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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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Patterns
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Patterns
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 04/25/2017
20,996 232.23 1.1%
9,249 -33.57 -0.4%
708 -0.61 -0.1%
6,025 41.67 0.7%
2,389 14.46 0.6%
YTD
6.2%
2.3%
7.4%
11.9%
6.7%
Tom's Targets    Overview: 04/17/2017
20,100 or 21,150 by 05/01/2017
8,500 or 9,500 by 05/01/2017
725 or 685 by 05/01/2017
6,150 or 5,900 by 05/15/2017
2,275 or 2,425 by 05/01/2017
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 2012 Headlines


Archives


Wednesday 10/31/12. Cat Attack.

Picture of the my dog on the daily scale.

The town where I live has a leash law. That means both dogs and cats must be on a leash. Yet, the neighbor's cat has begun using my garden as a litter box.

What's worse is my dog discovered the, um, deposits (sounds like a bank, doesn't it?) and tried to eat it. I yelled. She spit it out. Judging by her expression, she had the same reaction I did. Yuck.

I sprayed the area with repellant that was years old. It came out of the can in a small stream (the compressed air is mostly discharged despite the can being half full) and it took 5 minutes before the gas was completely gone.

If that doesn't work, I'm going to use the ant killer I bought last week. You know the one that smells like rotten eggs. I suspect it doesn't kill the ants, just chases them away.

I'm hoping it'll work that way on that cat, too.

-- Thomas Bulkowski


Tuesday 10/30/12. Market Monday on Mon-Wed: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

The markets are supposed to be closed on Monday and Tuesday because of the hurricane...(it's Sunday evening as I write this).

The breakout is upward 51% of the time, so that's about random. This one broke out downward by closing below the lower blue line. That may depend on how accurate you draw the line, of course. Since the breakout, a knot of congestion has formed.

That knot is just above a small support area which I show as a red line. The start of that line is really the bottom of an ascending scallop chart pattern. I don't discuss those much or catalog them because they occur so often. They become a pain when you look at 700 or so securities.

Anyway, the red line shows support so I think that the index will turn around and move higher soon. That's debatable since we are at the start of earnings season and the Dow has already dropped because of weak earnings. That suggests more weakness as other companies report. Thus, the index could fall through support and drop to 12,500, the bottom of the loose congestion region in the June to July area. Hope for the best but plan for the worst.

$ $ $

On the Allstate position I sold on Friday, I made 24% on one trade and 40% on the other. That's after I added in the dividend payments, so that's different from the 30% I reported earlier.

I still think that the stock represents a buying opportunity, but maybe after the weather clears and maybe after the quarter ends, too (to factor in the losses from Sandy). I think that hurricanes push the stock lower but less than you might think, and with the stock strong, I may have sold too soon.

Well, someone has to fund government spending.

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 2.38 points.
Tuesday: Down 243.36 points.
Wednesday: Down 25.19 points.
Thursday: Up 26.34 points.
Friday: Up 3.53 points.

For the Week...

The Dow industrials were down 236.3 points or 1.8%.
The Nasdaq composite was down 17.67 points or 0.6%.
The S&P 500 index was down 21.25 points or 1.5%.

Year to Date...

Dow Industrials
     4.1% down from the high of 13,661.87 on 10/05/2012.
     8.9% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     6.5% down from the high of 3,196.93 on 09/21/2012.
     13.7% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     4.2% down from the high of 1,474.51 on 09/14/2012.
     12.2% up from the low of 1,258.86 on 01/03/2012.

Top

Economic Reports

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

ReportTimeA-F
Rating
Description
Personal income & consumption8:30 MC+Measures sources of income to predict future demand.
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Chicago purchasing managers index9:45 WBMonitors regional manufacturing activity.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Productivity & costs8:30 ThD+Cost of producing a unit of output.
Construction spending10:00 ThDCovers residential/non-residential/public spending on new construction.
Auto & truck sales2:00 ThC-Monthly sales of domestically produced vehicles.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Factory orders10:00 FD+Durable/non-durable goods orders w/factory inventories.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 10/26/2012, the CPI had:

11 bearish patterns,
6 bullish patterns,
258 patterns waiting for breakout.
The CPI signal is 35.3%, which is neutral (between 35% and 65%).

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  12,988  13,048  13,100  13,159  13,211 
Weekly  12,843  12,975  13,172  13,304  13,501 
Monthly  12,648  12,877  13,270  13,499  13,892 
S&P 500 (^GSPC): Daily  1,397  1,404  1,411  1,418  1,425 
Weekly  1,385  1,398  1,417  1,431  1,449 
Monthly  1,361  1,386  1,429  1,454  1,496 
Nasdaq (^IXIC): Daily  2,945  2,966  2,983  3,004  3,021 
Weekly  2,930  2,959  2,990  3,019  3,049 
Monthly  2,827  2,907  3,042  3,122  3,257 
  • 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 30.4%  The trend may continue.
 1 month down 20.3%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week down 30.8%  The trend may continue.
 1 month down 21.9%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 3 weeks down 15.4%  Expect a reversal soon.
 1 month down 27.7%  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: bullish.
S&P 500 Index: bullish.
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
25Head-and-shoulders top
13Triangle, symmetrical
9Rectangle top
7Dead-cat bounce
7Pipe bottom
6Head-and-shoulders bottom
6Channel
6Broadening wedge, descending
6Triangle, ascending
5Double Top, Adam and Adam

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

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

 

 

 

 

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

This WeekLast Week
1. Homebuilding1. Homebuilding
2. Chemical (Specialty)2. Natural Gas (Diversified)
3. Cement and Aggregates3. Cement and Aggregates
4. Insurance (Prop/Casualty)4. Insurance (Prop/Casualty)
5. Biotechnology5. Chemical (Specialty)
48. Petroleum (Producing)48. Furn/Home Furnishings
49. Semiconductor Cap Equip.49. Shoe
50. Semiconductor50. Semiconductor Cap Equip.
51. Shoe51. Semiconductor

-- Thomas Bulkowski

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Friday 10/26/12. Neighborhood Shooting.

Picture of a flower.

Late Thursday afternoon, I heard a helicopter sound like it was landing or taking off. That happens from time to time for serious traffic accidents. A medical helicopter arrives and carries away the injured.

I didn't see anything and so ignored the sound but it didn't go away. So, I looked out my window and there was a helicopter hovering about 1/3 mile away. Then another appeared and soon, a third one showed up, all of them down wind from my house.

That's when I turned on my TV. This morning (Friday), I received a more complete story.

A shoplifter in the nearby department store (which is a magnet for shoplifters, judging by how often they are caught) was being held down by store security. Then the police arrived and a struggle ensued.

Four bullet holes later, the shoplifter is dead. And you know what? I'm not bothered by this one bit. At least the shoplifter won't be committing any more crimes. My thoughts go to the officer that pulled the trigger. I'm sure taking a life is never an easy choice and the memory of the event will linger. Wouldn't it be nice if everyone could just get along and not break the law?

$ $ $

On another note, I sold two stocks this morning at the open, Allstate and Arrowhead Research. The first was to capture a 30% gain before the hurricane puts a dent in its upward stock trajectory. They have been doing TV advertising for a few months, and that's going to hurt profits, too. I figured it was time to take my money to the bank.

As for the second stock, it's a dog that I decided to sell before they announce a reverse split. The split is probably months to a year away and anything can happen, but I need the loss to whittle down the profits I've booked this year. Fortunately, this was a small position (smaller than it used to be anyway).

-- Thomas Bulkowski


Thursday 10/25/12. Trading Thursday: Nasdaq

The index dropped by -0.3% or -8.76 points. Since 02/05/1971 the index made 428 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.1% on 222 occasions.
     Average loss was -0.9% on 206 occasions.
Expect 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 26/44 or 59.1% of the time.
     The prediction of the index closing lower has been right 15/28 or 53.6% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

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

A down-sloping channel appears at A. Price broke out upward from this channel when the index closed above the top trendline. That was the buy signal.

Following that, a double top appeared at BC. Since a candle with a long lower shadow appeared at C, it took the index until the blue line to confirm the double top as a valid chart pattern. By then, it didn't leave much time left for the index to drop. Indeed, the index moved slightly down to sideways in the last hour.

Looking to Thursday's close on the daily chart, I see the index resting on support setup by a loose congestion area I already discussed in Monday's post. I still see that as having an influence. Although the earnings season is weaker than I expected, I am still bullish. However, it's also October which has historically been a weak performing month, too. November and December, I think, will be stronger months. I look for a higher close tomorrow, unless something happens overnight to change that analysis.

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

-- Thomas Bulkowski

Top

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,862.97    
 Weekly S2  2,919.29  56.32   
 Monthly S1  2,922.34  3.04   Yes! The Monthly S1 is close to the Weekly S2.
 Weekly S1  2,950.50  28.16   
 Daily S2  2,956.91  6.41   
 Daily S1  2,969.30  12.40   
 Low  2,978.73  9.43   
 Close  2,981.70  2.97   Yes! The Close is close to the Low.
 Daily Pivot  2,991.13  9.43   
 61.8% Down from Intraday High  2,991.80  0.68   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  2,995.84  4.04   
 38.2% Down from Intraday High  2,999.88  4.04   
 Daily R1  3,003.52  3.65   
 Open  3,011.82  8.30   
 High  3,012.95  1.13   Yes! The High is close to the Open.
 Daily R2  3,025.35  12.40   
 Weekly Pivot  3,031.47  6.13   
 Monthly Pivot  3,059.63  28.16   
 Weekly R1  3,062.68  3.04   Yes! The Weekly R1 is close to the Monthly Pivot.
 Monthly R1  3,119.00  56.32   
 Weekly R2  3,143.65  24.66   
 Monthly R2  3,256.29  112.64   

Picture of my dog.

Wednesday 10/24/12. I Need Your Help!

To those of you that have read one of my books, I'm asking for a favor.

I'd like you to go to your favorite book e-retailer (Barnes and noble, Amazon.com) and post a review of one of my books.

You may find it helpful to read the review with the fewest stars and rebut that in your comments. I find that the reviews with the fewest stars are often wrong or their expectations too high or inappropriate for the style of the book.

Your positive comments discussing the bad review may help guide their buying decision.

Thanks.

-- Thomas Bulkowski


Tuesday 10/23/12. Trading Tuesday: Dow

The index climbed by 0.0% or 2.38 points. Since 10/01/1928 the index made 1168 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 618 occasions.
     Average loss was -0.7% on 550 occasions.
Expect the index to close higher 52.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 32/52 or 61.5% of the time.
     The prediction of the index closing lower has been right 10/16 or 62.5% 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 index formed a potential double bottom at AB. This failed at C when the index closed below the bottom of the AB valleys. That powered the index lower. But, in the last hour, the index made a strong recovery.

Knowing that yahoo beat expectations after the close, that should provide a reason for the index to go higher (but more so on the Nasdaq). With the probabilities suggesting a higher close, I am leaning that way, too.

On the daily chart, the index has hit the bottom trendline of a broadening formation, right-angled and descending pattern. That suggests the index will bounce higher and that's what I expect tomorrow -- 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

Top

© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  13,069.29    
 Weekly S2  13,139.10  69.81   
 Daily S2  13,183.13  44.03   
 Monthly S1  13,207.59  24.46   
 Low  13,235.15  27.56   
 Weekly S1  13,242.50  7.35   Yes! The Weekly S1 is close to the Low.
 Daily S1  13,264.51  22.01   
 61.8% Down from Intraday High  13,286.11  21.60   
 50% Down from Intraday High  13,301.85  15.74   
 Daily Pivot  13,316.53  14.68   
 38.2% Down from Intraday High  13,317.59  1.06   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Open  13,344.28  26.69   
 Close  13,345.89  1.61   Yes! The Close is close to the Open.
 High  13,368.55  22.66   
 Daily R1  13,397.91  29.36   
 Weekly Pivot  13,415.61  17.70   
 Monthly Pivot  13,434.73  19.12   
 Daily R2  13,449.93  15.20   
 Weekly R1  13,519.01  69.08   
 Monthly R1  13,573.03  54.02   
 Weekly R2  13,692.12  119.09   
 Monthly R2  13,800.17  108.05   

Monday 10/22/12. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq composite on the daily scale.

I show a head-and-shoulders top (LS = left shoulder, H = head, RS = right shoulder) on the daily chart of the Nasdaq composite.

The pattern confirmed as a valid reversal after Friday's 67+ point drop in the index (205 on the Dow). That means the index is headed lower, but how far?

I show a loose support region highlighted by the two blue lines. The loose looking support is that cluster between June and August where the index cycled up and down, seemingly without direction (except for sideways).

With such a large drop, that suggests the index is going to retrace that drop. Coupled with underlying support, the combination suggests this is going to be a short-term event.

However, this is earnings season. If earnings continue to come in weak, then the index will plummet. Strong earnings and we should see the index make new highs or at least recover.

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 95.38 points.
Tuesday: Up 127.55 points.
Wednesday: Up 5.22 points.
Thursday: Down 8.06 points.
Friday: Down 205.43 points.

For the Week...

The Dow industrials were up 14.66 points or 0.1%.
The Nasdaq composite was down 38.49 points or 1.3%.
The S&P 500 index was up 4.6 points or 0.3%.

Year to Date...

Dow Industrials
     2.3% down from the high of 13,661.87 on 10/05/2012.
     10.9% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     6.0% down from the high of 3,196.93 on 09/21/2012.
     14.4% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     2.8% down from the high of 1,474.51 on 09/14/2012.
     13.8% up from the low of 1,258.86 on 01/03/2012.

Top

Economic Reports

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

ReportTimeA-F
Rating
Description
New home sales10:00 WC+Shows sales of single-family homes.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Rate decision2:15 W?The Federal Reserves reports on interest rate changes.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Durable goods orders8:30 ThBMeasures orders, shipments of goods with lifespans >3 years.
Gross domestic product8:30 FBMeasures economic activity; GDP deflator measures inflation.
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 10/19/2012, the CPI had:

52 bearish patterns,
5 bullish patterns,
206 patterns waiting for breakout.
The CPI signal is 8.8%, which is bearish (<= 35%).

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  13,167  13,255  13,400  13,489  13,634 
Weekly  13,138  13,241  13,415  13,517  13,691 
Monthly  13,068  13,206  13,434  13,571  13,799 
S&P 500 (^GSPC): Daily  1,413  1,423  1,440  1,450  1,468 
Weekly  1,405  1,419  1,441  1,456  1,478 
Monthly  1,398  1,415  1,443  1,461  1,489 
Nasdaq (^IXIC): Daily  2,958  2,982  3,024  3,048  3,090 
Weekly  2,927  2,966  3,039  3,079  3,152 
Monthly  2,871  2,938  3,068  3,135  3,264 
  • 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.
 1 month down 20.3%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week up 42.4%  Expect a random direction.
 1 month down 21.9%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 2 weeks down 22.3%  Expect a reversal soon.
 1 month down 27.7%  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: bullish.
S&P 500 Index: bullish.
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.

 Found Chart Pattern Name
16Triangle, symmetrical
14Head-and-shoulders top
7Pipe bottom
6Rectangle top
6Triangle, ascending
5Broadening wedge, descending
5Dead-cat bounce
5Falling wedge
5Broadening top
4Flag, 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. Homebuilding1. Homebuilding
2. Natural Gas (Diversified)2. Biotechnology
3. Cement and Aggregates3. Natural Gas (Diversified)
4. Insurance (Prop/Casualty)4. Chemical (Specialty)
5. Chemical (Specialty)5. Insurance (Prop/Casualty)
48. Furn/Home Furnishings48. Human Resources
49. Shoe49. Furn/Home Furnishings
50. Semiconductor Cap Equip.50. Semiconductor Cap Equip.
51. Semiconductor51. Semiconductor

-- Thomas Bulkowski

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Thursday 10/18/12. Trading Thursday: Nasdaq

The index climbed by 0.1% or 2.95 points. Since 02/05/1971 the index made 592 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 330 occasions.
     Average loss was -0.9% on 262 occasions.
Expect the index to close higher 55.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 26/43 or 60.5% of the time.
     The prediction of the index closing lower has been right 15/28 or 53.6% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

After a strong opening, the index consolidated in a pennant or falling wedge (ending at A).

Following that, a rounded turn from A to B appeared. This one has not broken out yet (a close above the top or bottom of the pattern represents the breakout).

Looking to Thursday's close, the probabilities say it will close higher. The index is pulling back to a head-and-shoulders top that began in early September. That suggests the index will go down, but when the pullback will complete is not clear.

Another interpretation, among many, is that the index is going to bump up against a down-sloping trendline formed by the two recent peaks (daily chart). That trendlines also forms a channel. The trendline suggests there is at least another day of up movement yet to come.

On the 10-day, 5-minute chart, the index has reached overhead resistance setup by a strong horizontal consolidation region from a week ago Monday. It hit that resistance and dropped in the rounding turn, shown in the chart.

Since I have no idea what is going to happen tomorrow, I'll vote with the probabilities and look for a higher close on Thursday.

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

-- Thomas Bulkowski

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,956.19    
 Weekly S2  3,003.82  47.63   
 Monthly S1  3,030.16  26.34   
 Weekly S1  3,053.97  23.81   
 Daily S2  3,077.14  23.17   
 Low  3,088.05  10.91   
 Weekly Pivot  3,089.73  1.68   Yes! The Weekly Pivot is close to the Low.
 Daily S1  3,090.63  0.90   Yes! The Daily S1 is close to the Weekly Pivot.
 Open  3,091.38  0.75   Yes! The Open is close to the Daily S1.
 61.8% Down from Intraday High  3,097.37  5.99   
 50% Down from Intraday High  3,100.25  2.88   
 Daily Pivot  3,101.54  1.29   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  3,103.13  1.59   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  3,104.12  0.99   Yes! The Close is close to the 38.2% Down from Intraday High.
 High  3,112.45  8.33   
 Monthly Pivot  3,113.54  1.09   Yes! The Monthly Pivot is close to the High.
 Daily R1  3,115.03  1.49   Yes! The Daily R1 is close to the Monthly Pivot.
 Daily R2  3,125.94  10.91   
 Weekly R1  3,139.88  13.94   
 Weekly R2  3,175.64  35.76   
 Monthly R1  3,187.51  11.87   
 Monthly R2  3,270.89  83.39   

Tuesday 10/16/12. Trading Tuesday: Dow

The index climbed by 0.7% or 95.38 points. Since 10/01/1928 the index made 614 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 336 occasions.
     Average loss was -0.7% on 278 occasions.
Expect the index to close higher 54.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 31/51 or 60.8% of the time.
     The prediction of the index closing lower has been right 10/16 or 62.5% 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 Dow showed a symmetrical triangle early in the session. This is not a good looking pattern since it only has two touches on the bottom, but has plenty on the top to make up for it. Nevertheless, the index climbed far enough to make it a profitable trade.

Following that, a small double top at AB confirmed when the index closed below the green line. The double top became a triple top when the index closed below the blue line. The two patterns didn't amount to much of a decline in the index, but the height of the two didn't suggest a big move anyway.

Will tomorrow (Tuesday) close higher or lower? The probability says it will close higher than today. On the daily chart, the index is pulling back to the bottom of a confirmed double top pattern. It looks to move higher for a few days before heading back down. That scenario only plays out 47% of the time, so it's more likely that the index will just continue moving higher.

Intraday, the 10-day, 5-minute chart shows the index hitting overhead resistance. It's been my experience that the intraday chart is less reliable than the daily chart, so I'm going to bet for a higher close 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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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  13,035.35    
 Weekly S2  13,129.73  94.38   
 Monthly S1  13,229.79  100.06   
 Weekly S1  13,276.98  47.19   
 Daily S2  13,284.25  7.27   Yes! The Daily S2 is close to the Weekly S1.
 Low  13,325.96  41.71   
 Open  13,329.54  3.58   Yes! The Open is close to the Low.
 Daily S1  13,354.24  24.70   
 61.8% Down from Intraday High  13,368.63  14.39   
 50% Down from Intraday High  13,381.81  13.18   
 38.2% Down from Intraday High  13,394.99  13.18   
 Daily Pivot  13,395.95  0.96   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  13,424.23  28.28   
 High  13,437.66  13.43   
 Weekly Pivot  13,443.68  6.02   Yes! The Weekly Pivot is close to the High.
 Monthly Pivot  13,445.83  2.15   Yes! The Monthly Pivot is close to the Weekly Pivot.
 Daily R1  13,465.94  20.11   
 Daily R2  13,507.65  41.71   
 Weekly R1  13,590.93  83.28   
 Monthly R1  13,640.27  49.34   
 Weekly R2  13,757.63  117.36   
 Monthly R2  13,856.31  98.68   

Monday 10/15/12. Market Monday: The Week Ahead

My Prediction

Picture of the Dow utilities on the daily scale.

I show the Dow utilities on the daily scale.

This picture worries me. Why? Because it tells me that the index could perform a measured move down pattern.

In that pattern, price drops (A to B) and then corrects (B to C) followed by a resumption of the move down. If that happens and it obeys the typical scenario, that means the index at C will drop the same amount as the AB drop.

However, the chart shows support in the curving turn directly below B. That congestion area looks formidable enough that it should stop a decline that far. Plus, I expect the markets to rebound shortly anyway, so that will help power a move upward instead. I could be wrong, of course...

$ $ $

I read in the local newspaper about a financial consultant that suggested investors take profits this year (instead of pushing the income into next year) and take the tax hit because capital gain tax rates will likely increase next year. That's an interesting observation worth thinking about that applies most to high net-worth individuals.

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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 26.5 points.
Tuesday: Down 110.12 points.
Wednesday: Down 128.56 points.
Thursday: Down 18.58 points.
Friday: Up 2.46 points.

For the Week...

The Dow industrials were down 281.3 points or 2.1%.
The Nasdaq composite was down 92.08 points or 2.9%.
The S&P 500 index was down 32.34 points or 2.2%.

Year to Date...

Dow Industrials
     2.4% down from the high of 13,661.87 on 10/05/2012.
     10.7% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     4.8% down from the high of 3,196.93 on 09/21/2012.
     15.9% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     3.1% down from the high of 1,474.51 on 09/14/2012.
     13.5% up from the low of 1,258.86 on 01/03/2012.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Retail sales8:30 MA-Reports total retail sales (not services). Are people spending?
Business inventories10:00 MC-Reports manufacturing, wholesale, retail inventories.
Consumer price index8:30 TB+Inflation report. Measures cost of goods and services.
Industrial production9:15 TB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 TB-Gauges economic activity, hints of inflation.
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.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Leading indicators10:00 ThD-Summary of already known reports.
Existing home sales10:00 FCCounts sales of used homes.

Options Expiration

The following is courtesy of the Options Industry Council.

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

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

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Swing and Position Traders: Chart Pattern Indicator

As of 10/12/2012, the CPI had:

30 bearish patterns,
4 bullish patterns,
308 patterns waiting for breakout.
The CPI signal is 11.8%, 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  13,237  13,283  13,342  13,388  13,447 
Weekly  13,098  13,213  13,412  13,527  13,726 
Monthly  13,004  13,166  13,414  13,577  13,825 
S&P 500 (^GSPC): Daily  1,418  1,423  1,431  1,436  1,444 
Weekly  1,403  1,416  1,438  1,451  1,474 
Monthly  1,394  1,411  1,443  1,460  1,492 
Nasdaq (^IXIC): Daily  3,026  3,035  3,048  3,057  3,071 
Weekly  2,984  3,014  3,070  3,100  3,156 
Monthly  2,936  2,990  3,094  3,148  3,251 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week down 30.6%  The trend may continue.
 1 month down 20.3%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week down 30.9%  The trend may continue.
 1 month down 21.9%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 1 week down 33.7%  The trend may continue.
 1 month down 27.7%  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: bullish.
S&P 500 Index: bullish.
Dow Transports: bearish.
Dow Utilities: bullish.

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 0 days.

 Found Chart Pattern Name
37Pipe top
17Triangle, symmetrical
11Head-and-shoulders top
7Triangle, ascending
6Head-and-shoulders bottom
6Broadening top
6Rectangle top
5Channel
4Flag, high and tight
4Rectangle bottom

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

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

 

 

 

 

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

This WeekLast Week
1. Homebuilding1. Homebuilding
2. Biotechnology2. Biotechnology
3. Natural Gas (Diversified)3. Retail Building Supply
4. Chemical (Specialty)4. Cement and Aggregates
5. Insurance (Prop/Casualty)5. Short ETFs
48. Human Resources48. Trucking/Transp. Leasing
49. Furn/Home Furnishings49. Furn/Home Furnishings
50. Semiconductor Cap Equip.50. Semiconductor Cap Equip.
51. Semiconductor51. Semiconductor

-- Thomas Bulkowski

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Friday 10/12/12. I Survived a Colonoscopy.

Picture of a flower from my garden.

This flower pic has noting to do with my procedure....

I promised myself that when I turned 55, I'd have a colonoscopy done. That happened today (not me turning 55, but having a scope travel around inside me).

For prep, then make you buy a prep box which for me consisted of two bottles of liquid and a 16 oz glass (Suprep, it's called for $78 or discounted to $70 with insurance). The day before the procedure, you don't eat anything but you can drink water and selected other beverages. At 6 p.m., you empty the bottle into the glass, fill it to the 16 oz line with water, and drink it down. Then refill the glass TWICE with water and drink that as well (48 oz of fluid) within an hour.

Then, 40-45 minutes later, you're on the toilet letting the fluid back out. That Niagara Falls gushing comes in spurts that last to bed time and beyond.

The day of the procedure, it's a bit more strict. No food, as usual, but no extra water either. You use the second bottle of prep in the same way, drinking 48 ounces of fluid but you're not allowed to drink anything more until the procedure is over, which is almost 6 hours away. Yes, you'll be dehydrated. And hungry.

Picture of a flower from my garden.

The facility checks you in, makes you fill out forms, sticks a needle in your hand for the anesthesia. They gave me a combination of stuff, including the same stuff that killed Michael Jackson.

Thirty minutes later, you're awake but it feels as if there's a cloud over your mind, that's the best way to describe it. And they won't let you drive home NOR take a taxi, which I found weird. So, I had a neighbor take me down there and pick me up (thanks so much Rose Ann). She also grabbed my valuables, just in case (I needed a photo ID, medical insurance card and credit card. Obamacare paid the facility fee, the doc fee, but not the anesthesiologist. My cost $294. Without insurance, it would be been about $1,100 for the facility (after a 35% cash discount), more for the doctor (unknown cost), and the same anesthesiologist fee. If you had polyps, which I did not, there would be a fee for that as well and a higher doctor fee (with insurance, that would have been about $1,100 more).

So, I came out with no polyps, thirsty and hungry. I lost 4 pounds in one day from the lack of food and water. It's Friday. I feel like partying. You with me? Can't have alcohol, but maybe chips and dip. Maybe tune into YouTube to see how long it takes someone to post pictures of my colonoscopy...

-- Thomas Bulkowski


Thursday 10/11/12. Trading Thursday: Nasdaq

The index dropped by -0.4% or -13.24 points. Since 02/05/1971 the index made 373 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 182 occasions.
     Average loss was -1.1% on 191 occasions.
Expect the index to close lower 51.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 26/43 or 60.5% of the time.
     The prediction of the index closing lower has been right 14/27 or 51.9% 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 rising wedge (red lines) appears early in the session. The target for this pattern is the bottom of the formation, which the index easily hits by noon.

Later in the session, a double bottom forms but this one is unconfirmed. That means it's just squiggles on a chart and not a valid pattern. However, the pattern does show support, which is why price bottoms at A and B.

On the daily chart, it shows the index resting on underlying support after moving down for three days straight. I'm thinking that this support will hold and the index will close higher on Thursday. The probabilities say otherwise.

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

-- Thomas Bulkowski

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,939.63    
 Monthly S1  2,995.70  56.08   
 Daily S2  3,031.92  36.22   
 Weekly S2  3,038.47  6.55   
 Daily S1  3,041.85  3.38   
 Weekly S1  3,045.13  3.28   
 Low  3,046.78  1.65   Yes! The Low is close to the Weekly S1.
 Close  3,051.78  5.00   
 61.8% Down from Intraday High  3,056.25  4.47   
 Daily Pivot  3,056.71  0.46   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  3,059.18  2.47   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  3,062.10  2.93   
 Open  3,066.25  4.15   
 Daily R1  3,066.64  0.39   Yes! The Daily R1 is close to the Open.
 High  3,071.57  4.93   
 Daily R2  3,081.50  9.93   
 Monthly Pivot  3,096.32  14.82   
 Weekly Pivot  3,108.29  11.98   
 Weekly R1  3,114.95  6.65   
 Monthly R1  3,152.39  37.45   
 Weekly R2  3,178.11  25.72   
 Monthly R2  3,253.01  74.89   

Tuesday 10/9/12. Trading Tuesday: Dow

The index dropped by -0.2% or -26.5 points. Since 10/01/1928 the index made 1098 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 544 occasions.
     Average loss was -0.7% on 554 occasions.
Expect the index to close lower 50.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 31/51 or 60.8% of the time.
     The prediction of the index closing lower has been right 9/15 or 60.0% 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 only chart pattern I saw today was a rectangle top with a breakout at A. Despite the somewhat short height, the index didn't breakout until too late in the session to mount much of a move. Price threw back to the breakout price and if there was more time, the index might have recovered to score a good gain.

Is that what's in store for tomorrow?

The probabilities say the index will close lower. I agree. The index on the 10-day, 5 minute scale shows it forming a head-and-shoulders top. It has not confirmed so there is a chance that it's just squiggles and nothing else.

The daily chart shows the index hitting overhead resistance, too. I expect a lower close on Tuesday but check the futures before the open. Large swings there help steer the open in stocks.

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

-- Thomas Bulkowski

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  12,722.76    
 Monthly S1  13,153.20  430.45   
 Weekly S2  13,319.86  166.66   
 Monthly Pivot  13,407.54  87.67   
 Weekly S1  13,451.76  44.22   
 Daily S2  13,523.75  71.99   
 Low  13,552.09  28.34   
 Daily S1  13,553.70  1.61   Yes! The Daily S1 is close to the Low.
 Weekly Pivot  13,556.81  3.11   Yes! The Weekly Pivot is close to the Daily S1.
 61.8% Down from Intraday High  13,574.36  17.54   
 50% Down from Intraday High  13,581.24  6.88   
 Daily Pivot  13,582.04  0.80   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  13,583.65  1.61   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  13,588.11  4.46   Yes! The 38.2% Down from Intraday High is close to the Close.
 Open  13,610.38  22.27   
 High  13,610.38  0.00   Yes! The High is close to the Open.
 Daily R1  13,611.99  1.61   Yes! The Daily R1 is close to the High.
 Daily R2  13,640.33  28.34   
 Weekly R1  13,688.71  48.38   
 Weekly R2  13,793.76  105.06   
 Monthly R1  13,837.98  44.22   
 Monthly R2  14,092.32  254.33   

Monday 10/8/12. Market Monday: The Week Ahead

My Prediction

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

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

The index has been moving higher following the red trendline for the past few months. This line has tended to support the index but that could be coincidence.

At A and B, the index has formed a twin peak top. It's not a double top because the second peak has not been completely formed (price could continue moving up) and it hasn't confirmed either (price has not closed below the low between the two peaks).

What do these patterns imply for future price behavior?

The index could continue higher but overhead resistance setup by peak A might slow things. I would expect some hesitation here. The index could reverse and head down. If that happens, there is support at the red trendline. That support may be feeble, so an adverse world event could push the index well below the line and force the index much lower. Finally, the index could move horizontally, sandwiched between overhead resistance and underlying support until deciding on a direction.

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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 77.98 points.
Tuesday: Down 32.75 points.
Wednesday: Up 12.25 points.
Thursday: Up 80.75 points.
Friday: Up 34.79 points.

For the Week...

The Dow industrials were up 173.02 points or 1.3%.
The Nasdaq composite was up 19.96 points or 0.6%.
The S&P 500 index was up 20.26 points or 1.4%.

Year to Date...

Dow Industrials
     0.4% down from the high of 13,661.87 on 10/05/2012.
     13.1% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     1.9% down from the high of 3,196.93 on 09/21/2012.
     19.4% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     0.9% down from the high of 1,474.51 on 09/14/2012.
     16.1% up from the low of 1,258.86 on 01/03/2012.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Wholesale inventories10:00 WD-Wholesale sales and inventory statistics.
Treasury budget2:00 WDTracks budget deficit. Important in April (tax filing).
FEDs Beige book2:00 W?Reports on economic conditions.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Trade balance8:30 ThC+Signals balance of exports & imports.
International trade8:30 ThC+Import/export prices, trade balance. US economy vs others.
Crude inventories11:00 Th?My guess: Measures oil inventory.
Producer price index8:30 FB-Measures wholesale goods cost. An indication of future inflation.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 10/05/2012, the CPI had:

7 bearish patterns,
52 bullish patterns,
345 patterns waiting for breakout.
The CPI signal is 88.1%, 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  13,520  13,565  13,614  13,658  13,707 
Weekly  13,329  13,469  13,566  13,706  13,803 
Monthly  12,732  13,171  13,416  13,856  14,101 
S&P 500 (^GSPC): Daily  1,449  1,455  1,463  1,469  1,477 
Weekly  1,425  1,443  1,457  1,475  1,489 
Monthly  1,366  1,413  1,444  1,491  1,522 
Nasdaq (^IXIC): Daily  3,105  3,121  3,146  3,162  3,187 
Weekly  3,067  3,101  3,136  3,171  3,206 
Monthly  2,968  3,052  3,124  3,209  3,281 
  • 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 43.6%  Expect a random direction.
 5 months up 11.0%  Expect a reversal soon.
 S & P 500 (^GSPC) 1 week up 42.5%  Expect a random direction.
 5 months up 18.4%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 1 week up 41.3%  Expect a random direction.
 5 months up 11.9%  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: bullish.
Nasdaq Composite: bullish.
S&P 500 Index: bullish.
Dow Transports: bearish.
Dow Utilities: bullish.

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 7 days.

 Found Chart Pattern Name
36Pipe top
18Triangle, symmetrical
9Triangle, ascending
7Channel
6Head-and-shoulders bottom
6Rectangle top
5Flag, high and tight
5Broadening top
4Head-and-shoulders top
3Broadening wedge, 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. Homebuilding1. Homebuilding
2. Biotechnology2. Biotechnology
3. Retail Building Supply3. Chemical (Specialty)
4. Cement and Aggregates4. Chemical (Basic)
5. Short ETFs5. Natural Gas (Diversified)
48. Trucking/Transp. Leasing48. Trucking/Transp. Leasing
49. Furn/Home Furnishings49. Semiconductor Cap Equip.
50. Semiconductor Cap Equip.50. Furn/Home Furnishings
51. Semiconductor51. Semiconductor

-- Thomas Bulkowski

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Thursday 10/4/12. Trading Thursday: Nasdaq

The index climbed by 0.5% or 15.19 points. Since 02/05/1971 the index made 487 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 343 occasions.
     Average loss was -0.9% on 144 occasions.
Expect the index to close higher 70.4% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 25/42 or 59.5% of the time.
     The prediction of the index closing lower has been right 14/27 or 51.9% of the time.

Picture of the Nasdaq composite on the 5 minute scale.

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

The index shows a rare appearance of a rising wedge chart pattern, outlined here in red. The measure rule for the pattern says that price will drop to the bottom of the chart pattern. That's the target, and, so far, the index hasn't dropped that far. Could it reach the pattern's bottom tomorrow?

The daily chart shows a small head-and-shoulders top starting with a left shoulder in early September, head at the September peak, and now forming a right shoulder. That suggests, but does not guarantee a drop which would carry the index down far enough to reach and probably exceeded the target.

The 5 minute chart over the last 10 days shows the index moving horizontally for 5 days now. These periods of inactivity always precede periods of high volatility, so expect a large move soon. The chart shows what I call a partial decline. That suggests a move higher tomorrow. That analysis agrees with the above probabilities and since it works 70% of the time, I am going to suggest that the index will 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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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  2,967.44    
 Weekly S2  3,034.58  67.14   
 Monthly S1  3,051.34  16.75   
 Weekly S1  3,084.91  33.57   
 Daily S2  3,103.56  18.65   
 Low  3,115.04  11.48   
 Daily S1  3,119.39  4.35   
 Monthly Pivot  3,124.13  4.74   
 61.8% Down from Intraday High  3,125.48  1.34   Yes! The 61.8% Down from Intraday High is close to the Monthly Pivot.
 50% Down from Intraday High  3,128.70  3.22   
 Weekly Pivot  3,130.60  1.90   Yes! The Weekly Pivot is close to the 50% Down from Intraday High.
 Open  3,130.85  0.25   Yes! The Open is close to the Weekly Pivot.
 Daily Pivot  3,130.88  0.03   Yes! The Daily Pivot is close to the Open.
 38.2% Down from Intraday High  3,131.92  1.05   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  3,135.23  3.31   
 High  3,142.36  7.13   
 Daily R1  3,146.71  4.35   
 Daily R2  3,158.20  11.48   
 Weekly R1  3,180.93  22.73   
 Monthly R1  3,208.03  27.10   
 Weekly R2  3,226.62  18.60   
 Monthly R2  3,280.82  54.20   

Tuesday 10/2/12. Trading Tuesday: Dow

The index climbed by 0.6% or 77.98 points. Since 10/01/1928 the index made 788 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 437 occasions.
     Average loss was -0.7% on 351 occasions.
Expect the index to close higher 55.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 31/50 or 62.0% of the time.
     The prediction of the index closing lower has been right 9/15 or 60.0% 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.

A head-and-shoulders top chart patterns appeared early enough in the session that it fulfilled its promise of a down move strong enough to be worth taking.

One key to this is the swift rise, retrace and rise at the day's opening (move CDE). This type of measured move up pattern often sees the index return to the corrective phase D. By the end of the session, that's what happened.

Along the way, a double top at AB also provided another opportunity to profit from the short side. However, confirming as close to the end of the session suggested the pattern was only for the adventurous.

For tomorrow, the day's action shows a measured move down, suggesting the index will retrace upward to the corrective phase. That suggests a higher close on Tuesday, which also matches the above probabilities. Given that the index appears mired in overhead resistance, I don't see a big move happening, but world events could change that, of course.

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

-- Thomas Bulkowski

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© 2012 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  12,705.66    
 Monthly S1  13,110.39  404.72   
 Weekly S2  13,247.92  137.54   
 Daily S2  13,356.42  108.49   
 Weekly S1  13,381.52  25.10   
 Monthly Pivot  13,381.81  0.30   Yes! The Monthly Pivot is close to the Weekly S1.
 Daily S1  13,435.76  53.95   
 Open  13,437.66  1.90   Yes! The Open is close to the Daily S1.
 Low  13,437.66  0.00   Yes! The Low is close to the Open.
 61.8% Down from Intraday High  13,499.01  61.35   
 Weekly Pivot  13,500.86  1.86   Yes! The Weekly Pivot is close to the 61.8% Down from Intraday High.
 Close  13,515.11  14.25   Yes! The Close is close to the Weekly Pivot.
 Daily Pivot  13,517.01  1.90   Yes! The Daily Pivot is close to the Close.
 50% Down from Intraday High  13,517.96  0.95   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  13,536.90  18.95   
 Daily R1  13,596.35  59.45   
 High  13,598.25  1.90   Yes! The High is close to the Daily R1.
 Weekly R1  13,634.46  36.21   
 Daily R2  13,677.60  43.14   
 Weekly R2  13,753.80  76.21   
 Monthly R1  13,786.54  32.73   
 Monthly R2  14,057.96  271.43   

Monday 10/1/12. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq composite on the daily scale.

Shown is a picture of the Nasdaq composite on the daily scale.

The index has looped around and is now resting above a support area shown by the twin red lines. I drew the top one starting from the recent low price a few days ago, to the left. The lower line touches the bottom of a congestion area (support) in August and I also extended it to the left to see where it touches prior price action.

As you can see, there is a loose looking support area circled in blue. That may also provide support in the future.

In the near term, I expect the index to rebound upward off that support area. There is no guarantee of that, of course. It might touch the bottom red support line and then move sideways to form a head and shoulders top pattern. That pattern would have the left shoulder in the August peak (LS), head at the start of September, and the right should to form later, probably in about 10 days.

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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 20.55 points.
Tuesday: Down 101.37 points.
Wednesday: Down 44.04 points.
Thursday: Up 72.46 points.
Friday: Down 48.84 points.

For the Week...

The Dow industrials were down 142.34 points or 1.0%.
The Nasdaq composite was down 63.73 points or 2.0%.
The S&P 500 index was down 19.48 points or 1.3%.

Year to Date...

Dow Industrials
     1.6% down from the high of 13,653.24 on 09/14/2012.
     11.6% up from the low of 12,035.09 on 06/04/2012.
Nasdaq
     2.5% down from the high of 3,196.93 on 09/21/2012.
     18.6% up from the low of 2,627.23 on 01/04/2012.
S&P 500
     2.3% down from the high of 1,474.51 on 09/14/2012.
     14.4% up from the low of 1,258.86 on 01/03/2012.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Construction spending10:00 MDCovers residential/non-residential/public spending on new construction.
Auto & truck sales2:00 TC-Monthly sales of domestically produced vehicles.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Minutes2:00 W?Minutes of the prior Federal Reserve meeting.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Factory orders10:00 ThD+Durable/non-durable goods orders w/factory inventories.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Consumer credit3:00 FD-Measures auto, credit card and other debt.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 09/28/2012, the CPI had:

13 bearish patterns,
4 bullish patterns,
268 patterns waiting for breakout.
The CPI signal is 23.5%, 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  13,310  13,374  13,431  13,494  13,551 
Weekly  13,222  13,330  13,475  13,582  13,728 
Monthly  12,680  13,058  13,356  13,735  14,032 
S&P 500 (^GSPC): Daily  1,430  1,435  1,441  1,447  1,453 
Weekly  1,412  1,426  1,445  1,459  1,478 
Monthly  1,359  1,400  1,437  1,478  1,515 
Nasdaq (^IXIC): Daily  3,097  3,107  3,120  3,129  3,142 
Weekly  3,028  3,072  3,124  3,168  3,220 
Monthly  2,961  3,039  3,118  3,195  3,274 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 2 weeks down 18.5%  Expect a reversal soon.
 4 months up 17.5%  Expect a reversal soon.
 S & P 500 (^GSPC) 2 weeks down 19.6%  Expect a reversal soon.
 4 months up 24.9%  Expect a reversal soon.
 Nasdaq composite (^IXIC) 2 weeks down 22.5%  Expect a reversal soon.
 4 months up 20.1%  Expect a reversal soon.

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

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season is over.

 Found Chart Pattern Name
35Pipe top
17Pipe bottom
16Triangle, symmetrical
10Triangle, ascending
8Head-and-shoulders bottom
6Channel
5Rectangle top
4Broadening top
4Flag, high and tight
3Diamond 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. Homebuilding1. Homebuilding
2. Biotechnology2. Chemical (Specialty)
3. Chemical (Specialty)3. Biotechnology
4. Chemical (Basic)4. Chemical (Basic)
5. Natural Gas (Diversified)5. Retail Building Supply
48. Trucking/Transp. Leasing48. Trucking/Transp. Leasing
49. Semiconductor Cap Equip.49. Furn/Home Furnishings
50. Furn/Home Furnishings50. Semiconductor
51. Semiconductor51. Semiconductor Cap Equip.

-- Thomas Bulkowski

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