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

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October 2013 Headlines


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Thursday 10/31/13. Trading Thursday: Nasdaq

The index dropped by -0.5% or -21.72 points. Since 02/05/1971 the index made 302 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 144 occasions.
     Average loss was -1.0% on 158 occasions.
Expect the index to close lower 52.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 51/82 or 62.2% of the time.
     The prediction of the index closing lower has been right 21/42 or 50.0% 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.

Not much happened today except that the composite tumbled. It followed a down-sloping channel for most of the day, which I don't show highlighted on the chart.

A small double bottom (AB) appears at noon and after the downtrend, I would have expected this one to reverse the trend. It's hard to tell if the chart pattern confirmed as a valid one or not. In other words, the index has to close above the red line at C or else it's not a valid double bottom. That's tough to see on this chart. Regardless, the index didn't climb much before tumbling and busting the double bottom. Once the bust took hold, the index really tumbled about 2:15.

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

© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,536.18    
 Monthly S1  3,733.40  197.22   
 Monthly Pivot  3,847.25  113.85   
 Weekly S2  3,853.03  5.78   
 Daily S2  3,891.25  38.22   
 Weekly S1  3,891.83  0.57   Yes! The Weekly S1 is close to the Daily S2.
 Daily S1  3,910.94  19.11   
 Low  3,919.14  8.20   
 Weekly Pivot  3,926.46  7.32   
 Close  3,930.62  4.16   Yes! The Close is close to the Weekly Pivot.
 61.8% Down from Intraday High  3,937.31  6.69   
 Daily Pivot  3,938.82  1.51   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  3,942.93  4.10   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  3,948.54  5.61   
 Daily R1  3,958.51  9.97   
 Open  3,962.40  3.89   Yes! The Open is close to the Daily R1.
 Weekly R1  3,965.26  2.86   Yes! The Weekly R1 is close to the Open.
 High  3,966.71  1.45   Yes! The High is close to the Weekly R1.
 Daily R2  3,986.39  19.68   
 Weekly R2  3,999.89  13.50   
 Monthly R1  4,044.47  44.58   
 Monthly R2  4,158.32  113.85   

Tuesday 10/29/13. Trading Tuesday: Dow

The index dropped by 0.0% or -1.35 points. Since 10/01/1928 the index made 1189 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 629 occasions.
     Average loss was -0.7% on 560 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 60/89 or 67.4% of the time.
     The prediction of the index closing lower has been right 18/30 or 60.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

This chart has two patterns that I want to discuss. The first is a double bottom (AB) that looks tall, too tall to expect price to rise to the target price. The pattern confirms when the index closes above C. The height added to the price of C gives a target in which the index didn't come close.

However, if you bought when the index closed above the trendline D, that would have provided an early entry. I don't know how often this type of entry works, but it's worth studying.

The second pattern is a broadening top at E. The height of this pattern was still quite tall and I find it surprising that the index met the target in the last hour. That suggests weakness going into Tuesday's trading. The target is the height subtracted from the breakout price. The breakout is where price pierces the bottom trendline.

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

-- Thomas Bulkowski

Top

© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,435.15    
 Monthly S1  15,002.04  566.89   
 Monthly Pivot  15,286.32  284.28   
 Weekly S2  15,292.79  6.47   Yes! The Weekly S2 is close to the Monthly Pivot.
 Weekly S1  15,430.86  138.07   
 Weekly Pivot  15,500.73  69.87   
 Daily S2  15,501.56  0.83   Yes! The Daily S2 is close to the Weekly Pivot.
 Low  15,533.48  31.92   
 Daily S1  15,535.24  1.76   Yes! The Daily S1 is close to the Low.
 61.8% Down from Intraday High  15,558.54  23.30   
 50% Down from Intraday High  15,566.29  7.74   
 Daily Pivot  15,567.17  0.88   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  15,568.93  1.76   Yes! The Close is close to the Daily Pivot.
 Open  15,569.19  0.26   Yes! The Open is close to the Close.
 38.2% Down from Intraday High  15,574.03  4.84   Yes! The 38.2% Down from Intraday High is close to the Open.
 High  15,599.09  25.06   
 Daily R1  15,600.85  1.76   Yes! The Daily R1 is close to the High.
 Daily R2  15,632.78  31.92   
 Weekly R1  15,638.80  6.02   Yes! The Weekly R1 is close to the Daily R2.
 Weekly R2  15,708.67  69.87   
 Monthly R1  15,853.21  144.54   
 Monthly R2  16,137.49  284.28   

Monday 10/28/13. Market Monday: The Week Ahead

My Prediction

Picture of the Dow transports on the daily scale.

I show a picture of the Dow transports on the daily scale.

I chose this one because of the measured move up chart pattern at ABCD.

Before I discuss that, look at the wonderful busted head-and-shoulders top chart pattern. The pattern confirms as a valid head-and-shoulders top when the index closes below the horizontal line (when the neckline slopes downward, use the right armpit as the price of confirmation). Notice how price quickly reverses and shoots out the top of the chart pattern. When that happens, it busts the head-and-shoulders and sometimes leads to a good move, like we see here.

The measured move up is a chart pattern that it pays to know. The theory is that the AB leg will be equal to the CD leg. What happens with this pattern is that price often retraces back to the corrective phase, BC. That is what I expect to happen. However, given that the head-and-shoulders didn't amount to much of a reversal, it's possible that the index will just consolidate sideways before resuming another upward move.

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A Brief Look Back

Picture of a cat.

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 7.45 points.
Tuesday: Up 75.46 points.
Wednesday: Down 54.33 points.
Thursday: Up 95.88 points.
Friday: Up 61.07 points.

For the Week...

The Dow industrials were up 170.63 points or 1.1%.
The Nasdaq composite was up 29.08 points or 0.7%.
The S&P 500 index was up 15.27 points or 0.9%.

Year to Date...

Dow Industrials
     0.9% down from the high of 15,709.58 on 09/18/2013.
     18.8% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     0.4% down from the high of 3,961.10 on 10/25/2013.
     28.2% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     0.0% down from the high of 1,759.82 on 10/25/2013.
     23.4% up from the low of 1,426.19 on 01/02/2013.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Industrial production9:15 MB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 MB-Gauges economic activity, hints of inflation.
Retail sales8:30 TA-Reports total retail sales (not services). Are people spending?
Producer price index8:30 TB-Measures wholesale goods cost. An indication of future inflation.
Business inventories10:00 TC-Reports manufacturing, wholesale, retail inventories.
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Gross domestic product8:30 WBMeasures economic activity; GDP deflator measures inflation.
Consumer price index8:30 WB+Inflation report. Measures cost of goods and services.
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.
Personal income & consumption8:30 ThC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 ThC+Covers durables, non-durables, and services.
Chicago purchasing managers index9:45 ThBMonitors regional manufacturing activity.
Construction spending10:00 FDCovers residential/non-residential/public spending on new construction.
Auto & truck sales2:00 FC-Monthly sales of domestically produced vehicles.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 10/25/2013, the CPI had:

6 bearish patterns,
42 bullish patterns,
276 patterns waiting for breakout.
The CPI signal is 87.5%, 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  15,494  15,532  15,551  15,590  15,609 
Weekly  15,293  15,432  15,501  15,640  15,709 
Monthly  14,436  15,003  15,287  15,854  16,138 
S&P 500 (^GSPC): Daily  1,750  1,755  1,757  1,762  1,765 
Weekly  1,734  1,747  1,753  1,766  1,773 
Monthly  1,609  1,684  1,722  1,798  1,835 
Nasdaq (^IXIC): Daily  3,910  3,927  3,944  3,960  3,978 
Weekly  3,857  3,900  3,931  3,974  4,004 
Monthly  3,540  3,742  3,851  4,053  4,163 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 3 weeks up 22.1%   Expect a reversal soon. 
 2 months up 37.4%   The trend may continue. 
 S & P 500 (^GSPC) 3 weeks up 22.3%   Expect a reversal soon. 
 2 months up 40.3%   Expect a random direction. 
 Nasdaq composite (^IXIC) 2 weeks up 29.2%   The trend may continue. 
 2 months up 40.3%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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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
14Triangle, symmetrical
12Pipe bottom
12Scallop, ascending and inverted
10Rectangle top
8Channel
6Rising wedge
5Double Top, Adam and Eve
5Scallop, ascending
5Pennant
5Head-and-shoulders 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, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The industries I follow were the best (rank 1) and worst performing.

This WeekLast Week
1. Internet1. E-Commerce
2. Aerospace/Defense2. Internet
3. Information Services3. Insurance (Life)
4. Human Resources4. Human Resources
5. Machinery5. Information Services
50. Electric Utility (Central)50. Homebuilding
51. Electric Utility (West)51. Electric Utility (Central)
52. Electric Utility (East)52. Electric Utility (West)
53. Homebuilding53. Electric Utility (East)
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Thursday 10/24/13. Trading Thursday: Nasdaq

The index dropped by -0.6% or -22.5 points. Since 02/05/1971 the index made 281 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.1% on 121 occasions.
     Average loss was -1.1% on 160 occasions.
Expect the index to close lower 56.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 51/82 or 62.2% of the time.
     The prediction of the index closing lower has been right 21/41 or 51.2% 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 head-and-shoulders pattern appears at A, B and confirms at C when the index closes above the red neckline. I usually shy away from trading head-and-shoulders intraday because of their height. They are often so tall that the index won't move far enough to reach a price target.

This head-and-shoulders was the exception. The index climbed far enough to reach the measure rule target. That's the height of the pattern (from the head low to the neckline directly above) added to the breakout price (C).

A descending triangle appears near the close. This one broke out upward but didn't translate into much movement before the close. Price threw back to the breakout price and started recovering. That's how the pattern is supposed to work. Maybe Thursday will see additional gains.

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

© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,559.11    
 Weekly S2  3,714.11  155.00   
 Monthly S1  3,733.09  18.98   
 Weekly S1  3,810.59  77.50   
 Monthly Pivot  3,824.01  13.42   
 Weekly Pivot  3,862.76  38.75   
 Daily S2  3,878.16  15.40   
 Low  3,887.67  9.51   
 Daily S1  3,892.61  4.94   
 61.8% Down from Intraday High  3,896.83  4.21   
 50% Down from Intraday High  3,899.66  2.83   
 Daily Pivot  3,902.13  2.47   
 38.2% Down from Intraday High  3,902.48  0.36   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  3,907.07  4.59   
 Open  3,907.30  0.23   Yes! The Open is close to the Close.
 High  3,911.64  4.34   
 Daily R1  3,916.58  4.94   
 Daily R2  3,926.10  9.51   
 Weekly R1  3,959.24  33.14   
 Monthly R1  3,997.99  38.75   
 Weekly R2  4,011.41  13.42   
 Monthly R2  4,088.91  77.50   

Tuesday 10/22/13. Trading Tuesday: Dow

The index dropped by 0.0% or -7.45 points. Since 10/01/1928 the index made 1188 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 628 occasions.
     Average loss was -0.7% on 560 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 59/88 or 67.0% of the time.
     The prediction of the index closing lower has been right 18/30 or 60.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

A head-and-shoulders bottom appears early in the day's session. The pattern confirms as a valid one at D, when the index closes above the red neckline.

In the late afternoon, a double bottom appears in the index at AB and it confirms at C. This was too late in the session to expect it to fulfill the measure rule. The measure rule for this pattern is the height added to the peak between the two bottoms (C). That gives a price target.

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

-- Thomas Bulkowski

Top

© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,283.59    
 Monthly S1  14,837.89  554.31   
 Weekly S2  15,037.26  199.37   
 Weekly S1  15,214.73  177.47   
 Monthly Pivot  15,273.74  59.01   
 Weekly Pivot  15,313.85  40.11   
 Daily S2  15,340.83  26.98   
 Low  15,362.66  21.83   
 Daily S1  15,366.51  3.85   Yes! The Daily S1 is close to the Low.
 61.8% Down from Intraday High  15,380.81  14.30   
 50% Down from Intraday High  15,386.42  5.61   
 Daily Pivot  15,388.35  1.93   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  15,392.03  3.68   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  15,392.20  0.17   Yes! The Close is close to the 38.2% Down from Intraday High.
 Open  15,401.32  9.12   
 High  15,410.18  8.86   
 Daily R1  15,414.03  3.85   Yes! The Daily R1 is close to the High.
 Daily R2  15,435.87  21.83   
 Weekly R1  15,491.32  55.45   
 Weekly R2  15,590.44  99.12   
 Monthly R1  15,828.04  237.60   
 Monthly R2  16,263.89  435.84   

Monday 10/21/13. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq composite on the daily scale.

I show a chart of the Nasdaq composite on the daily scale.

I chose this chart because of the plunge at A. There's a little known technique where you measure the drop from peak to trough (the top green line to the lower one) and project that height up above the top green line to get a target.

It's called the swing rule and it was discovered by Stan Weinstein.

In a bull market, it works quite well, 86% of the time, on average. Click on the above link for more information.

 

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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 64.15 points.
Tuesday: Down 133.25 points.
Wednesday: Up 205.82 points.
Thursday: Down 2.18 points.
Friday: Up 28 points.

For the Week...

The Dow industrials were up 162.54 points or 1.1%.
The Nasdaq composite was up 122.41 points or 3.2%.
The S&P 500 index was up 41.3 points or 2.4%.

Year to Date...

Dow Industrials
     2.0% down from the high of 15,709.58 on 09/18/2013.
     17.5% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     0.0% down from the high of 3,914.93 on 10/18/2013.
     27.2% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     0.0% down from the high of 1,745.31 on 10/18/2013.
     22.3% up from the low of 1,426.19 on 01/02/2013.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Existing home sales10:00 MCCounts sales of used homes.
Crude inventories10:30 M??My guess: Measures oil inventory.
4 Employment reports8:30 TANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
International trade8:30 WC+Import/export prices, trade balance. US economy vs others.
Crude inventories10:30 W??My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
New home sales10:00 ThC+Shows sales of single-family homes.
Durable goods orders8:30 FBMeasures orders, shipments of goods with lifespans >3 years.
Michigan sentiment9:55 FB-Consumer sentiment: Measures strength of consumer spending.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 10/18/2013, the CPI had:

2 bearish patterns,
68 bullish patterns,
240 patterns waiting for breakout.
The CPI signal is 97.1%, 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  15,287  15,343  15,378  15,434  15,469 
Weekly  15,040  15,220  15,316  15,496  15,593 
Monthly  14,286  14,843  15,276  15,833  16,266 
S&P 500 (^GSPC): Daily  1,732  1,738  1,742  1,748  1,751 
Weekly  1,674  1,709  1,727  1,762  1,780 
Monthly  1,613  1,679  1,712  1,778  1,811 
Nasdaq (^IXIC): Daily  3,871  3,893  3,904  3,925  3,937 
Weekly  3,717  3,815  3,865  3,964  4,014 
Monthly  3,562  3,738  3,826  4,003  4,091 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 2 weeks up 31.2%   The trend may continue. 
 2 months up 37.4%   The trend may continue. 
 S & P 500 (^GSPC) 2 weeks up 30.9%   The trend may continue. 
 2 months up 40.3%   Expect a random direction. 
 Nasdaq composite (^IXIC) 1 week up 43.1%   Expect a random direction. 
 2 months up 40.3%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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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
13Triangle, symmetrical
10Scallop, ascending and inverted
9Channel
9Scallop, ascending
7Rectangle top
7Pipe top
6Rising wedge
6Triangle, ascending
6Head-and-shoulders top
6Pipe 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, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The industries I follow were the best (rank 1) and worst performing.

This WeekLast Week
1. E-Commerce1. E-Commerce
2. Internet2. Insurance (Life)
3. Insurance (Life)3. Retail (Special Lines)
4. Human Resources4. Information Services
5. Information Services5. Aerospace/Defense
50. Homebuilding50. Electric Utility (West)
51. Electric Utility (Central)51. Metals and Mining (Div.)
52. Electric Utility (West)52. Electric Utility (East)
53. Electric Utility (East)53. Homebuilding
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Thursday 10/17/13. Trading Thursday: Nasdaq

The index climbed by 1.2% or 45.42 points. Since 02/05/1971 the index made 146 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 95 occasions.
     Average loss was -1.2% on 51 occasions.
Expect the index to close higher 65.1% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 50/81 or 61.7% of the time.
     The prediction of the index closing lower has been right 21/41 or 51.2% 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 long descending triangle appears midway through the session. Unfortunately, by the time price pushed outside the trendline borders in a breakout, it was almost too late to hope for a large move. Almost.

That large move never happened. With a solution to the government shutdown and debt ceiling in the works, the market was bullish. The downward breakout was short-lived when price turned and eased higher.

The word is that congress will pass the bill tonight and it will become law. That suggests an upward move tomorrow. Maybe we'll drop instead. Buy on the rumor and sell on the news.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,600.33    
 Weekly S2  3,613.13  12.80   
 Monthly S1  3,719.88  106.75   
 Weekly S1  3,726.28  6.40   
 Weekly Pivot  3,763.18  36.90   
 Monthly Pivot  3,769.58  6.40   
 Daily S2  3,805.02  35.44   
 Low  3,814.15  9.13   
 Open  3,815.00  0.85   Yes! The Open is close to the Low.
 Daily S1  3,822.23  7.23   
 61.8% Down from Intraday High  3,824.21  1.98   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  3,827.31  3.11   
 38.2% Down from Intraday High  3,830.42  3.11   
 Daily Pivot  3,831.35  0.93   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  3,839.43  8.08   
 High  3,840.48  1.05   Yes! The High is close to the Close.
 Daily R1  3,848.56  8.08   
 Daily R2  3,857.68  9.13   
 Weekly R1  3,876.33  18.65   
 Monthly R1  3,889.13  12.80   
 Weekly R2  3,913.23  24.10   
 Monthly R2  3,938.83  25.60   

Tuesday 10/15/13. Trading Tuesday: Dow

The index climbed by 0.4% or 64.15 points. Since 10/01/1928 the index made 1014 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 534 occasions.
     Average loss was -0.6% on 480 occasions.
Expect the index to close higher 52.7% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 59/87 or 67.8% of the time.
     The prediction of the index closing lower has been right 18/30 or 60.0% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

I drew an up-sloping channel that lasted a good portion of the day.

The index closed below the bottom of the channel around 3:00 and then went sideways. Those wishing to make a killing by seeing the index drop during that hour were instead forced to pay for it.

I think this shows strength, that there is a belief on Wall Street that congress will finally do the right thing and allow people back to work and allow the government to pay its bills.

We can only hope.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,253.27    
 Weekly S2  14,568.13  314.85   
 Monthly S1  14,777.27  209.14   
 Weekly S1  14,934.69  157.43   
 Daily S2  15,075.94  141.25   
 Weekly Pivot  15,086.00  10.06   Yes! The Weekly Pivot is close to the Daily S2.
 Low  15,136.38  50.38   
 Daily S1  15,188.60  52.22   
 61.8% Down from Intraday High  15,202.50  13.90   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  15,222.93  20.43   
 Open  15,231.33  8.40   Yes! The Open is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  15,243.36  12.03   Yes! The 38.2% Down from Intraday High is close to the Open.
 Monthly Pivot  15,243.42  0.07   Yes! The Monthly Pivot is close to the 38.2% Down from Intraday High.
 Daily Pivot  15,249.04  5.62   Yes! The Daily Pivot is close to the Monthly Pivot.
 Close  15,301.26  52.22   
 High  15,309.48  8.22   Yes! The High is close to the Close.
 Daily R1  15,361.70  52.22   
 Daily R2  15,422.14  60.44   
 Weekly R1  15,452.56  30.42   
 Weekly R2  15,603.87  151.30   
 Monthly R1  15,767.42  163.55   
 Monthly R2  16,233.57  466.16   

Monday 10/14/13. Market Monday: The Week Ahead

My Prediction

Picture of the Dow industrials on the daily scale.

I show the Dow industrials on the daily chart.

I picked this chart because of what I believe will happen. The index bounced off the bottom of the channel and is now heading toward the top.

If congress fixes the shutdown problem and raises the debt ceiling, then I expect the markets to respond. We already saw some of that this week.

Going into November, I look for the index to reach or exceed that top line.

But I could be wrong, too.

 

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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 136.34 points.
Tuesday: Down 159.71 points.
Wednesday: Up 26.45 points.
Thursday: Up 323.09 points.
Friday: Up 111.04 points.

For the Week...

The Dow industrials were up 164.53 points or 1.1%.
The Nasdaq composite was down 15.88 points or 0.4%.
The S&P 500 index was up 12.7 points or 0.8%.

Year to Date...

Dow Industrials
     3.0% down from the high of 15,709.58 on 09/18/2013.
     16.3% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     0.7% down from the high of 3,819.28 on 10/02/2013.
     23.2% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     1.5% down from the high of 1,729.86 on 09/19/2013.
     19.4% up from the low of 1,426.19 on 01/02/2013.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Consumer price index8:30 WB+Inflation report. Measures cost of goods and services.
FEDs Beige book2:00 W?Reports on economic conditions.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Housing starts8:30 ThB-Number of homes beginning construction.
Building permits8:30 ThB-Measures building permits for new construction.
Industrial production9:15 ThB-Production of utilities, mines, and manufacturers.
Capacity utilization9:15 ThB-Gauges economic activity, hints of inflation.
Crude inventories10:30 Th?My guess: Measures oil inventory.
Leading indicators10:00 FD-Summary of already known reports.

Options Expiration

The following is courtesy of the Options Industry Council.

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

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

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Swing and Position Traders: Chart Pattern Indicator

As of 10/11/2013, the CPI had:

1 bearish patterns,
44 bullish patterns,
190 patterns waiting for breakout.
The CPI signal is 97.8%, 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  15,054  15,146  15,192  15,283  15,329 
Weekly  14,547  14,892  15,065  15,410  15,582 
Monthly  14,232  14,735  15,222  15,725  16,212 
S&P 500 (^GSPC): Daily  1,683  1,693  1,698  1,708  1,713 
Weekly  1,627  1,665  1,684  1,722  1,741 
Monthly  1,610  1,656  1,693  1,740  1,777 
Nasdaq (^IXIC): Daily  3,736  3,764  3,779  3,807  3,822 
Weekly  3,597  3,695  3,747  3,845  3,897 
Monthly  3,584  3,688  3,754  3,857  3,923 
  • 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 44.0%   Expect a random direction. 
 2 months up 37.4%   The trend may continue. 
 S & P 500 (^GSPC) 1 week up 43.7%   Expect a random direction. 
 2 months up 40.3%   Expect a random direction. 
 Nasdaq composite (^IXIC) 1 week down 30.9%   The trend may continue. 
 2 months up 40.3%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 2 days.

 Found Chart Pattern Name
12Triangle, symmetrical
10Channel
9Pipe top
7Double Top, Adam and Adam
6Rising wedge
6Head-and-shoulders top
6Double Top, Adam and Eve
5Scallop, ascending
5Pennant
5Falling 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, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The industries I follow were the best (rank 1) and worst performing.

This WeekLast Week
1. E-Commerce1. E-Commerce
2. Insurance (Life)2. Insurance (Life)
3. Retail (Special Lines)3. Internet
4. Information Services4. Information Services
5. Aerospace/Defense5. Shoe
50. Electric Utility (West)50. Electric Utility (West)
51. Metals and Mining (Div.)51. Medical Supplies
52. Electric Utility (East)52. Electric Utility (East)
53. Homebuilding53. Homebuilding
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Thursday 10/10/13. Trading Thursday: Nasdaq

The index dropped by -0.5% or -17.05 points. Since 02/05/1971 the index made 301 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 143 occasions.
     Average loss was -1.0% on 158 occasions.
Expect the index to close lower 52.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 49/80 or 61.3% of the time.
     The prediction of the index closing lower has been right 21/40 or 52.5% 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 head-and-shoulders bottom appears early in the session, soon enough for the index to attempt to fulfill the measure rule target. The index confirmed the chart pattern at A when it closed above the red neckline. Even so, the height of the pattern at the head measured to the neckline directly above was too tall for the index to meet (that is, add the pattern's height to the breakout price and then pray). It's why I don't like to trade this pattern intraday.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,454.47    
 Monthly S1  3,566.13  111.65   
 Daily S2  3,624.53  58.41   
 Low  3,650.03  25.50   
 Daily S1  3,651.16  1.13   Yes! The Daily S1 is close to the Low.
 Weekly S2  3,659.39  8.24   
 Weekly S1  3,668.59  9.19   
 61.8% Down from Intraday High  3,669.94  1.35   Yes! The 61.8% Down from Intraday High is close to the Weekly S1.
 50% Down from Intraday High  3,676.09  6.15   
 Daily Pivot  3,676.65  0.56   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 Close  3,677.78  1.13   Yes! The Close is close to the Daily Pivot.
 38.2% Down from Intraday High  3,682.24  4.46   Yes! The 38.2% Down from Intraday High is close to the Close.
 Monthly Pivot  3,692.70  10.46   
 Open  3,701.62  8.92   
 High  3,702.15  0.53   Yes! The High is close to the Open.
 Daily R1  3,703.28  1.13   Yes! The Daily R1 is close to the High.
 Daily R2  3,728.77  25.50   
 Weekly Pivot  3,743.93  15.16   
 Weekly R1  3,753.13  9.19   
 Monthly R1  3,804.36  51.23   
 Weekly R2  3,828.47  24.12   
 Monthly R2  3,930.93  102.46   

Tuesday 10/8/13. Trading Tuesday: Dow

The index dropped by -0.9% or -136.34 points. Since 10/01/1928 the index made 404 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 191 occasions.
     Average loss was -0.8% on 213 occasions.
Expect 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 59/87 or 67.8% of the time.
     The prediction of the index closing lower has been right 17/29 or 58.6% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

After the swift plunge in the Dow during the first 5 minutes, the index recovered for the next two hours before easing over and heading back down.

I can see several patterns in the picture (head-and-shoulders, complex H & S, double top), so let's talk about the double top.

This pattern (AB) is both too tall and too long to be tradable. By the time it confirmed as a valid double top, it was too late in the session to expect the index to drop far enough to be worth trading. This is one of those days that you spend reading a book or something.

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

-- Thomas Bulkowski

Top

© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,188.83    
 Monthly S1  14,562.53  373.71   
 Weekly S2  14,741.57  179.04   
 Daily S2  14,826.99  85.41   
 Weekly S1  14,838.91  11.92   Yes! The Weekly S1 is close to the Daily S2.
 Daily S1  14,881.61  42.71   
 Low  14,920.83  39.22   
 Close  14,936.24  15.41   
 Daily Pivot  14,975.46  39.22   
 61.8% Down from Intraday High  14,977.55  2.09   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  14,995.07  17.52   
 38.2% Down from Intraday High  15,012.58  17.52   
 Daily R1  15,030.08  17.50   
 Weekly Pivot  15,044.36  14.28   Yes! The Weekly Pivot is close to the Daily R1.
 High  15,069.30  24.94   
 Open  15,069.30  0.00   Yes! The Open is close to the High.
 Daily R2  15,123.93  54.63   
 Monthly Pivot  15,136.06  12.13   Yes! The Monthly Pivot is close to the Daily R2.
 Weekly R1  15,141.70  5.64   Yes! The Weekly R1 is close to the Monthly Pivot.
 Weekly R2  15,347.15  205.46   
 Monthly R1  15,509.76  162.61   
 Monthly R2  16,083.29  573.52   

Monday 10/7/13. Market Monday: The Week Ahead

My Prediction

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

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

I haven't shown the S&P many times this year, so that's really the only reason I show it now.

However, the red line shows a support area. I drew it from the right of the chart to the left, showing where support is in the past.

If the line holds as support, the index should bounce.

The index will find support, perhaps when congress allows the government to function again or maybe when it raises the debt limit.

 

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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 128.57 points.
Tuesday: Up 62.03 points.
Wednesday: Down 58.56 points.
Thursday: Down 136.66 points.
Friday: Up 76.1 points.

For the Week...

The Dow industrials were down 185.66 points or 1.2%.
The Nasdaq composite was up 26.16 points or 0.7%.
The S&P 500 index was down 1.25 points or 0.1%.

Year to Date...

Dow Industrials
     4.1% down from the high of 15,709.58 on 09/18/2013.
     15.0% up from the low of 13,104.30 on 01/02/2013.
Nasdaq
     0.3% down from the high of 3,819.28 on 10/02/2013.
     23.8% up from the low of 3,076.60 on 01/08/2013.
S&P 500
     2.3% down from the high of 1,729.86 on 09/19/2013.
     18.5% up from the low of 1,426.19 on 01/02/2013.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Consumer credit3:00 MD-Measures auto, credit card and other debt.
Trade balance8:30 TC+Signals balance of exports & imports.
Wholesale inventories10:00 WD-Wholesale sales and inventory statistics.
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.
International trade8:30 ThC+Import/export prices, trade balance. US economy vs others.
Treasury budget2:00 ThDTracks budget deficit. Important in April (tax filing).
Retail sales8:30 FA-Reports total retail sales (not services). Are people spending?
Producer price index8:30 FB-Measures wholesale goods cost. An indication of future inflation.
Business inventories10:00 FC-Reports manufacturing, wholesale, retail inventories.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 10/04/2013, the CPI had:

18 bearish patterns,
20 bullish patterns,
266 patterns waiting for breakout.
The CPI signal is 52.6%, 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  14,931  15,002  15,043  15,114  15,155 
Weekly  14,787  14,930  15,090  15,233  15,393 
Monthly  14,234  14,653  15,182  15,601  16,129 
S&P 500 (^GSPC): Daily  1,672  1,681  1,687  1,696  1,701 
Weekly  1,660  1,675  1,686  1,701  1,712 
Monthly  1,581  1,636  1,683  1,738  1,785 
Nasdaq (^IXIC): Daily  3,759  3,783  3,798  3,823  3,837 
Weekly  3,703  3,755  3,787  3,840  3,872 
Monthly  3,498  3,653  3,736  3,891  3,974 
  • 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 17.1%   Expect a reversal soon. 
 1 month down 20.0%   Expect a reversal soon. 
 S & P 500 (^GSPC) 2 weeks down 15.8%   Expect a reversal soon. 
 2 months up 40.3%   Expect a random direction. 
 Nasdaq composite (^IXIC) 5 weeks up 7.7%   Expect a reversal soon. 
 2 months up 40.3%   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 indices, based on the most recent trend of closes.

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

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

Buy-and-Hold: 12-Month SMA

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

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 9 days.

 Found Chart Pattern Name
14Triangle, symmetrical
6Pennant
6Channel
6Double Bottom, Adam and Adam
6Scallop, ascending
5Head-and-shoulders bottom
5Falling wedge
4Rising wedge
4Double Top, Adam and Adam
3Scallop, 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, indices, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

 

 

 

 

The industries I follow were the best (rank 1) and worst performing.

This WeekLast Week
1. E-Commerce1. Retail (Special Lines)
2. Insurance (Life)2. E-Commerce
3. Internet3. Aerospace/Defense
4. Information Services4. Shoe
5. Shoe5. Internet
50. Electric Utility (West)50. Electric Utility (East)
51. Medical Supplies51. Medical Supplies
52. Electric Utility (East)52. Metals and Mining (Div.)
53. Homebuilding53. Homebuilding
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

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Saturday 10/5/13. Saturday Supplement

Picture of my books

My publisher has sold a translation of my book, Visual Guide to Chart Patterns, to the Chinese (translation language: Simplified Chinese).

I have four new children born this year. Their pictures are on the right. They are:

  1. Trading Basics
  2. Fundamental Analysis and Position Trading
  3. Swing and Day Trading
  4. Visual Guide to Chart Patterns

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

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

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

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

The books are available now at your favorite e-tailer.

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Thursday 10/3/13. Trading Thursday: Nasdaq

The index dropped by -0.1% or -2.96 points. Since 02/05/1971 the index made 512 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 278 occasions.
     Average loss was -1.0% on 234 occasions.
Expect the index to close higher 54.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 49/79 or 62.0% of the time.
     The prediction of the index closing lower has been right 21/40 or 52.5% 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.

Shown is a chart pattern that we are familiar with, a head-and-shoulders top.

With about an hour and a half after A (the breakout point), there seemed to be enough time for the index to drop and reach the measure rule target. But the height represented about 30% of the day's trading range. I think that's too tall for the index to move that far in the time remaining.

As it turned out, the index failed to reach the target (about two horizontal grids tall). It seems that the head-and-shoulder on the indices don't work well intraday.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,503.93    
 Monthly S1  3,659.47  155.55   
 Monthly Pivot  3,729.12  69.64   
 Weekly S2  3,735.25  6.13   
 Weekly S1  3,775.13  39.89   
 Daily S2  3,776.75  1.62   Yes! The Daily S2 is close to the Weekly S1.
 Weekly Pivot  3,785.43  8.67   
 Low  3,788.45  3.02   Yes! The Low is close to the Weekly Pivot.
 Open  3,793.11  4.66   
 Daily S1  3,795.89  2.78   Yes! The Daily S1 is close to the Open.
 61.8% Down from Intraday High  3,800.23  4.34   
 50% Down from Intraday High  3,803.86  3.64   
 38.2% Down from Intraday High  3,807.50  3.64   
 Daily Pivot  3,807.58  0.08   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  3,815.02  7.44   
 High  3,819.28  4.26   
 Weekly R1  3,825.31  6.03   
 Daily R1  3,826.72  1.40   Yes! The Daily R1 is close to the Weekly R1.
 Weekly R2  3,835.61  8.89   
 Daily R2  3,838.41  2.81   Yes! The Daily R2 is close to the Weekly R2.
 Monthly R1  3,884.66  46.25   
 Monthly R2  3,954.31  69.64   

Tuesday 10/1/13. Trading Tuesday: Dow

The index dropped by -0.8% or -128.57 points. Since 10/01/1928 the index made 490 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.8% on 255 occasions.
     Average loss was -0.9% on 235 occasions.
Expect the index to close higher 52.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 58/86 or 67.4% of the time.
     The prediction of the index closing lower has been right 17/29 or 58.6% of the time.

Picture of the Dow industrials on the 5 minute scale.

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

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

Two patterns caught my attention. First is a double top, outlined here with a blue confirmation line under B and LS. The index didn't drop far enough to be worth trading.

The second pattern is a head-and-shoulders top shown by a red neckline. This confirms as a valid pattern at A when the index closes below the neckline. Despite its height, this pattern comes close to reaching its measure rule target, that of the height of the pattern at the head (to neckline directly below) projected downward from the breakout price, A.

Based on support near the bottom of the chart at the open and close, it suggests that the index will climb tomorrow. I'm not predicting it will but that's what the chart says to me.

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

-- Thomas Bulkowski

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© 2013 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  14,250.72    
 Monthly S1  14,690.19  439.48   
 Daily S2  14,992.29  302.10   
 Weekly S2  15,014.34  22.05   
 Daily S1  15,060.98  46.64   
 Weekly S1  15,072.00  11.02   Yes! The Weekly S1 is close to the Daily S1.
 Low  15,086.71  14.71   Yes! The Low is close to the Weekly S1.
 Close  15,129.67  42.96   
 61.8% Down from Intraday High  15,149.02  19.35   
 Daily Pivot  15,155.40  6.38   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  15,168.26  12.86   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  15,187.51  19.25   
 Monthly Pivot  15,199.89  12.38   Yes! The Monthly Pivot is close to the 38.2% Down from Intraday High.
 Daily R1  15,224.09  24.20   
 High  15,249.82  25.73   
 Open  15,249.82  0.00   Yes! The Open is close to the High.
 Weekly Pivot  15,269.48  19.66   
 Daily R2  15,318.51  49.03   
 Weekly R1  15,327.14  8.63   Yes! The Weekly R1 is close to the Daily R2.
 Weekly R2  15,524.62  197.47   
 Monthly R1  15,639.36  114.75   
 Monthly R2  16,149.06  509.69   

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