthly R1  2,779.38  43.85   
 Monthly R2  2,908.10  128.71   

Tuesday 10/25/11. Trading Tuesday: Dow

The index climbed by 0.9% or 104.83 points. Since 10/01/1928 the index made 469 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 280 occasions.
     Average loss was -0.7% on 189 occasions.
Look for the index to close higher 59.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 12/16 or 75.0% 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.

Early in the day, a double bottom (C and D) formed, but it's not really a bottom pattern, is it? It does not act as a reversal but as a continuation pattern. The higher bottom at D than C suggested more up move ahead.

After noon, a double top at A and B formed but price did not drop much after confirmation. Why? Because it is resting on support (the dip just before 1:00).

I think that the index will move up in the morning, but struggle to rise above peaks A and B. It will eventually push through that overhead resistance and close higher.

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  9,968.89    
 Monthly S1  10,941.25  972.37   
 Weekly S2  11,157.73  216.47   
 Monthly Pivot  11,376.86  219.13   
 Weekly S1  11,535.67  158.82   
 Weekly Pivot  11,674.07  138.39   
 Daily S2  11,751.73  77.67   
 Low  11,805.77  54.04   
 Open  11,807.96  2.19   Yes! The Open is close to the Low.
 Daily S1  11,832.68  24.72   
 61.8% Down from Intraday High  11,857.33  24.66   
 50% Down from Intraday High  11,873.26  15.93   
 Daily Pivot  11,886.71  13.45   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  11,889.19  2.47   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  11,913.62  24.43   
 High  11,940.75  27.13   
 Daily R1  11,967.66  26.91   
 Daily R2  12,021.69  54.04   
 Weekly R1  12,052.01  30.32   
 Weekly R2  12,190.41  138.39   
 Monthly R1  12,349.22  158.82   
 Monthly R2  12,784.83  435.60   

Monday 10/24/11. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the monthly scale.

I show the Dow utility index on the monthly scale. The index seems to be showing the way higher, leading the other indices.

The inset at B is a zoom of the price action at A. B has closed above the prior monthly high.

Looking at the rest of the chart, you can see that the index has been trending higher since the 2009 low and it's recovered enough to break out to a multi-year high.

What does it mean? It tells me that the uptrend will continue. That's not a guarantee, of course. The congestion region during 2005, shown by the blue lines, is close enough to create worries. But even so, the index has closed above that region, too.

Thus, all of the people that said the markets were going to 0, that we were sliding into another bear market have, at least so far, been wrong.

That, of course, means that the markets are going to tumble this week.

I believe that over the coming weeks, we will continue to trend higher. The historical weakness shown during the months of September and October are almost behind us. Looking forward, I see blue sky. We may hit turbulence along the way, but I expect to greet the clouds.

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 247.49 points.
Tuesday: Up 180.05 points.
Wednesday: Down 72.43 points.
Thursday: Up 37.16 points.
Friday: Up 267.01 points.

For the Week...

The Dow industrials were up 164.3 points or 1.4%.
The Nasdaq composite was down 30.39 points or 1.1%.
The S&P 500 index was up 13.67 points or 1.1%.

Year to Date...

Dow Industrials
     8.3% down from the high of 12,876.00 on 05/02/2011.
     13.5% up from the low of 10,404.49 on 10/04/2011.
Nasdaq
     8.7% down from the high of 2,887.75 on 05/02/2011.
     14.7% up from the low of 2,298.89 on 10/04/2011.
S&P 500
     9.7% down from the high of 1,370.58 on 05/02/2011.
     15.2% 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
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Durable goods orders8:30 WBMeasures orders, shipments of goods with lifespans >3 years.
New home sales10:00 WC+Shows sales of single-family homes.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Gross domestic product8:30 ThBMeasures economic activity; GDP deflator measures inflation.
Personal income & consumption8:30 FC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 FC+Covers durables, non-durables, and services.
Michigan sentiment9:55 FB-Consumer sentiment: Measures strength of consumer spending.

Options Expiration

No options expire this week.

Top

Swing and Position Traders: Chart Pattern Indicator

As of 10/21/2011, the CPI had:

2 bearish patterns,
59 bullish patterns,
225 patterns waiting for breakout.
The CPI signal is 96.7%, which is bullish (>= 65%).

The chart pattern indicator is bullish 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  11,452  11,630  11,721  11,900  11,991 
Weekly  11,123  11,466  11,639  11,982  12,155 
Monthly  9,934  10,871  11,342  12,279  12,750 
S&P 500 (^GSPC): Daily  1,207  1,223  1,231  1,246  1,255 
Weekly  1,175  1,207  1,223  1,254  1,270 
Monthly  1,020  1,129  1,184  1,293  1,348 
Nasdaq (^IXIC): Daily  2,596  2,617  2,632  2,653  2,668 
Weekly  2,510  2,574  2,621  2,684  2,731 
Monthly  2,166  2,402  2,535  2,771  2,904 
  • 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) 4 weeks up 15.1%  Expect a reversal soon.
 1 month up 51.3%  Expect a random direction.
 S & P 500 (^GSPC) 3 weeks up 18.4%  Expect a reversal soon.
 1 month up 53.5%  Expect a random direction.
 Nasdaq composite (^IXIC) 1 week down 34.2%  The trend may continue.
 1 month up 47.7%  Expect a random direction.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the 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: bearish.
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.

 Found Chart Pattern Name
60Double Bottom, Adam and Adam
32Pipe bottom
25Horn bottom
16Head-and-shoulders bottom
13Broadening bottom
10Triple bottom
9Head-and-shoulders top
9Rectangle bottom
8Dead-cat bounce
5Triangle, symmetrical

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. Electric Utility (Central)3. Apparel
4. Retail Store4. Electric Utility (Central)
5. Electric Utility (West)5. Computers and Peripherals
48. Homebuilding48. Insurance (Life)
49. Human Resources49. Cement and Aggregates
50. Cement and Aggregates50. Homebuilding
51. Securities Brokerage51. Securities Brokerage
52. Coal52. Coal

-- Thomas Bulkowski

Top


Thursday 10/20/11. Trading Thursday: Nasdaq

The index dropped by -2.0% or -53.39 points. Since 02/05/1971 the index made 55 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.5% on 26 occasions.
     Average loss was -1.1% on 29 occasions.
Look for the index to close lower 52.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 6/11 or 54.5% of the time.
     The prediction of the index closing lower has been right 5/8 or 62.5% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

A head-and-shoulders top appears early in the trading session, but the peaks are not pronounced, at least when the compression of the day's session makes it look smaller.

The left shoulder (LS) appears near the price of the Head (H) and the right shoulder (R). Taking a short position when price pierced the "neckline" would have been a mistake for a hour or so. The neckline usually connects the armpits of the pattern. However, when the neckline slopes downward on a top pattern, it's better to use a close below the right armpit, as shown.

After 1:00, the position began to yield results when the index tumbled.

The index appears to be forming support just above 2600. Looking on the 10-day, 5 minute chart, it appears that the index stopped just above a support layer that extends down to 2585 or so. Although I think the index could drop in the early hours, I expect a recovery due to that underlying support. That prediction, however, is different than the probabilities. Either the computer or I am wrong.

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  2,154.63    
 Monthly S1  2,379.34  224.70   
 Weekly S2  2,449.15  69.82   
 Monthly Pivot  2,523.59  74.44   
 Weekly S1  2,526.60  3.00   Yes! The Weekly S1 is close to the Monthly Pivot.
 Daily S2  2,563.79  37.19   
 Daily S1  2,583.91  20.13   
 Weekly Pivot  2,597.22  13.31   
 Low  2,597.77  0.55   Yes! The Low is close to the Weekly Pivot.
 Close  2,604.04  6.27   
 Daily Pivot  2,617.90  13.86   
 61.8% Down from Intraday High  2,618.44  0.54   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  2,624.82  6.39   
 38.2% Down from Intraday High  2,631.21  6.39   
 Daily R1  2,638.02  6.81   
 Open  2,642.89  4.87   Yes! The Open is close to the Daily R1.
 High  2,651.88  8.99   
 Daily R2  2,672.01  20.13   
 Weekly R1  2,674.67  2.66   Yes! The Weekly R1 is close to the Daily R2.
 Weekly R2  2,745.29  70.63   
 Monthly R1  2,748.30  3.00   Yes! The Monthly R1 is close to the Weekly R2.
 Monthly R2  2,892.55  144.26   

Tuesday 10/18/11. Trading Tuesday: Dow

The index dropped by -2.1% or -247.49 points. Since 10/01/1928 the index made 59 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 33 occasions.
     Average loss was -0.7% on 26 occasions.
Look for the index to close higher 55.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 11/15 or 73.3% 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.

One clue to trading today's action comes from a measured move down chart pattern, highlighted by the turns CDEF. The CD move continues after the corrective phase, DE to form EF (or EA). The slope and duration are often similar. In this case, the EA move (yes EA) is much longer than CD and the slope is not as steep.

After price bottoms at A, it bounces and forms an Eve & Eve double bottom. This has not confirmed yet, so it's really just squiggles on the chart. Price has to close above the peak between the two bottoms to confirm it. I expect that to happen tomorrow (Tuesday). Look for the index to close higher. I think today's action moved the Dow down too far based on something one man said. Then again, I was accused of moving the market, too, so I know how he must feel.

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  9,907.10    
 Monthly S1  10,652.05  744.95   
 Weekly S2  10,840.53  188.48   
 Weekly S1  11,118.76  278.24   
 Monthly Pivot  11,149.44  30.68   
 Daily S2  11,207.90  58.46   
 Daily S1  11,302.45  94.55   
 Low  11,378.35  75.90   
 Weekly Pivot  11,382.80  4.45   Yes! The Weekly Pivot is close to the Low.
 Close  11,397.00  14.20   Yes! The Close is close to the Weekly Pivot.
 Daily Pivot  11,472.90  75.90   
 61.8% Down from Intraday High  11,479.58  6.68   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  11,510.85  31.27   
 38.2% Down from Intraday High  11,542.12  31.27   
 Daily R1  11,567.45  25.33   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Open  11,643.35  75.90   
 High  11,643.35  0.00   Yes! The High is close to the Open.
 Weekly R1  11,661.03  17.68   Yes! The Weekly R1 is close to the High.
 Daily R2  11,737.90  76.87   
 Monthly R1  11,894.39  156.49   
 Weekly R2  11,925.07  30.68   
 Monthly R2  12,391.78  466.71   

Monday 10/17/11. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq on the daily scale.

I show a pic of the Nasdaq on the daily scale. Price has closed above the recent peak in September, suggesting a continued move higher.

However, there is nearby overhead resistance shown between the two red lines and between the two blue ones. I chose those based on peaks or valleys or just congestion regions (where price moves sideways).

This tells me that the upward move is ready for a breather. I expect a retrace before another move higher. The gap formed between Thursday and Friday's trading suggests it's an exhaustion gap. That bolsters the case of a retrace. If not, then I'm perfectly willing to watch the index move higher, adding profit to my portfolio.

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: Up 330.06 points.
Tuesday: Down 16.88 points.
Wednesday: Up 102.55 points.
Thursday: Down 40.72 points.
Friday: Up 166.36 points.

For the Week...

The Dow industrials were up 541.37 points or 4.9%.
The Nasdaq composite was up 188.5 points or 7.6%.
The S&P 500 index was up 69.12 points or 6.0%.

Year to Date...

Dow Industrials
     9.6% down from the high of 12,876.00 on 05/02/2011.
     11.9% up from the low of 10,404.49 on 10/04/2011.
Nasdaq
     7.6% down from the high of 2,887.75 on 05/02/2011.
     16.0% up from the low of 2,298.89 on 10/04/2011.
S&P 500
     10.7% down from the high of 1,370.58 on 05/02/2011.
     13.9% 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
Industrial production9:15 MB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 MB-Gauges economic activity, hints of inflation.
Producer price index8:30 TB-Measures wholesale goods cost. An indication of future inflation.
Consumer price index8:30 WB+Inflation report. Measures cost of goods and services.
Housing starts8:30 WB-Number of homes beginning construction.
Building permits8:30 WB-Measures building permits for new construction.
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.
Existing home sales10:00 ThCCounts sales of used homes.
Leading indicators10:00 ThD-Summary of already known reports.

Options Expiration

The following is courtesy of the Options Industry Council.

OptionDate
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).

Top

Swing and Position Traders: Chart Pattern Indicator

As of 10/14/2011, the CPI had:

1 bearish patterns,
162 bullish patterns,
378 patterns waiting for breakout.
The CPI signal is 99.4%, which is bullish (>= 65%).

The chart pattern indicator is bullish 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  11,422  11,533  11,590  11,701  11,758 
Weekly  10,923  11,284  11,465  11,826  12,008 
Monthly  9,990  10,817  11,232  12,059  12,474 
S&P 500 (^GSPC): Daily  1,199  1,212  1,218  1,231  1,237 
Weekly  1,136  1,180  1,202  1,247  1,269 
Monthly  1,025  1,125  1,175  1,275  1,324 
Nasdaq (^IXIC): Daily  2,625  2,647  2,657  2,678  2,689 
Weekly  2,470  2,569  2,618  2,717  2,767 
Monthly  2,176  2,422  2,545  2,791  2,914 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

Top

Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 3 weeks up 20.8%  Expect a reversal soon.
 1 month up 51.3%  Expect a random direction.
 S & P 500 (^GSPC) 2 weeks up 28.6%  The trend may continue.
 1 month up 53.5%  Expect a random direction.
 Nasdaq composite (^IXIC) 2 weeks up 25.4%  The trend may continue.
 1 month up 47.7%  Expect a random direction.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the 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: bearish.
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.

 Found Chart Pattern Name
56Double Bottom, Adam and Adam
19Head-and-shoulders top
18Pipe bottom
18Triangle, symmetrical
18Horn bottom
9Rectangle bottom
8Head-and-shoulders bottom
8Broadening bottom
8Pipe top
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. Electric Utility (East)1. Short ETFs
2. Household Products2. Household Products
3. Apparel3. Electric Utility (East)
4. Electric Utility (Central)4. Electric Utility (Central)
5. Computers and Peripherals5. Apparel
48. Insurance (Life)48. Human Resources
49. Cement and Aggregates49. Insurance (Life)
50. Homebuilding50. Homebuilding
51. Securities Brokerage51. Securities Brokerage
52. Coal52. Coal

-- Thomas Bulkowski

Top


Thursday 10/13/11. Trading Thursday: Nasdaq

The index climbed by 0.8% or 21.7 points. Since 02/05/1971 the index made 338 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 221 occasions.
     Average loss was -1.0% on 117 occasions.
Look for the index to close higher 65.4% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 5/10 or 50.0% of the time.
     The prediction of the index closing lower has been right 5/8 or 62.5% 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 first chart pattern that caught my eye was the descending triangle, shown above outlined in blue. Although I prefer at least five touches of the trendline and price, this one has only four. That's ok in a pinch and this pattern is well defined, too. The index broke out upward from this triangle and that was the buy signal.

Price threw back to the top triangle trendline around 2:00 before moving up to A. I can't see any sell signals at or near A, except maybe a 2B pattern, where A is near the prior peaks and it stalls. Clearly the height of the triangle would not be of help in this trade.

Looking ahead to tomorrow, a measured move down chart pattern appears at ABCD. After these stair-step patterns occur, price tends to retrace into the corrective phase (BC). That is what I expect.

Thus, my guess is that the index will close higher tomorrow (Thursday).

From the last two trading days, there is underlying support at 2,580 and 2550, so if the index drops instead, look for it to stall or even turn at those points.

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  2,171.18    
 Weekly S2  2,258.67  87.49   
 Monthly S1  2,387.96  129.29   
 Weekly S1  2,431.70  43.74   
 Weekly Pivot  2,471.92  40.22   
 Monthly Pivot  2,515.66  43.74   
 Daily S2  2,585.00  69.33   
 Daily S1  2,594.86  9.87   
 Low  2,602.31  7.45   
 Close  2,604.73  2.42   Yes! The Close is close to the Low.
 Open  2,606.61  1.88   Yes! The Open is close to the Close.
 Daily Pivot  2,612.18  5.57   
 61.8% Down from Intraday High  2,612.69  0.52   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  2,615.90  3.21   
 38.2% Down from Intraday High  2,619.11  3.21   
 Daily R1  2,622.04  2.94   
 High  2,629.49  7.45   
 Daily R2  2,639.36  9.87   
 Weekly R1  2,644.95  5.59   
 Weekly R2  2,685.17  40.22   
 Monthly R1  2,732.44  47.27   
 Monthly R2  2,860.14  127.71   

Wednesday 10/12/11. What's Hot Wednesday

Yesterday, I was doing my time trials on my bicycle where I go as fast as I can over a 14.6 mile course. I was struggling up a "roller" (hill) when this guy passes me on his bike.

I pass riders all the time, but it's rare for me to be passed. I pedaled as fast as my muscles would allow, but he still sped away. I justified it by thinking that he's younger, his bike is lighter, his shoes clip to his pedals (I just wear sneakers without any clips) and he probably does runs twice as long as mine (he's stronger). All of that is true, I think.

Today, I decided to really push it, striving for that rare 19+ mph average over the same distance. Normally, I can hit 18 mph but 19 is rare. Anyway, I hit 19.25, which is the fourth fastest this season (my record: 19.51 mph).

I felt as if I met him again and beat him. That's still a dream but it felt good nonetheless.


Tuesday 10/11/11. Trading Tuesday: Dow

Picture of the Dow industrials on the 5 minute scale.

The index climbed by 3.0% or 330.06 points. Since 10/01/1928 the index made 15 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 10 occasions.
     Average loss was -0.4% on 5 occasions.
Look for the index to close higher 66.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 11/14 or 78.6% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

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

With the large move up in the opening minutes of today's trading session, it compressed the view during the rest of the day's chart. Nevertheless, we can see that a potential double top at A and B extended into a triple top at C and then a quad top. Don't look for a chart pattern called a quad top, because it's a name I just made up.

Price confirmed the quad when it closed below the lowest low in the series, around 3:00. But the decline didn't last and price zipped higher in a straight-line move into the close.

What does this suggest about tomorrow's (Tuesday's) trading? We can see that if price drops, it will find support at those four tops, between 11,350 and 11,400, roughly. I expect some give back at the opening bell or in the first hour. After that, I'll go with the probabilities and expect to see a higher close. I'm skeptical of that, however. I can't believe that another gain can happen on top of a big day's move, but it's happened before. I might as well open my wallet with the hope that Mr. or Mrs. Market will fill it again with greenbacks (money).

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  9,983.57    
 Weekly S2  10,195.68  212.11   
 Monthly S1  10,708.37  512.69   
 Weekly S1  10,814.43  106.06   
 Daily S2  10,994.92  180.49   
 Weekly Pivot  11,023.24  28.32   Yes! The Weekly Pivot is close to the Daily S2.
 Low  11,104.56  81.32   
 Open  11,104.56  0.00   Yes! The Open is close to the Low.
 Monthly Pivot  11,129.30  24.74   Yes! The Monthly Pivot is close to the Open.
 Daily S1  11,214.05  84.75   
 61.8% Down from Intraday High  11,230.15  16.10   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  11,268.95  38.79   
 38.2% Down from Intraday High  11,307.74  38.79   
 Daily Pivot  11,323.69  15.95   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  11,433.18  109.49   
 High  11,433.33  0.15   Yes! The High is close to the Close.
 Daily R1  11,542.82  109.49   
 Weekly R1  11,641.99  99.17   
 Daily R2  11,652.46  10.47   Yes! The Daily R2 is close to the Weekly R1.
 Weekly R2  11,850.80  198.34   
 Monthly R1  11,854.10  3.30   Yes! The Monthly R1 is close to the Weekly R2.
 Monthly R2  12,275.03  420.92   

Monday 10/10/11. Market Monday: The Week Ahead

My Prediction

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

This week I show the S&P 500 index on the daily scale. Yes, as I have reported before, there is a head-and-shoulders top chart pattern at L (left shoulder), H (head), and R (right shoulder). The red line is the neckline. A close below the neckline (which happened at B) confirms the head-and-shoulders top as a valid chart pattern. It means price is going down.

Surprise! Price did drop but not much, did it? Certainly not at B. The height of the head-and-shoulders from the head to the neckline directly below is the measure. I show that with a thick green line from H to D. Subtract the height of that line from the breakout price at B, and it extends lower than E.

Price has not met the full-height target. I could explain more about this, where you adjust the height by how often the full measure works, but let's look at the rounded turn.

Price forms a rounding top chart pattern shown by the blue line. I found that rounding tops breakout upward 53% of the time in a bull market. A breakout will not occur until price closes above the top of the chart pattern (H), so we have a long way to go.

Is the C to A move just a pullback?. It looks likely to me. The height of the candles are getting shorter with the color changing from white (bullish) to black (bearish).

In the coming week, we could see the index head back down to C. My guess is it will make it about half way down (to the low at B) before reversing, forming a small head-and-shoulders bottom chart pattern. If I'm wrong, then look for the index to continue moving higher toward the price at H. That would be sweet!

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 258.08 points.
Tuesday: Up 153.41 points.
Wednesday: Up 131.24 points.
Thursday: Up 183.38 points.
Friday: Down 20.21 points.

For the Week...

The Dow industrials were up 189.74 points or 1.7%.
The Nasdaq composite was up 63.95 points or 2.6%.
The S&P 500 index was up 24.04 points or 2.1%.

Year to Date...

Dow Industrials
     13.8% down from the high of 12,876.00 on 05/02/2011.
     6.7% up from the low of 10,404.49 on 10/04/2011.
Nasdaq
     14.1% down from the high of 2,887.75 on 05/02/2011.
     7.8% up from the low of 2,298.89 on 10/04/2011.
S&P 500
     15.7% down from the high of 1,370.58 on 05/02/2011.
     7.5% 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
FOMC Minutes2:00 T?Minutes of the prior Federal Reserve meeting.
Initial jobless claims8:30 WC+Counts people filing for state unemployment benefits.
Trade balance8:30 ThC+Signals balance of exports & imports.
Crude inventories10:30 Th?My guess: Measures oil inventory.
Treasury budget2:00 ThDTracks budget deficit. Important in April (tax filing).
Retail sales8:30 FA-Reports total retail sales (not services). Are people spending?
International trade8:30 FC+Import/export prices, trade balance. US economy vs others.
Business inventories10:00 FC-Reports manufacturing, wholesale, retail inventories.

Options Expiration

No options expire this week.

Top

Swing and Position Traders: Chart Pattern Indicator

As of 10/07/2011, the CPI had:

2 bearish patterns,
8 bullish patterns,
344 patterns waiting for breakout.
The CPI signal is 80.0%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  10,948  11,025  11,129  11,206  11,310 
Weekly  10,086  10,594  10,913  11,422  11,741 
Monthly  9,874  10,488  11,019  11,634  12,165 
S&P 500 (^GSPC): Daily  1,138  1,147  1,159  1,168  1,180 
Weekly  1,037  1,096  1,134  1,193  1,231 
Monthly  1,005  1,080  1,150  1,226  1,296 
Nasdaq (^IXIC): Daily  2,443  2,461  2,487  2,505  2,530 
Weekly  2,217  2,348  2,430  2,561  2,643 
Monthly  2,129  2,304  2,474  2,649  2,818 
  • 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 up 30.4%  The trend may continue.
 1 month up 51.3%  Expect a random direction.
 S & P 500 (^GSPC) 1 week up 40.4%  Expect a random direction.
 1 month up 53.5%  Expect a random direction.
 Nasdaq composite (^IXIC) 1 week up 39.7%  The trend may continue.
 1 month up 47.7%  Expect a random direction.

How long can an index close higher (or lower) each day? The adjacent table shows how often consecutive up or down closes occur in the 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: bearish.
Nasdaq Composite: bearish.
S&P 500 Index: bearish.
Dow Transports: bearish.
Dow Utilities: bullish.

Top

Earnings, Chart Patterns & Industries

Earnings season will be starting in about 4 days.

 Found Chart Pattern Name
65Head-and-shoulders top
37Triangle, symmetrical
22Double Bottom, Adam and Adam
17Double Top, Adam and Adam
14Head-and-shoulders bottom
12Broadening bottom
10Horn top
9Rectangle bottom
7Pipe bottom
7Pipe 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. Short ETFs1. Short ETFs
2. Household Products2. Household Products
3. Electric Utility (East)3. Electric Utility (East)
4. Electric Utility (Central)4. Electric Utility (Central)
5. Apparel5. Drug
48. Human Resources48. Cement and Aggregates
49. Insurance (Life)49. Homebuilding
50. Homebuilding50. Securities Brokerage
51. Securities Brokerage51. Human Resources
52. Coal52. Coal

-- Thomas Bulkowski

Top


Thursday 10/6/11. Trading Thursday: Nasdaq

Picture of the Nasdaq composite on the 5 minute scale.

The index climbed by 2.3% or 55.69 points. Since 02/05/1971 the index made 22 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 15 occasions.
     Average loss was -1.3% on 7 occasions.
Look for the index to close higher 68.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 4/9 or 44.4% of the time.
     The prediction of the index closing lower has been right 5/8 or 62.5% of the time.

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

The index climbed almost from the open, leading to peak C. Then it made a higher peak at A. To me, the CA move looks like the left shoulder and head of a head-and-shoulders top. Price retraced after A and then started climbing to form a right shoulder.

However, the index climbed to B and then continued moving up. That signaled a strong push higher. Those of you familiar with the 2B top will recognize that it busted. Busted patterns tend to perform well. An upward channel takes hold and pushes the index higher (the two parallel red lines).

What will happen tomorrow? On the 10-day scale, the index is bumping up against overhead resistance. My guess is it will struggle pushing through it. I think that the move up will end. Despite the probabilities suggesting the index will close higher, I expect it to wobble throughout the day, trying to move up, but close lower.

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

-- Thomas Bulkowski

Top 

© 2011 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,238.28    
 Weekly S2  2,312.97  74.69   
 Monthly S1  2,349.40  36.43   
 Daily S2  2,350.45  1.05   Yes! The Daily S2 is close to the Monthly S1.
 Low  2,380.96  30.51   
 Weekly S1  2,386.74  5.78   Yes! The Weekly S1 is close to the Low.
 Open  2,398.37  11.63   
 Daily S1  2,405.48  7.11   Yes! The Daily S1 is close to the Open.
 61.8% Down from Intraday High  2,413.64  8.16   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  2,423.73  10.09   
 38.2% Down from Intraday High  2,433.82  10.09   
 Daily Pivot  2,435.99  2.17   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  2,460.51  24.52   
 High  2,466.50  5.99   Yes! The High is close to the Close.
 Weekly Pivot  2,488.84  22.34   
 Daily R1  2,491.02  2.18   Yes! The Daily R1 is close to the Weekly Pivot.
 Monthly Pivot  2,496.38  5.36   Yes! The Monthly Pivot is close to the Daily R1.
 Daily R2  2,521.53  25.15   
 Weekly R1  2,562.61  41.08   
 Monthly R1  2,607.50  44.89   
 Weekly R2  2,664.71  57.21   
 Monthly R2  2,754.48  89.77   

Tuesday 10/4/11. Trading Tuesday: Dow

Picture of the Dow industrials on the 5 minute scale.

The index dropped by -2.4% or -258.08 points. Since 10/01/1928 the index made 54 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 2.3% on 28 occasions.
     Average loss was -1.0% on 26 occasions.
Look for the index to close higher 51.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 10/13 or 76.9% of the time.
     The prediction of the index closing lower has been right 3/4 or 75.0% of the time.

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

The index found support at A and B but never closed above the red line. That means A and B are just squiggles on a chart and not a double bottom. When price closed below the lower of AB, it represented a good shorting opportunity.

Fast forward to 2:00. Price bottoms at C then D and E. This time, however, the index closed above the peak shown by the red line. That occurred at F. When the index failed to move higher and closed below the low at D, it busted the triple bottom. That means another drop in the index. However, the market closed before the new decline really got going.

Looking forward, the probabilities say that the index is going to close higher. Every time I have gone against that advice, I've been wrong. Thus, I expect the index to open weak and then recover later in the day. Look for the index to close the day higher. Check the futures before the open to help gauge the opening direction, too.

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  9,870.06    
 Monthly S1  10,262.68  392.62   
 Weekly S2  10,334.61  71.93   
 Daily S2  10,436.76  102.15   
 Weekly S1  10,494.95  58.19   
 Daily S1  10,546.03  51.08   
 Low  10,653.34  107.31   
 Close  10,655.30  1.96   Yes! The Close is close to the Low.
 Daily Pivot  10,762.61  107.31   
 61.8% Down from Intraday High  10,777.81  15.20   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  10,816.26  38.45   
 38.2% Down from Intraday High  10,854.71  38.45   
 Daily R1  10,871.88  17.17   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Open  10,912.10  40.22   
 Weekly Pivot  10,932.13  20.03   Yes! The Weekly Pivot is close to the Open.
 High  10,979.19  47.06   
 Monthly Pivot  10,989.76  10.57   Yes! The Monthly Pivot is close to the High.
 Daily R2  11,088.46  98.70   
 Weekly R1  11,092.47  4.01   Yes! The Weekly R1 is close to the Daily R2.
 Monthly R1  11,382.38  289.91   
 Weekly R2  11,529.65  147.27   
 Monthly R2  12,109.46  579.81   

Monday 10/3/11. Market Monday: The Week Ahead

Picture of the Dow industrials on the daily scale.

My Prediction

I show a picture of the Dow industrials on the daily scale. A head-and-shoulders top appears as labeled and similar patterns appear in the other indices. The pattern confirms when price closes below the blue neckline near C. However, this pattern doesn't have any up trend to reverse, so price stalls out.

Notice the bottoms A and B. Point C reminds me of A, so I expect the index to form another bottom like B, at D. It's uncanny how often these price mirrors work (but this one might not, so keep that in mind).

To the right of the green line is my guess as to what price could do in the future. Thus, look for another down day but a reversal soon (at D), which sends price recovering.

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: Up 272.38 points.
Tuesday: Up 146.83 points.
Wednesday: Down 179.79 points.
Thursday: Up 143.08 points.
Friday: Down 240.6 points.

For the Week...

The Dow industrials were up 141.9 points or 1.3%.
The Nasdaq composite was down 67.83 points or 2.7%.
The S&P 500 index was down 5.01 points or 0.4%.

Year to Date...

Dow Industrials
     15.2% down from the high of 12,876.00 on 05/02/2011.
     3.0% up from the low of 10,597.14 on 09/22/2011.
Nasdaq
     16.4% down from the high of 2,887.75 on 05/02/2011.
     3.6% up from the low of 2,331.65 on 08/09/2011.
S&P 500
     17.4% down from the high of 1,370.58 on 05/02/2011.
     2.7% up from the low of 1,101.54 on 08/09/2011.

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
Construction spending10:00 MDCovers residential/non-residential/public spending on new construction.
Auto & truck sales3:00 MC-Monthly sales of domestically produced vehicles.
Factory orders10:00 TD+Durable/non-durable goods orders w/factory inventories.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Wholesale inventories10:00 FD-Wholesale sales and inventory statistics.
Consumer credit3:00 FD-Measures auto, credit card and other debt.

Options Expiration

No options expire this week.

Top

Swing and Position Traders: Chart Pattern Indicator

As of 09/30/2011, the CPI had:

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

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  10,749  10,831  10,992  11,074  11,235 
Weekly  10,421  10,667  11,018  11,265  11,616 
Monthly  9,956  10,435  11,076  11,554  12,195 
S&P 500 (^GSPC): Daily  1,112  1,122  1,141  1,150  1,169 
Weekly  1,088  1,110  1,153  1,174  1,218 
Monthly  1,042  1,087  1,159  1,203  1,275 
Nasdaq (^IXIC): Daily  2,379  2,397  2,433  2,451  2,487 
Weekly  2,298  2,357  2,474  2,533  2,650 
Monthly  2,223  2,319  2,481  2,577  2,739 
  • 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 up 43.0%  Expect a random direction.
 5 months down 3.9%  Expect a reversal soon.
 S & P 500 (^GSPC) 2 weeks down 20.5%  Expect a reversal soon.
 5 months down 0.0%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 2 weeks down 21.9%  Expect a reversal soon.
 5 months down 1.9%  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: bearish.
Nasdaq Composite: bearish.
S&P 500 Index: bearish.
Dow Transports: bearish.
Dow Utilities: bullish.

Top

Earnings, Chart Patterns & Industries

Earnings season will be starting in about 12 days.

 Found Chart Pattern Name
60Head-and-shoulders top
45Triangle, symmetrical
17Head-and-shoulders bottom
14Broadening bottom
14Double Top, Adam and Adam
10Double Bottom, Adam and Adam
9Pipe top
8Rectangle bottom
8Horn top
6Falling wedge

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. Short ETFs
2. Household Products2. Electric Utility (East)
3. Electric Utility (East)3. Household Products
4. Electric Utility (Central)4. Apparel
5. Drug5. Shoe
48. Cement and Aggregates48. Insurance (Life)
49. Homebuilding49. Securities Brokerage
50. Securities Brokerage50. Human Resources
51. Human Resources51. Homebuilding
52. Coal52. Coal

-- Thomas Bulkowski

Top

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.