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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
Candles Chart
Patterns
Event
Patterns
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 03/27/2017
20,551 -45.74 -0.2%
8,935 6.33 0.1%
702 -3.50 -0.5%
5,840 11.63 0.2%
2,342 -2.39 -0.1%
YTD
4.0%
-1.2%
6.5%
8.5%
4.6%
Tom's Targets    Overview: 03/14/2017
20,100 or 21,250 by 04/15/2017
8,500 or 9,500 by 04/15/2017
675 or 715 by 04/01/2017
5,950 or 5,650 by 04/15/2017
2,275 or 2,425 by 04/15/2017
Mutt Losers: None YTD
Mutt Winners: None YTD

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

October 2014 Headlines


Archives


Thursday 10/30/14. Intraday Market Direction: Nasdaq

The index dropped by -0.3% or -15.06 points. Since 02/05/1971 the index made 458 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 240 occasions.
     Average loss was -0.9% on 218 occasions.
Expect the index to close higher 52.4% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 70/123 or 56.9% of the time.
     The prediction of the index closing lower has been right 26/53 or 49.1% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

Picture of the Nasdaq composite on the 5 minute scale.

$ $ $

I show a picture of the Nasdaq composite on the 5-minute scale.

Notice how the index has been trending higher following the blue trendline. That slope is what I like to see since it is not overheated (rising too fast) nor too slow (puts you to sleep while waiting to make money).

Today, the index cut through the trendline, suggesting a trend change. The signals for a trend change haven't occurred yet, though (see the link).

Look at the volatility shown in the red circle. That's when the FED announced the end of quantitative easing. The market seemed to be confused about whether that was a good idea or not.

$ $ $

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

© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,959.30    
 Weekly S2  4,189.86  230.57   
 Monthly S1  4,254.26  64.40   
 Weekly S1  4,369.55  115.28   
 Monthly Pivot  4,411.57  42.02   
 Weekly Pivot  4,427.90  16.34   
 Daily S2  4,496.14  68.24   
 Low  4,517.02  20.88   
 Daily S1  4,522.69  5.67   
 61.8% Down from Intraday High  4,535.13  12.45   
 50% Down from Intraday High  4,540.73  5.60   
 Daily Pivot  4,543.56  2.83   Yes! The Daily Pivot is close to the 50% Down from Intraday High.
 38.2% Down from Intraday High  4,546.33  2.76   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Close  4,549.23  2.90   Yes! The Close is close to the 38.2% Down from Intraday High.
 Open  4,551.37  2.14   Yes! The Open is close to the Close.
 High  4,564.44  13.07   
 Daily R1  4,570.11  5.67   
 Daily R2  4,590.98  20.88   
 Weekly R1  4,607.59  16.60   
 Weekly R2  4,665.94  58.36   
 Monthly R1  4,706.53  40.59   
 Monthly R2  4,863.84  157.30   

Wednesday 10/29/14. Market Direction: CPI

Picture of the chart pattern indicator

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

The indicator is near 100, the highest it can go. That means it'll go down. I think it suggests the index is going to run into overhead resistance and drop.

Picture of the chart pattern indicator

This is another view of the CPI only it shows signal changes.

There's nothing on this picture that would indicate a weakening position in the indicator. It's bullish as the green lines show.

I will say that the October low turn was a good call.

Looking forward, I would expect to see neutral readings occur when the index's upward momentum slows. When the index rolls over, then I would expect to see red bars again. None of that has happened yet. However, the length of the straight line run suggests a turn is coming. So be prepared.

-- Thomas Bulkowski

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Tuesday 10/28/14. Intraday Market Direction: Dow

The index climbed by 0.1% or 12.53 points. Since 10/01/1928 the index made 1255 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 643 occasions.
     Average loss was -0.6% on 612 occasions.
Expect the index to close higher 51.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 82/130 or 63.1% of the time.
     The prediction of the index closing lower has been right 22/40 or 55.0% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

Picture of the Dow industrials on the 5 minute scale.

$ $ $

I show a picture of the Dow industrials on the 5-minute scale.

The red chart pattern is an ascending triangle. Those breakout upward 70% of the time according to the statistics in my book, Encyclopedia of Chart Patterns, Second Edition.

Notice how the index has flat lined, bumping up against overhead resistance. Now look at the two circles. These are areas where the index also moved horizontally. I'm thinking that they give a hint of what is to come. Neither circle showed the index remaining flat for the entire day, so the comparison isn't exact.

With earnings season in full swing, the breakout from the triangle can be in any direction, but if nothing else gets in the way, I am looking for an higher close tomorrow (Tuesday).

$ $ $

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

© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  15,227.55    
 Monthly S1  16,022.75  795.19   
 Weekly S2  16,078.89  56.15   
 Weekly S1  16,448.42  369.52   
 Weekly Pivot  16,630.06  181.65   
 Monthly Pivot  16,650.31  20.25   
 Daily S2  16,687.77  37.46   
 Low  16,729.83  42.06   
 Daily S1  16,752.85  23.02   
 61.8% Down from Intraday High  16,770.76  17.91   
 50% Down from Intraday High  16,783.40  12.64   
 Daily Pivot  16,794.92  11.51   
 38.2% Down from Intraday High  16,796.05  1.13   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Open  16,796.10  0.05   Yes! The Open is close to the 38.2% Down from Intraday High.
 Close  16,817.94  21.84   
 High  16,836.98  19.04   
 Daily R1  16,860.00  23.02   
 Daily R2  16,902.07  42.06   
 Weekly R1  16,999.59  97.52   
 Weekly R2  17,181.23  181.65   
 Monthly R1  17,445.51  264.27   
 Monthly R2  18,073.07  627.57   

Monday 10/27/14. 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.

Although I have enjoyed participating in the meteoric rise of the indices over the past week or so, I'm worried.

Why?

Because such strong runs come to an end. When the run ends, what then?

The index could just drop. A string of bad earnings would cause this as would a surprising world event. Since earnings have been strong so far, I think a quick reversal is unlikely.

The index could resume its rise. That would probably occur after earnings season ends and there would need some good news to power it higher. I don't see that happening. Thus, I expect the index to drop. That's what I show on the chart. Once this upward run ends, I think the indices will move horizontally for a time (but they could coast up or down slightly) and then ease over and head down, retracing some of the gains. Once they bottom, that would be another buying opportunity going into the year end window dressing by mutual funds.

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A Brief Look Back

Picture of a flower from my garden.

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Up 19.26 points.
Tuesday: Up 215.14 points.
Wednesday: Down 153.49 points.
Thursday: Up 216.58 points.
Friday: Up 127.51 points.

For the Week...

The Dow industrials were up 425 points or 2.6%.
The Nasdaq composite was up 225.28 points or 5.3%.
The S&P 500 index was up 77.82 points or 4.1%.

Year to Date...

Dow Industrials
     3.1% down from the high of 17,350.64 on 09/19/2014.
     9.5% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     2.8% down from the high of 4,610.57 on 09/19/2014.
     13.6% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     2.7% down from the high of 2,019.26 on 09/19/2014.
     13.0% up from the low of 1,737.92 on 02/05/2014.

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
Durable goods orders8:30 TBMeasures orders, shipments of goods with lifespans >3 years.
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Rate decision2:00 W?The Federal Reserves reports on interest rate changes.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Gross domestic product8:30 ThBMeasures economic activity; GDP deflator measures inflation.
Personal income & consumption8:30 FC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 FC+Covers durables, non-durables, and services.
Chicago purchasing managers index9:45 FBMonitors regional manufacturing activity.
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 10/24/2014, the CPI had:

8 bearish patterns,
102 bullish patterns,
467 patterns waiting for breakout.
The CPI signal is 92.7%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,594  16,700  16,756  16,862  16,918 
Weekly  16,075  16,440  16,626  16,991  17,177 
Monthly  15,223  16,014  16,646  17,437  18,069 
S&P500 (^GSPC): Daily  1,940  1,952  1,959  1,971  1,978 
Weekly  1,854  1,909  1,937  1,992  2,020 
Monthly  1,743  1,854  1,931  2,042  2,120 
Nasdaq (^IXIC): Daily  4,432  4,458  4,472  4,498  4,512 
Weekly  4,168  4,326  4,406  4,564  4,644 
Monthly  3,937  4,211  4,390  4,663  4,842 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

Top

Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 1 week up 43.2%   Expect a random direction. 
 2 months down 11.0%   Expect a reversal soon. 
 S & P 500 (^GSPC) 1 week up 42.5%   Expect a random direction. 
 2 months down 11.3%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week up 43.7%   Expect a random direction. 
 2 months down 15.8%   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 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: 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
21Pipe bottom
12Head-and-shoulders top
5Rectangle top
5Triangle, symmetrical
5Broadening bottom
5Double Top, Eve and Eve
4Triangle, descending
4Broadening top
3Channel
3Head-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. Biotechnology1. Biotechnology
2. E-Commerce2. Shoe
3. Air Transport3. E-Commerce
4. Shoe4. Air Transport
5. Long ETFs5. Retail Store
50. Short ETFs50. Retail Building Supply
51. Natural Gas (Diversified)51. Toiletries/Cosmetics
52. Petroleum (Producing)52. Natural Gas (Diversified)
53. Toiletries/Cosmetics53. Petroleum (Producing)
54. Oilfield Svcs/Equipment54. Oilfield Svcs/Equipment

-- Thomas Bulkowski

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Thursday 10/23/14. Intraday Market Direction: Nasdaq

The index dropped by -0.8% or -36.63 points. Since 02/05/1971 the index made 230 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 113 occasions.
     Average loss was -1.4% on 117 occasions.
Expect the index to close lower 50.9% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 70/123 or 56.9% of the time.
     The prediction of the index closing lower has been right 26/52 or 50.0% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

Picture of the Nasdaq composite on the 5 minute scale.

$ $ $

I show a picture of the Nasdaq composite on the 5-minute scale.

There's not much to say about this figure. The index made a V-shaped drop as the red lines show.

The index slides through the right red line at A. That could mean the market is turning bearish for a spell. Think Elliott wave's simple ABC correction. Price moves down in a series of down-up-down steps. After it completes, a 5-wave move up returns.

$ $ $

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

© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  3,876.04    
 Weekly S2  4,080.54  204.50   
 Monthly S1  4,129.44  48.91   
 Weekly S1  4,231.69  102.25   
 Weekly Pivot  4,267.76  36.06   
 Daily S2  4,345.42  77.66   
 Daily S1  4,364.13  18.72   
 Monthly Pivot  4,370.01  5.87   
 Low  4,381.28  11.27   
 Close  4,382.85  1.57   Yes! The Close is close to the Low.
 Daily Pivot  4,400.00  17.15   
 61.8% Down from Intraday High  4,402.13  2.13   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  4,408.57  6.44   
 38.2% Down from Intraday High  4,415.01  6.44   
 Daily R1  4,418.71  3.70   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Weekly R1  4,418.91  0.20   Yes! The Weekly R1 is close to the Daily R1.
 Open  4,429.16  10.25   
 High  4,435.86  6.70   
 Daily R2  4,454.58  18.72   
 Weekly R2  4,454.98  0.40   Yes! The Weekly R2 is close to the Daily R2.
 Monthly R1  4,623.41  168.44   
 Monthly R2  4,863.98  240.56   

Wednesday 10/22/14. Market Direction: CPI

Picture of the chart pattern indicator

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

Notice how the indicator has shot upward into bullish territory in just a few days. The problem is to maintain a bullish hold on the altitude. If it can't, then look for the bullish signal to disappear and the bearish one from mid October to remain.

Picture of the chart pattern indicator

This is another view of the CPI only it shows signal changes.

The indicator called the turn three days ago by turning bullish. That's about the same time as I called the turn. But I also expected the rise to falter and drop back to form a double bottom. That hasn't happened yet.

An alternative thought is that the index will form a head-and-shoulders top chart pattern. The right armpit is in place so now all we need is the index to rise a bit higher to near the July bump's height.

$ $ $

Over 5 million vehicles are subject to an airbag recall. To see if you vehicle is on any recall list, go here (http://www.safercar.gov/). Click "Search for recalls" on the upper right. The site was slow to connect and update, probably due to traffic.

-- Thomas Bulkowski

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Tuesday 10/21/14. Intraday Market Direction: Dow

The index climbed by 0.1% or 19.26 points. Since 10/01/1928 the index made 1254 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 642 occasions.
     Average loss was -0.6% on 612 occasions.
Expect the index to close higher 51.2% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 81/129 or 62.8% of the time.
     The prediction of the index closing lower has been right 22/40 or 55.0% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

Picture of the Dow industrials on the 5 minute scale.

$ $ $

I show a picture of the Dow industrials on the 5-minute scale.

A head-and-shoulders top appears at L (left shoulder, H (head), and R (guess ). The pattern confirms as a valid one at A. That's when the index closes above the red neckline.

The blue pattern may be a puzzle for most of you. I call it an inverted roof. If the shoulders are well-defined, you can call it a head-and-shoulders or even one from the complex variety (complex head and shoulders). The inverted roof does not need confirmation to be valid. All it needs is for the index to close outside of the blue lines. The breakout direction is random.

The narrow trading range today makes me think of Bollinger bands. That indicator shows periods of low volatility followed by periods of high volatility. Thus, look for the index to make a big move. The upward trend in place since last Wednesday suggests an upward breakout. Earnings reports would have to support that notion, of course. But the index could drop just as easily, forming a double bottom.

That would mean a loss of at least 300 points.

$ $ $

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

© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  15,039.62    
 Weekly S2  15,538.44  498.82   
 Monthly S1  15,719.65  181.20   
 Weekly S1  15,969.06  249.41   
 Daily S2  16,212.86  243.80   
 Low  16,260.54  47.68   
 Weekly Pivot  16,285.73  25.19   
 Daily S1  16,306.26  20.53   
 61.8% Down from Intraday High  16,314.44  8.17   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  16,331.08  16.65   
 38.2% Down from Intraday High  16,347.73  16.65   
 Daily Pivot  16,353.95  6.21   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Open  16,373.15  19.20   
 Close  16,399.67  26.52   
 High  16,401.63  1.96   Yes! The High is close to the Close.
 Daily R1  16,447.35  45.72   
 Daily R2  16,495.04  47.68   
 Monthly Pivot  16,535.14  40.11   
 Weekly R1  16,716.35  181.20   
 Weekly R2  17,033.02  316.68   
 Monthly R1  17,215.17  182.14   
 Monthly R2  18,030.66  815.50   

Monday 10/20/14. Market Monday: The Week Ahead

My Prediction

Picture of the nasdaq on the daily scale.

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

I think the indices have made a major turn to the upside. However, I am worried about the indices forming a double bottom.

Working against a rise is the following.

  • Ebola both here and abroad
  • Earnings season has started
  • Ukraine. Putin still wants dirt there
  • ISIS fights in Syria and Iraq
  • Iran's desire to become a nuke state
  • Fears of a recession in China and Europe
  • The unexpected (anything else that spooks the market)

What does the chart say? A symmetrical triangle appears in blue at A. The apex of this triangle lines up quite nicely to lend support to the index at B. Those of us well versed in chart patterns know that the apex is a support area but the clarity of this turn is remarkable.

I expect the index to round over and make a second bottom in the coming days, perhaps weeks. Hopefully, by mid November, after earnings season is done, we can get some traction and fatten our wallets and purses.

I you missed the buying opportunity a few days ago (I put in four limit orders on Wednesday and none of them hit. Sigh, but I snuck one in using a market order, all on existing positions), I expect you'll be given another chance.

Top

A Brief Look Back

Picture of a flower from my garden.

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Down 223.03 points.
Tuesday: Down 5.88 points.
Wednesday: Down 173.45 points.
Thursday: Down 24.5 points.
Friday: Up 263.17 points.

For the Week...

The Dow industrials were down 163.69 points or 1.0%.
The Nasdaq composite was down 17.8 points or 0.4%.
The S&P 500 index was down 19.37 points or 1.0%.

Year to Date...

Dow Industrials
     5.6% down from the high of 17,350.64 on 09/19/2014.
     6.8% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     7.6% down from the high of 4,610.57 on 09/19/2014.
     7.9% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     6.6% down from the high of 2,019.26 on 09/19/2014.
     8.6% up from the low of 1,737.92 on 02/05/2014.

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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 TuCCounts sales of used homes.
Consumer price index8:30 WB+Inflation report. Measures cost of goods and services.
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.
New home sales10:00 FC+Shows sales of single-family homes.

Options Expiration

VIX expires on Wednesday.

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Swing and Position Traders: Chart Pattern Indicator

As of 10/17/2014, the CPI had:

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

The chart pattern indicator is bearish with 1 of 3 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  16,000  16,190  16,309  16,499  16,618 
Weekly  15,532  15,956  16,279  16,704  17,027 
Monthly  15,033  15,707  16,529  17,202  18,024 
S&P500 (^GSPC): Daily  1,850  1,868  1,883  1,902  1,917 
Weekly  1,782  1,834  1,873  1,926  1,965 
Monthly  1,710  1,799  1,909  1,997  2,107 
Nasdaq (^IXIC): Daily  4,211  4,235  4,265  4,289  4,320 
Weekly  4,039  4,149  4,226  4,336  4,414 
Monthly  3,835  4,047  4,329  4,540  4,823 
  • Seekinger doesn't look at the range of S2 to R2 as support and resistance levels. Rather, he considers them oversold (S) and overbought (R) areas.
  • S2 to R2 range of values across daily, weekly, and monthly periods: If two values are close together then they lend more significance to the area.
  • If the market trends on day 1, the odds rise tremendously that the market will be range bound between daily S1 and daily R1 the next day.
  • In a quiet market when traders are waiting for an important earnings announcement or economic report, look for daily R1 and S1 levels to hold and for the market to return to the daily pivot.
  • A move outside of daily R1 or S1 usually does not mean a breakout.
  • The odds suggest that the entire week's price action will remain between weekly R2 and S2.
  • Avoid going long when the market moves above weekly R2 (it's overbought) and avoid going short when price moves below weekly S2 (oversold).
  • Consider going short at weekly R1 or long at weekly S1 with a profit objective of the weekly pivot.
  • Consider going long at weekly S2 or short at weekly R2 with a profit objective of weekly S1 or R1, respectively.

Here are the formulas:

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

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Consecutive Price Trends

Index Consecutive
Closes So Far 
% Comments 
 Dow industrials (^DJI) 4 weeks down 2.0%   Expect a reversal soon. 
 2 months down 11.0%   Expect a reversal soon. 
 S & P 500 (^GSPC) 4 weeks down 3.2%   Expect a reversal soon. 
 2 months down 11.3%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 4 weeks down 5.0%   Expect a reversal soon. 
 2 months down 15.8%   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 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: 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
23Head-and-shoulders top
10Double Top, Adam and Adam
8Double Top, Eve and Eve
7Double Top, Eve and Adam
5Triangle, symmetrical
5Triple top
5Rectangle top
4Triangle, ascending
4Broadening bottom
4Broadening 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, 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. Biotechnology1. Biotechnology
2. Shoe2. Shoe
3. E-Commerce3. E-Commerce
4. Air Transport4. Securities Brokerage
5. Retail Store5. Retail Store
50. Retail Building Supply50. Petroleum (Producing)
51. Toiletries/Cosmetics51. Cement and Aggregates
52. Natural Gas (Diversified)52. Retail Building Supply
53. Petroleum (Producing)53. Homebuilding
54. Oilfield Svcs/Equipment54. Oilfield Svcs/Equipment

-- Thomas Bulkowski

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Thursday 10/16/14. Intraday Market Direction: Nasdaq

The index dropped by -0.3% or -11.85 points. Since 02/05/1971 the index made 457 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 239 occasions.
     Average loss was -0.9% on 218 occasions.
Expect the index to close higher 52.3% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 69/122 or 56.6% of the time.
     The prediction of the index closing lower has been right 26/52 or 50.0% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

Picture of the Nasdaq composite on the 5 minute scale.

$ $ $

Before I discuss the Nasdaq, let me offer this bold prediction. Based on the length of the tail in the Dow today, I think this downturn is over. That is just a guess and it really hinges on whether Thursday's trading remains above most of today's price action (so that a clear tail appears). Tails or spikes are known turning points, but my research contradicts this. The study says, "If there is one thing you take away from this study it is that short lower shadows strongly suggest that price will rise." I also conclude that the study needs to be redone. Based on my experience, however, I like to see long lower tails (shadows) during a downward price trend.

I show a picture of the Nasdaq composite on the 5-minute scale.

I drew in blue channel lines but stopped them before today's price action. If you extend the top line, it looks like the index closed above the line (C). The AB pattern is a double bottom. The index confirmed the double bottom as a valid one when it closed above the red line. That suggests the index is headed higher. I expect a higher close on Thursday and that agrees with the probabilities.

And remember, if you look back at the index a month from now and see that today was the low, then I told you so. But let me also warn you that my predictions of this nature tend to be about 2-3 days ahead of time. So, we might not see the reversal until Friday or Monday. Or I could be completely wrong.

$ $ $

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  4,033.05    
 Daily S2  4,072.88  39.83   
 Weekly S2  4,109.25  36.37   
 Low  4,116.60  7.35   Yes! The Low is close to the Weekly S2.
 Monthly S1  4,124.18  7.58   Yes! The Monthly S1 is close to the Low.
 Daily S1  4,144.10  19.92   
 Open  4,154.10  10.00   Yes! The Open is close to the Daily S1.
 61.8% Down from Intraday High  4,160.51  6.41   Yes! The 61.8% Down from Intraday High is close to the Open.
 Weekly S1  4,162.29  1.78   Yes! The Weekly S1 is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  4,174.07  11.78   
 38.2% Down from Intraday High  4,187.63  13.56   
 Daily Pivot  4,187.82  0.19   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Close  4,215.32  27.50   
 High  4,231.54  16.22   
 Daily R1  4,259.04  27.50   
 Daily R2  4,302.76  43.72   
 Weekly Pivot  4,329.27  26.51   
 Monthly Pivot  4,367.38  38.10   
 Weekly R1  4,382.31  14.93   
 Monthly R1  4,458.51  76.21   
 Weekly R2  4,549.29  90.78   
 Monthly R2  4,701.71  152.41   

Wednesday 10/15/14. Market Direction: CPI

Picture of the chart pattern indicator

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

As the chart shows, the indicator is at or near zero and it's been below the bearish 35 line since September. A large gain in the index could switch this to neutral or even bullish.

As yet, there is just one clue that I can see of a bullish turn coming. The indicator is so low that it has nowhere else to go but up.

Picture of the chart pattern indicator

This is another view of the CPI only it shows signal changes.

The bearish red lines have been in place for weeks, as I mentioned. The neutral white bars are few and far between, too.

The number of red bars in this downturn suggests a more robust bearish move than I expected. I'm hoping that the bullish sentiment that often begins in November will turn this market bullish, but I don't see that happening yet from these two charts.

-- Thomas Bulkowski

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Tuesday 10/14/14. Intraday Market Direction: Dow

The index dropped by -1.3% or -223.03 points. Since 10/01/1928 the index made 204 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 105 occasions.
     Average loss was -0.9% on 99 occasions.
Expect the index to close higher 51.5% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 81/128 or 63.3% of the time.
     The prediction of the index closing lower has been right 22/40 or 55.0% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

Picture of the Dow industrials on the 5 minute scale.

$ $ $

I show a picture of the Dow industrials on the 5-minute scale.

The slide of the last week or two has been a surprise or even a shock to me. I still expect that the indices will rebound by November 1, but it's possible they could continue lower. Clearly the markets are skittish over what I consider trivial things. The world economy is not going into recession. The US won't be overrun with Ebola cases, and so on. The market is using those excuses to increase volatility and scare the little guy out of his positions. It's becoming a buying opportunity for solid companies knocked down.

So let's talk about the Dow. The picture shows a descending triangle outlined in red at A. A measured move down chart pattern appears at BCDE.

That measured move pattern is key, I believe, to tomorrow's price movement. I think the index will recover to the corrective phase (CD). That means a 200 point up move. It might not hold that throughout the day, but that is the minimum move I expect.

$ $ $

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  15,931.81    
 Weekly S2  16,099.31  167.50   
 Daily S2  16,119.38  20.07   Yes! The Daily S2 is close to the Weekly S2.
 Monthly S1  16,126.44  7.06   Yes! The Monthly S1 is close to the Daily S2.
 Weekly S1  16,210.19  83.75   
 Daily S1  16,220.22  10.03   Yes! The Daily S1 is close to the Weekly S1.
 Low  16,310.47  90.25   
 Close  16,321.07  10.60   Yes! The Close is close to the Low.
 Daily Pivot  16,411.32  90.25   
 61.8% Down from Intraday High  16,421.99  10.67   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 50% Down from Intraday High  16,456.44  34.45   
 38.2% Down from Intraday High  16,490.89  34.45   
 Daily R1  16,512.16  21.28   Yes! The Daily R1 is close to the 38.2% Down from Intraday High.
 Open  16,535.43  23.27   Yes! The Open is close to the Daily R1.
 High  16,602.41  66.98   
 Weekly Pivot  16,654.79  52.38   
 Daily R2  16,703.26  48.47   
 Monthly Pivot  16,738.54  35.28   
 Weekly R1  16,765.67  27.13   Yes! The Weekly R1 is close to the Monthly Pivot.
 Monthly R1  16,933.17  167.50   
 Weekly R2  17,210.27  277.10   
 Monthly R2  17,545.27  335.00   

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

My Prediction

Picture of the Dow utilities on the daily scale.

I show the Dow utilities index on the daily scale.

This index is unusual since it's holding its own against the other indices which are struggling to hold ground and losing. The double top at AB, has not confirmed since the index hasn't closed below C, but it's a red flag.

My suspicion is that people are flocking to dividend paying stocks like the utilities. A dividend tends to cushion the downward move. I've read that and think I proved it at one time or another.

Will the other indices begin to trend higher? I think so, but I've been wrong so far on this downturn (except for the Nasdaq. I figured it would drop and it did).

Come November, this downturn should be over and the indices should begin their move up to the year end. That's my hope at any rate.

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A Brief Look Back

Picture of a flower from my garden.

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Down 17.78 points.
Tuesday: Down 272.52 points.
Wednesday: Up 274.83 points.
Thursday: Down 334.97 points.
Friday: Down 115.15 points.

For the Week...

The Dow industrials were down 465.59 points or 2.7%.
The Nasdaq composite was down 199.38 points or 4.5%.
The S&P 500 index was down 61.77 points or 3.1%.

Year to Date...

Dow Industrials
     4.6% down from the high of 17,350.64 on 09/19/2014.
     7.8% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     7.3% down from the high of 4,610.57 on 09/19/2014.
     8.4% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     5.6% down from the high of 2,019.26 on 09/19/2014.
     9.7% up from the low of 1,737.92 on 02/05/2014.

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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 WA-Reports total retail sales (not services). Are people spending?
Producer price index8:30 WB-Measures wholesale goods cost. An indication of future inflation.
Business inventories10:00 WC-Reports manufacturing, wholesale, retail inventories.
FEDs Beige book2:00 W?Reports on economic conditions.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
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.
Housing starts8:30 FB-Number of homes beginning construction.
Building permits8:30 FB-Measures building permits for new construction.

Options Expiration

The following is courtesy of the Options Industry Council.

OptionDate
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 10/10/2014, the CPI had:

19 bearish patterns,
2 bullish patterns,
71 patterns waiting for breakout.
The CPI signal is 9.5%, which is bearish (<= 35%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,402  16,473  16,615  16,686  16,829 
Weekly  16,174  16,359  16,729  16,914  17,285 
Monthly  16,006  16,275  16,813  17,082  17,620 
S&P500 (^GSPC): Daily  1,885  1,896  1,916  1,927  1,947 
Weekly  1,858  1,882  1,930  1,954  2,002 
Monthly  1,831  1,868  1,944  1,982  2,057 
Nasdaq (^IXIC): Daily  4,207  4,241  4,311  4,346  4,415 
Weekly  4,130  4,203  4,350  4,423  4,570 
Monthly  4,053  4,165  4,388  4,499  4,722 
  • 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 down 12.6%   Expect a reversal soon. 
 2 months down 11.0%   Expect a reversal soon. 
 S & P 500 (^GSPC) 3 weeks down 8.2%   Expect a reversal soon. 
 2 months down 11.3%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 3 weeks down 11.4%   Expect a reversal soon. 
 2 months down 15.8%   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 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: bullish.

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 3 days.

 Found Chart Pattern Name
25Head-and-shoulders top
11Double Top, Adam and Adam
10Rectangle top
10Scallop, ascending and inverted
9Double Top, Eve and Adam
6Triple top
5Double Top, Eve and Eve
5Triangle, symmetrical
4Rising wedge
4Channel

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. Biotechnology1. Biotechnology
2. Shoe2. Shoe
3. E-Commerce3. E-Commerce
4. Securities Brokerage4. Air Transport
5. Retail Store5. Retail Store
50. Petroleum (Producing)50. Short ETFs
51. Cement and Aggregates51. Human Resources
52. Retail Building Supply52. Homebuilding
53. Homebuilding53. Retail Building Supply
54. Oilfield Svcs/Equipment54. Oilfield Svcs/Equipment

-- Thomas Bulkowski

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Thursday 10/9/14. Intraday Market Direction: Nasdaq

The index climbed by 1.9% or 83.39 points. Since 02/05/1971 the index made 58 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.0% on 31 occasions.
     Average loss was -1.0% on 27 occasions.
Expect the index to close higher 53.4% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 69/121 or 57.0% of the time.
     The prediction of the index closing lower has been right 26/52 or 50.0% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

Picture of the Nasdaq composite on the 5 minute scale.

$ $ $

I show a picture of the Nasdaq composite on the 5-minute scale.

An unconfirmed double bottom appears at AB. It's unconfirmed since the index hasn't closed above the peak between the two bottoms. It might do that on Thursday if the index closes above the red line.

Overhead resistance shown as two blue lines outlining the tops and bottoms of recent price action extended forward to today shows where the index might stall or even reverse. Although the above probabilities suggest a continued move up, the resistance may make for a difficult rise or even one where price doesn't move much.

What bothers me is that a week ago Monday, the index was at 4525. Monday it was at 4500 and today it topped out at 4475. Those are lower peaks. Instead of the index rising tomorrow, will we see a decline? My guess, and it's only a guess, is that if you draw a trendline connecting those peaks, it'll show overhead resistance that the index won't be able to pierce this time (or if it does, the index won't climb much). Thus, I'm looking for a lower close on Thursday. A weak jobless claims report might be the catalyst.

$ $ $

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  4,239.47    
 Weekly S2  4,298.48  59.01   
 Daily S2  4,314.16  15.69   
 Monthly S1  4,354.03  39.87   
 Low  4,355.34  1.31   Yes! The Low is close to the Monthly S1.
 Weekly S1  4,383.53  28.19   
 Open  4,385.70  2.17   Yes! The Open is close to the Weekly S1.
 Daily S1  4,391.38  5.68   Yes! The Daily S1 is close to the Open.
 61.8% Down from Intraday High  4,400.56  9.19   Yes! The 61.8% Down from Intraday High is close to the Daily S1.
 50% Down from Intraday High  4,414.54  13.97   
 38.2% Down from Intraday High  4,428.50  13.97   
 Daily Pivot  4,432.55  4.05   Yes! The Daily Pivot is close to the 38.2% Down from Intraday High.
 Weekly Pivot  4,452.80  20.24   
 Close  4,468.59  15.79   
 High  4,473.73  5.14   Yes! The High is close to the Close.
 Monthly Pivot  4,482.30  8.57   Yes! The Monthly Pivot is close to the High.
 Daily R1  4,509.77  27.47   
 Weekly R1  4,537.85  28.09   
 Daily R2  4,550.94  13.09   
 Monthly R1  4,596.86  45.92   
 Weekly R2  4,607.12  10.26   Yes! The Weekly R2 is close to the Monthly R1.
 Monthly R2  4,725.13  118.01   

Wednesday 10/8/14. Market Direction: CPI

Picture of the chart pattern indicator

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

On Monday's post, I used price mirrors to suggest a head-and-shoulders top might be forming in the Dow transports. It could be that this downturn is the armpit of that pattern. I certainly didn't expect today's nearly 300 point Dow drop.

What does the CPI have to say? It was bullish only a few days ago but that signal disappeared as more data became available. Now, it's bearish and stuck at or near 0 as the above chart shows.

The index is convergent with the indicator, meaning both are trending the same way: down.

Picture of the chart pattern indicator

This is another view of the CPI only it shows signal changes.

Again, the red lines highlight the bearish intensity. The indicator has been bearish since early September and it says that October is going to be a difficult month, too. However, one strong move up could flip the indicator into bullish territory. If the market then coasts higher for a week or so, we could have a lasting buy signal. I've been waiting with a pile of cash for just this type of buying opportunity.

-- Thomas Bulkowski

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Tuesday 10/7/14. Intraday Market Direction: Dow

The index dropped by -0.1% or -17.78 points. Since 10/01/1928 the index made 1242 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 646 occasions.
     Average loss was -0.8% on 596 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 81/127 or 63.8% of the time.
     The prediction of the index closing lower has been right 22/40 or 55.0% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

Picture of the Dow industrials on the 5 minute scale.

$ $ $

I show a picture of the Dow industrials on the 5-minute scale, and it's an interesting one.

I drew two blue lines, roughly outlining the top and bottom of the prior trading range. It's a channel of support and resistance.

The red pattern is an extended V-bottom. The extension comes as part of the handle off the right side of the V, not because I've drawn the V longer on the right than on the left.

I don't know how often these patterns breakout upward.

There is another pattern here and that is a trendline mirror. Often you'll see price following a trendline and price will rise above the trendline then plunge below it at a similar distance on both the rise and plunge, as measured from the trendline.

In this example, the distance from the bottom blue trendline to A suggests a rise above the bottom blue trendline by a similar amount. That means a rise to between 17,100 and 17,200. Today it missed 17,100 by a point, so maybe we'll see it complete the move on Tuesday.

$ $ $

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  16,328.93    
 Weekly S2  16,465.96  137.03   
 Monthly S1  16,660.42  194.46   
 Weekly S1  16,728.93  68.51   
 Daily S2  16,838.22  109.28   
 Daily S1  16,915.06  76.85   
 Low  16,930.38  15.32   Yes! The Low is close to the Daily S1.
 Weekly Pivot  16,937.02  6.64   Yes! The Weekly Pivot is close to the Low.
 Close  16,991.91  54.89   
 61.8% Down from Intraday High  16,994.94  3.03   Yes! The 61.8% Down from Intraday High is close to the Close.
 Monthly Pivot  17,005.53  10.59   Yes! The Monthly Pivot is close to the 61.8% Down from Intraday High.
 Daily Pivot  17,007.23  1.70   Yes! The Daily Pivot is close to the Monthly Pivot.
 Open  17,010.34  3.11   Yes! The Open is close to the Daily Pivot.
 50% Down from Intraday High  17,014.88  4.54   Yes! The 50% Down from Intraday High is close to the Open.
 38.2% Down from Intraday High  17,034.83  19.94   
 Daily R1  17,084.07  49.25   
 High  17,099.39  15.32   Yes! The High is close to the Daily R1.
 Daily R2  17,176.24  76.85   
 Weekly R1  17,199.99  23.76   
 Monthly R1  17,337.02  137.03   
 Weekly R2  17,408.08  71.06   
 Monthly R2  17,682.13  274.05   

Monday 10/6/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow transports on the daily scale.

It's been a while since I showed the transports, I think, so that's what I have pictured on the daily scale.

I also haven't used price mirrors much lately, so I show that as well.

Let's get into it. A small head-and-shoulders top appears in red at LS (left shoulder), Head, and RS (right shoulder). It's not a perfect example of a head-and-shoulders because\ the right shoulder dips too far and it's only a one-day spike. The breakout from this has been downward and price has pulled back to the chart pattern. I expect a resumption of the downward move. That happens 47% of the time, which is about random.

However, if you look at the bigger picture, it shows one possibility. I took a snapshot of the left shoulder and flipped it horizontally and pasted it in to the right of the green line.

The index might follow this form and mirror on the right what is on the left in the coming months. Sometimes this method works surprisingly well. It won't be exact, of course, but it does give you an idea of what could come.

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A Brief Look Back

Picture of a flower from my garden.

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

Monday: Down 41.93 points.
Tuesday: Down 28.32 points.
Wednesday: Down 238.19 points.
Thursday: Down 3.66 points.
Friday: Up 208.64 points.

For the Week...

The Dow industrials were down 103.46 points or 0.6%.
The Nasdaq composite was down 36.57 points or 0.8%.
The S&P 500 index was down 14.95 points or 0.8%.

Year to Date...

Dow Industrials
     2.0% down from the high of 17,350.64 on 09/19/2014.
     10.9% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     2.9% down from the high of 4,610.57 on 09/19/2014.
     13.4% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     2.5% down from the high of 2,019.26 on 09/19/2014.
     13.2% up from the low of 1,737.92 on 02/05/2014.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Consumer credit3:00 TD-Measures auto, credit card and other debt.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Minutes2:00 W?Minutes of the prior Federal Reserve meeting.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Wholesale inventories10:00 ThD-Wholesale sales and inventory statistics.
International trade8:30 FC+Import/export prices, trade balance. US economy vs others.
Treasury budget2:00 FDTracks budget deficit. Important in April (tax filing).

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

On 10/03/2014, the CPI had:

0 bearish patterns,
13 bullish patterns,
181 patterns waiting for breakout.
The CPI signal is 100.0%, which is bullish (>= 65%).

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

Swing Traders: Pivot Points

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

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  16,721  16,865  16,947  17,091  17,172 
Weekly  16,472  16,741  16,943  17,212  17,414 
Monthly  16,335  16,672  17,011  17,349  17,688 
S&P500 (^GSPC): Daily  1,939  1,954  1,962  1,977  1,985 
Weekly  1,901  1,934  1,960  1,993  2,019 
Monthly  1,878  1,923  1,971  2,016  2,064 
Nasdaq (^IXIC): Daily  4,427  4,452  4,470  4,494  4,512 
Weekly  4,301  4,388  4,455  4,543  4,609 
Monthly  4,242  4,359  4,485  4,602  4,727 
  • 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 16.4%   Expect a reversal soon. 
 2 months down 11.0%   Expect a reversal soon. 
 S & P 500 (^GSPC) 2 weeks down 15.7%   Expect a reversal soon. 
 2 months down 11.3%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 2 weeks down 18.3%   Expect a reversal soon. 
 2 months down 15.8%   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 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: bullish.

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 10 days.

 Found Chart Pattern Name
16Head-and-shoulders top
13Scallop, ascending and inverted
10Rectangle top
10Double Top, Eve and Adam
8Triangle, symmetrical
8Double Top, Adam and Adam
7Pipe top
5Falling wedge
5Double Top, Eve and Eve
5Broadening 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, 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. Biotechnology1. Biotechnology
2. Shoe2. Shoe
3. E-Commerce3. Air Transport
4. Air Transport4. Semiconductor Cap Equip.
5. Retail Store5. Retail Store
50. Short ETFs50. Human Resources
51. Human Resources51. Oilfield Svcs/Equipment
52. Homebuilding52. Toiletries/Cosmetics
53. Retail Building Supply53. Retail Building Supply
54. Oilfield Svcs/Equipment54. Short ETFs

-- Thomas Bulkowski

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Thursday 10/2/14. Intraday Market Direction: Nasdaq

The index dropped by -1.6% or -71.3 points. Since 02/05/1971 the index made 75 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 1.3% on 36 occasions.
     Average loss was -0.9% on 39 occasions.
Expect the index to close lower 52.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 69/121 or 57.0% of the time.
     The prediction of the index closing lower has been right 26/51 or 51.0% of the time.

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

Picture of the Nasdaq composite on the 5 minute scale.

$ $ $

I show a picture of the Nasdaq composite on the 5-minute scale.

I drew red channel lines just to show the trend of the index. It's downward, of course, but there is a key to tomorrow's price movement. Do you know what it is?

The index is at the bottom of the channel. That suggests it will bounce off the bottom and rise. The above probabilities suggest that won't be the case. It's possible the index will slide along the bottom channel line before rebounding on Friday. I think today's move is an over-reaction to world events (mostly Ebola, if you can believe the news) and that the markets will recover. However, China is warning nations that the Hong Kong crisis is an internal matter, suggesting that they are going to crack down on the protest soon. That could drive the markets lower, too.

If you're wondering how to play this, consider these two articles.

Price Recovery. It says that stocks beaten down most during a bear market recover most after the market turns bullish.

Countertrends. Stocks that climbed when the index dropped substantially outperformed the index and their peers up to a year later, on average.

$ $ $

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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© 2014 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  4,355.84    
 Daily S2  4,361.90  6.07   Yes! The Daily S2 is close to the Monthly S2.
 Weekly S2  4,383.64  21.73   
 Monthly S1  4,388.96  5.33   Yes! The Monthly S1 is close to the Weekly S2.
 Daily S1  4,392.00  3.03   Yes! The Daily S1 is close to the Monthly S1.
 Weekly S1  4,402.86  10.87   
 Low  4,409.30  6.44   Yes! The Low is close to the Weekly S1.
 Close  4,422.09  12.79   
 61.8% Down from Intraday High  4,438.90  16.81   
 Daily Pivot  4,439.39  0.49   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  4,448.04  8.65   
 38.2% Down from Intraday High  4,457.19  9.14   
 Daily R1  4,469.49  12.30   
 Weekly Pivot  4,485.87  16.38   
 Open  4,486.65  0.78   Yes! The Open is close to the Weekly Pivot.
 High  4,486.79  0.14   Yes! The High is close to the Open.
 Monthly Pivot  4,499.77  12.98   
 Weekly R1  4,505.09  5.33   Yes! The Weekly R1 is close to the Monthly Pivot.
 Daily R2  4,516.88  11.79   
 Monthly R1  4,532.89  16.01   
 Weekly R2  4,588.10  55.20   
 Monthly R2  4,643.70  55.60   

Wednesday 10/1/14. Market Direction: CPI

Picture of the chart pattern indicator

This is a picture of the chart pattern indicator on the daily scale. The indicator is the line chart below a chart of the S&P 500 composite.

I've been reporting on the bearish divergence of the indicator with the index for weeks now and the index has followed the indicator lower. It is now convergent: both are moving lower.

Of course, when the CPI hits 0, it can't go any lower. So, all it can do is rise. That is what will happen but world events like the upcoming China crackdown on Hong Kong are going to throw a wrench into the workings of the financial markets. They will take a one or two day hit.

Picture of the chart pattern indicator

This is another view of the CPI only it shows signal changes. It shows the indicator is still bearish.

-- Thomas Bulkowski

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