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.

Wednesday 7/26/17. A Look At Indicators

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 index continues to rise and the indicator backs this trend. The vertical green bar on the far right shows this.

The thin blue indicator line beneath the red and green signals shows gathering strength, too. That's the first time in several weeks that the indicator has turned higher.

From this chart, the bull market seems solid.

The red line is the percentage of stocks at least 20% below their 1-year high (plotted upside down). The blue line is the average percentage drop of stocks below their 1-year high (plotted upside down).

The two lines went nowhere from a snapshot done a week ago. That's not unusual. The red line is the more sensitive of the two lines. You might think that after today's 100 point gain in the Dow, the stocks would rejoice and the lines would move up. But my take on this is today's move only affected a few stocks, leaving the majority of stocks on the sidelines, licking their chops, hoping for a tasty treat.

$ $ $

The IRS phone scam is back in business. You'll receive a phone call demanding money or else the IRS will file a lawsuit against you.

The government busted the ring running this scam several months ago and the calls stopped. Apparently, the scammers made bail and the calls have restarted. Do yourself a favor and either hang up or delete the recorded voice mail message.

-- Thomas Bulkowski

Tuesday 7/25/17. Intraday Market Direction: Dow

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

$ $ $

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

I had to search for this descending triangle.

Point A doesn't quite make it up to the top trendline, so that's a concern, but not a big one. It's close enough, I think.

So we have three touches on the top trendline and two on the bottom, all of which is sufficient to form a valid triangle. The breakout from descending triangles is downward 47% of the time, according to my book, Chart Patterns: After the Buy.

And that means it breaks out upward more often. Notice, however, that the index was falling in the few minutes before the close.

$ $ $

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

Monday 7/24/17. Market Monday: The Week Ahead

• My Prediction
• A Brief Look Back
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Earnings, Chart Patterns & Industries

My Prediction

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

My eye is drawn to the consolidation region highlighted here by the two nearly parallel red lines. I'm not sure why but it's an interesting pattern.

When the two lines converge and descend, the pattern is a falling wedge.

When the two lines are parallel, it's a channel.

Some may claim that it's a bull flag but I don't think so. It's too long to be a flag.

Regardless, let's turn our attention to points A and B. B is the prior high. A is a new high but it's also where price appears to have stalled. At least for the last few days.

This could be a 2B pattern, where price in an uptrend sets a new high but fails to continue higher. A retrace follows. To me, that's what it looks like will happen.

A Brief Look Back

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.

For the Week...

Year to Date...

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 07/21/2017, the CPI had:

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.

• 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:

Consecutive Price Trends

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.

Earnings, Chart Patterns & Industries

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

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.

-- Thomas Bulkowski

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.