Subscribe to RSS feeds Bulkowski Blog via RSS

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

Support this site! Clicking on his books (below) takes you to Amazon.com. If you buy ANYTHING, they pay for the referral.

Bulkowski's Blog: ThePatternSite.com
Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 11/25/2014
17,815 -2.96 0.0%
9,203 36.27 0.4%
590 -0.79 -0.1%
4,758 3.36 0.1%
2,067 -2.38 -0.1%
YTD
7.5%
24.4%
20.3%
13.9%
11.8%
Tom's Targets    Overview: 11/14/2014
18,100 or 17,200 by 12/01/2014
9,300 or 8,700 by 12/01/2014
610 or 570 by 12/01/2014
5,000 or 4,500 by 12/01/2014
2,100 or 1,975 by 12/01/2014

Written and copyright © 2014 by Thomas N. Bulkowski. All rights reserved.

Top Headlines

Archives



Wednesday 11/26/14. Chart Pattern Indicator: What's It Say?

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 drew a thin red line where the indicator showed its recent weakness, just to see how the index behaved at that point.

The index moved horizontally there, but not for long. Strength returned and sent the indicator soaring again. Now, it's in bullish territory after leaving the neutral zone to the Klingons.

Picture of the chart pattern indicator

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

This chart highlights the white neutral area that I mentioned in the last chart. The indicator is showing solid green, suggesting a continuation of the bullish run.

This is a holiday week, so volume is probably lighter than average. That might allow wider swings in the indices (more volatile than average).

-- Thomas Bulkowski

Top


Tuesday 11/25/14.Symmetrical Triangle in the Dow. Good Omen?

The index climbed by 0.0% or 7.84 points. Since 10/01/1928 the index made 1210 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 641 occasions.
     Average loss was -0.7% on 569 occasions.
Expect the index to close higher 53.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 86/134 or 64.2% 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.

Outlined in red is a symmetrical triangle. Those have price action that forms lower highs and higher lows. The up and down price waves converge.

The breakout from a symmetrical triangle, on the daily charts in stocks, is upward 54% of the time.

I expect a strong move either upward or downward, perhaps as soon as Tuesday. This is based on the narrowing price action. However, it's a holiday week.

My studies of holidays suggests that the market will close higher on Wednesday and lower on Friday.

$ $ $

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  15,500.60    
 Monthly S1  16,659.25  1,158.65   
 Monthly Pivot  17,277.04  617.79   
 Weekly S2  17,481.27  204.23   
 Weekly S1  17,649.58  168.32   
 Daily S2  17,760.04  110.46   
 Weekly Pivot  17,772.21  12.17   
 Daily S1  17,788.97  16.76   
 Low  17,793.19  4.22   Yes! The Low is close to the Daily S1.
 Open  17,812.63  19.44   
 61.8% Down from Intraday High  17,816.90  4.27   Yes! The 61.8% Down from Intraday High is close to the Open.
 Close  17,817.90  1.00   Yes! The Close is close to the 61.8% Down from Intraday High.
 Daily Pivot  17,822.12  4.22   Yes! The Daily Pivot is close to the Close.
 50% Down from Intraday High  17,824.23  2.11   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  17,831.55  7.32   
 Daily R1  17,851.05  19.50   
 High  17,855.27  4.22   Yes! The High is close to the Daily R1.
 Daily R2  17,884.20  28.93   
 Weekly R1  17,940.52  56.32   
 Weekly R2  18,063.15  122.62   
 Monthly R1  18,435.69  372.54   
 Monthly R2  19,053.48  617.79   

Monday 11/24/14. Market Monday: The Week Ahead

My Prediction

Picture of the Dow transports on the daily scale.

I received an email from Dave asking if the major indices are showing broadening tops. I show a picture of one in the Dow transports using the daily scale.

Notice that the red line doesn't touch at A because it doesn't quite line up with the adjacent minor low. This is more blatant at B. At B price is in the middle of an uptrend so there is no minor high touch. You can't count it as a touch when it's in the middle of a trend like it is at B. Only touches at minor highs and minor lows count.

For broadening patterns, I prefer to have at least five touches total, three on one side and two on the other, to be a valid pattern. With just two touches, you can call all sort of patterns broadening tops and you'd be wrong.

In this case, you have two touches on the top and two to three on the bottom. However, clearly the index it making broadening swings from up to down. So yes, it's a broadening top.

It has already broken out upward and formed a flag at C.

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: Up 13.01 points.
Tuesday: Up 40.07 points.
Wednesday: Down 2.09 points.
Thursday: Up 33.27 points.
Friday: Up 91.06 points.

For the Week...

The Dow industrials were up 175.32 points or 1.0%.
The Nasdaq composite was up 24.43 points or 0.5%.
The S&P 500 index was up 23.68 points or 1.2%.

Year to Date...

Dow Industrials
     0.5% down from the high of 17,894.83 on 11/21/2014.
     16.1% up from the low of 15,340.69 on 02/05/2014.
Nasdaq
     0.8% down from the high of 4,751.60 on 11/21/2014.
     19.4% up from the low of 3,946.03 on 04/15/2014.
S&P 500
     0.4% down from the high of 2,071.46 on 11/21/2014.
     18.7% 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
Gross domestic product8:30 TBMeasures economic activity; GDP deflator measures inflation.
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Initial jobless claims8:30 WC+Counts people filing for state unemployment benefits.
Durable goods orders8:30 WBMeasures orders, shipments of goods with lifespans >3 years.
Personal income & consumption8:30 WC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 WC+Covers durables, non-durables, and services.
Chicago purchasing managers index9:45 WBMonitors regional manufacturing activity.
Michigan sentiment9:55 WB-Consumer sentiment: Measures strength of consumer spending.
New home sales10:00 WC+Shows sales of single-family homes.
Crude inventories10:30 W?My guess: Measures oil inventory.

Options Expiration

No options expire this week.

Top

Swing and Position Traders: Chart Pattern Indicator

As of 11/21/2014, the CPI had:

3 bearish patterns,
31 bullish patterns,
269 patterns waiting for breakout.
The CPI signal is 91.2%, 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  17,635  17,722  17,809  17,896  17,982 
Weekly  17,479  17,644  17,770  17,935  18,061 
Monthly  15,498  16,654  17,274  18,430  19,051 
S&P500 (^GSPC): Daily  2,049  2,056  2,064  2,071  2,079 
Weekly  2,019  2,041  2,056  2,078  2,093 
Monthly  1,793  1,928  2,000  2,135  2,207 
Nasdaq (^IXIC): Daily  4,671  4,692  4,722  4,743  4,773 
Weekly  4,608  4,660  4,706  4,759  4,804 
Monthly  4,059  4,386  4,569  4,896  5,079 
  • 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) 5 weeks up 8.6%   Expect a reversal soon. 
 2 months up 40.2%   Expect a random direction. 
 S & P 500 (^GSPC) 5 weeks up 9.3%   Expect a reversal soon. 
 2 months up 42.1%   Expect a random direction. 
 Nasdaq composite (^IXIC) 5 weeks up 6.5%   Expect a reversal soon. 
 2 months up 40.5%   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: bullish.

Top

Earnings, Chart Patterns & Industries

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

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

 Found Chart Pattern Name
22Flag
13Scallop, ascending and inverted
13Triangle, symmetrical
10Head-and-shoulders bottom
9Pennant
6Broadening wedge, descending
5Diamond top
4Broadening top
3Double Bottom, Adam and Adam
3Pipe 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. E-Commerce
2. E-Commerce2. Biotechnology
3. Shoe3. Semiconductor Cap Equip.
4. Medical Supplies4. Securities Brokerage
5. Air Transport5. Information Services
50. Natural Gas (Diversified)50. Toiletries/Cosmetics
51. Toiletries/Cosmetics51. Natural Gas (Diversified)
52. Petroleum (Producing)52. Petroleum (Producing)
53. Oilfield Svcs/Equipment53. Oilfield Svcs/Equipment
54. Short ETFs54. Short ETFs

-- Thomas Bulkowski

Top

Written and copyright © 2014 by Thomas N. Bulkowski. All rights reserved.