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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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Chart Patterns: After the Buy
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Visual Guide to Chart Patterns book.
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Bulkowski's Blog: ThePatternSite.com
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Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 08/30/2016
18,454 -48.69 -0.3%
7,910 49.82 0.6%
665 -7.10 -1.1%
5,223 -9.34 -0.2%
2,176 -4.26 -0.2%
YTD
5.9%
5.3%
15.1%
4.3%
6.5%
Tom's Targets    Overview: 08/12/2016
19,000 or 18,000 by 09/01/2016
8,275 or 7,500 by 09/01/2016
710 or 680 by 09/01/2016
5,300 or 5,000 by 09/01/2016
2,225 or 2,125 by 09/01/2016

  Written by and copyright © 2005-2016 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

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Wednesday 8/31/16. A Look At Indicators

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 chart shows bearish divergence between the index and the indicator.

I show that with the two red lines. The indicator says the index will fall, but the index is stubborn. It's coasting horizontally.

Picture of the percent down indicators

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).

Shown as a red line on the above chart...
On Monday, 25% of stocks in my database are in bear market territory (down at least 20% from their 1-year high).
A week ago, it was 26%.
The fewest was 25% on 08/23/2016.
And the most was 70% on 02/11/2016.
Shown as a blue line on the above chart...
The 530 stocks in my database are down an average of 14% from their yearly high.
A week ago, the average was 14%.
The peak was 14% on 08/23/2016.
And the bottom was 32% on 02/11/2016.

The lines are moving higher and the stats bear that out. Sort of. The red line has shown improvement over the prior week, but the blue line dropped and then recovered to tie the week ago value.

I am inclined to believe that the prior chart shows weakness going into September. I expect a drop. I've been taking modest profit on some of my positions, raising cash for the decline.

Then I'll buy the dip.

-- Thomas Bulkowski

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Tuesday 8/30/16. Intraday Market Direction: Dow

The index climbed by 0.6% or 107.59 points. Since 10/01/1928 the index made 827 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 460 occasions.
     Average loss was -0.6% on 367 occasions.
Expect the index to close higher 55.6% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 122/204 or 59.8% of the time.
     The prediction of the index closing lower has been right 31/60 or 51.7% 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.

I show three colored lines on the chart. The middle one is red and I started it from the right, extending it to the left. It shows current overhead resistance, where the index topped out today (Monday).

The top blue line is another one of resistance drawn along the top of price movement and extended to the right. It's where the index could stall.

The green line is the one I favor. It could mark the low of a right shoulder of a head (H) and shoulders bottom (L, R) chart pattern. I can imagine the index dropping to form a right shoulder.

$ $ $

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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© 2016 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  18,052.42    
 Weekly S2  18,193.72  141.29   
 Monthly S1  18,277.71  83.99   
 Weekly S1  18,348.35  70.65   
 Daily S2  18,378.83  30.48   
 Low  18,419.92  41.09   
 Open  18,421.29  1.37   Yes! The Open is close to the Low.
 Daily S1  18,440.91  19.62   
 61.8% Down from Intraday High  18,459.33  18.42   
 50% Down from Intraday High  18,471.51  12.18   
 Monthly Pivot  18,473.07  1.57   Yes! The Monthly Pivot is close to the 50% Down from Intraday High.
 Daily Pivot  18,482.00  8.93   Yes! The Daily Pivot is close to the Monthly Pivot.
 38.2% Down from Intraday High  18,483.68  1.68   Yes! The 38.2% Down from Intraday High is close to the Daily Pivot.
 Weekly Pivot  18,489.98  6.30   Yes! The Weekly Pivot is close to the 38.2% Down from Intraday High.
 Close  18,502.99  13.01   
 High  18,523.09  20.10   
 Daily R1  18,544.08  20.99   
 Daily R2  18,585.17  41.09   
 Weekly R1  18,644.61  59.44   
 Monthly R1  18,698.36  53.74   
 Weekly R2  18,786.24  87.88   
 Monthly R2  18,893.72  107.49   

Monday 8/29/16. Market Monday: The Week Ahead

My Prediction

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

I shows a picture of the S&P 500 index on the daily scale.

The chart shows another broadening top. It's the same as I have shown in the last two Monday postings in other indices.

I extended the top line knowing that September -- which is the worst performing month of the year -- is coming.

I expect the indices to show weakness and maybe it'll drop far enough to touch the trendline and rebound.

Perhaps we'll see it happen this week.

 

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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 23.15 points.
Tuesday: Up 17.88 points.
Wednesday: Down 65.82 points.
Thursday: Down 33.07 points.
Friday: Down 53.01 points.

For the Week...

The Dow industrials were down 157.17 points or 0.8%.
The Nasdaq composite was down 19.46 points or 0.4%.
The S&P 500 index was down 14.83 points or 0.7%.

Year to Date...

Dow Industrials
     1.5% down from the high of 18,668.44 on 08/15/2016.
     19.1% up from the low of 15,450.56 on 01/20/2016.
Nasdaq
     1.1% down from the high of 5,275.74 on 08/23/2016.
     24.0% up from the low of 4,209.76 on 02/11/2016.
S&P 500
     1.1% down from the high of 2,193.81 on 08/15/2016.
     19.8% up from the low of 1,810.10 on 02/11/2016.

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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
Personal income & consumption8:30 MC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 MC+Covers durables, non-durables, and services.
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Chicago purchasing managers index9:45 WBMonitors regional manufacturing activity.
Crude inventories10:30 W?My guess: Measures oil inventory.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Productivity & costs8:30 ThD+Cost of producing a unit of output.
Construction spending10:00 ThDCovers residential/non-residential/public spending on new construction.
Auto & truck sales2:00 ThC-Monthly sales of domestically produced vehicles.
4 Employment reports8:30 FANonfarm payrolls, unemployment rate, avg workweek, hourly earnings.
Trade balance8:30 FC+Signals balance of exports & imports.
Factory orders10:00 FD+Durable/non-durable goods orders w/factory inventories.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

The chart pattern indicator is bearish 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  18,198  18,296  18,434  18,533  18,671 
Weekly  18,158  18,277  18,454  18,573  18,750 
Monthly  18,017  18,206  18,437  18,627  18,858 
S&P500 (^GSPC): Daily  2,145  2,157  2,172  2,185  2,200 
Weekly  2,141  2,155  2,174  2,188  2,207 
Monthly  2,124  2,146  2,170  2,193  2,216 
Nasdaq (^IXIC): Daily  5,160  5,189  5,221  5,251  5,283 
Weekly  5,145  5,182  5,229  5,266  5,313 
Monthly  4,975  5,097  5,186  5,308  5,398 
  • 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 16.0%   Expect a reversal soon. 
 1 month down 19.8%   Expect a reversal soon. 
 S & P 500 (^GSPC) 2 weeks down 15.3%   Expect a reversal soon. 
 1 month down 20.5%   Expect a reversal soon. 
 Nasdaq composite (^IXIC) 1 week down 28.6%   The trend may continue. 
 2 months up 38.0%   The trend may continue. 

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

 Found Chart Pattern Name
27Triangle, symmetrical
11Pipe bottom
9Triangle, descending
8Broadening top
7Triangle, ascending
7Head-and-shoulders top
7Dead-cat bounce
5Rising wedge
5Flag
4Double Top, Eve and Adam

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

The 10 types of most frequently appearing chart patterns in the stocks, 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. Natural Gas (Diversified)1. Natural Gas (Diversified)
2. Petroleum (Producing)2. Semiconductor
3. Semiconductor3. Petroleum (Producing)
4. Furn/Home Furnishings4. Cement and Aggregates
5. Cement and Aggregates5. Furn/Home Furnishings
50. Electric Utility (Central)50. Shoe
51. Trucking/Transp. Leasing51. Household Products
52. Electric Utility (East)52. Insurance (Prop/Casualty)
53. Shoe53. Electric Utility (East)
54. Retail Store54. Trucking/Transp. Leasing
55. Retail (Special Lines)55. Apparel
56. Apparel56. Retail (Special Lines)
57. Short ETFs57. Short ETFs

-- Thomas Bulkowski

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Written by and copyright © 2005-2016 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.