As of 05/17/2019   Industrials: 25,764 -98.68 -0.4%     Transports: 10,492 -113.76 -1.1%     Utilities: 790 +3.91 +0.5%     Nasdaq: 7,816 -81.77 -1.0%     S&P 500: 2,860 -16.79 -0.6%	YTD  +10.4%    +14.4%    +10.8%    +17.8%    +14.1%	Tom's Targets    Overview: 05/14/2019     26,600 or 25,000 by 06/01/2019   10,700 or 10,000 by 06/01/2019   825 or 755 by 06/01/2019   8,100 or 7,400 by 06/01/2019   2,900 or 2,740 by 06/01/2019
Chart pattern indicator: on 5/6/19

As of 05/17/2019   Industrials: 25,764 -98.68 -0.4%     Transports: 10,492 -113.76 -1.1%     Utilities: 790 +3.91 +0.5%     Nasdaq: 7,816 -81.77 -1.0%     S&P 500: 2,860 -16.79 -0.6%	YTD  +10.4%    +14.4%    +10.8%    +17.8%    +14.1%
Tom's Targets    Overview: 05/14/2019     26,600 or 25,000 by 06/01/2019   10,700 or 10,000 by 06/01/2019   825 or 755 by 06/01/2019   8,100 or 7,400 by 06/01/2019   2,900 or 2,740 by 06/01/2019
Chart pattern indicator: on 5/6/19

Monday 5/20/19. 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

The chart shows the Dow industrials on the daily scale.

A double top appears at AB and that's the only thing which is interesting in this chart.

I drew a horizontal red line across a few valleys to show where support is.

Last week, I showed a chart of where the transports might go. The image formed a head-and-shoulders top chart pattern.

The Dow could form the same structure, a three-peak pattern, only this version has two peaks on the left, a center one at AB, and a forming one off the chart to the right (that is, in the future). The right side might be a double peak, too, matching the ones on the left.

Based on the height of the two peaks on the left, it appears the right side has more room to move up this week followed by a drop. So that's what I expect...a rising price trend for a few days followed by a small drop. Then another run up and down (a second peak). After that, we'll have to see.

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 05/17/2019, the CPI had:

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

Swing Traders: Pivot Points

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

• 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

Friday 5/17/19. Pattern Trading Setups for the Weekend.

You can find setups based on a Fibonacci retrace by clicking on the link.

Click the link for a list of symbols from the table.

The following patterns were found manually, so the results may differ from those found using Patternz.

There were 10 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 591 stocks searched, or 1.7%. Based on the percentage, the stock market is trending since few consolidation patterns appear.

I found 1 pipe bottom chart patterns, which is neutral. High numbers of pipe bottoms can signal a bullish move (I see many of them just before a bear market ends or during a bear market rally. Often it means the first bottom of a double bottom has formed. Thus, expect a move down to the second bottom).

Excluding ETFs, there were 6 bullish chart patterns this week and 3 bearish ones with any remaining (2) being undecided. The ratio of bullish to bearish patterns suggests the market is hinting of a coming bullish (up) turn.

In the table below, the red and green colors are based on the historical breakout direction for the associated chart pattern. If a high and tight flag appears, the start and end dates highlight the flagpole only and not the flag.

More...

-- Thomas Bulkowski

Weekly screen for chart patterns ending between 05/09/2019 and 05/16/2019. Many may be still in development. If no securities appear, then I have not identified any new patterns.

Industry: Building Materials

WARNING: This industry is within the top 7 that Dead-cat bounce often.

Industry RS rank: 14 out of 58

Stock RS rank: 235 out of 585

5/16/19 close: $40.36

1 Month avg volatility: $0.82. Volatility stop (for upward breakout): $38.37 or 4.9% below the close.

Change YTD: 35.21%

Volume: 101,100 shares. 3 month avg: 243,183 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Friday.

 

Chart pattern: Scallop, ascending and inverted continuation pattern from 04/11/2019 to 05/13/2019

Breakout is upward 100% of the time.

Average rise: 43%.

Break-even failure rate: 4%.

Throwbacks occur 61% of the time.

Price hits measure rule target 61% of the time.

Industry: Furn/Home Furnishings

Industry RS rank: 17 out of 58

Stock RS rank: 490 out of 585

5/16/19 close: $16.77

1 Month avg volatility: $0.56. Volatility stop (for downward breakout): $18.10 or 7.9% above the close.

Change YTD: -16.32%

Volume: 17,000 shares. 3 month avg: 28,538 shares.

This security may be thinly traded (less than 100k shares)!

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Friday.

 

Chart pattern: Pipe top reversal pattern from 04/29/2019 to 05/06/2019

Breakout is downward 100% of the time.

Average decline: 20%.

Break-even failure rate: 11%.

Pullbacks occur 41% of the time.

Price hits measure rule target 70% of the time.

Industry: Healthcare Information

Industry RS rank: 8 out of 58

Stock RS rank: 518 out of 585

5/16/19 close: $69.64

1 Month avg volatility: $3.29. Volatility stop (for upward breakout): $62.48 or 10.3% below the close.

Change YTD: 16.75%

Volume: 515,400 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Friday, and best sell day (most up closes) is Wednesday.

 

Chart pattern: Triangle, symmetrical continuation pattern from 04/16/2019 to 05/16/2019

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price hits measure rule target 66% of the time.

Industry: Petroleum (Producing)

Industry RS rank: 48 out of 58

Stock RS rank: 360 out of 585

5/16/19 close: $58.08

1 Month avg volatility: $1.65. Volatility stop (for upward breakout): $53.96 or 7.1% below the close.

Change YTD: 21.15%

Volume: 889,500 shares. 3 month avg: 1,539,165 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Tuesday.

 

Chart pattern: Double Bottom, Adam and Adam reversal pattern from 05/02/2019 to 05/10/2019

Breakout is upward 100% of the time.

Average rise: 35%.

Break-even failure rate: 5%.

Throwbacks occur 64% of the time.

Price hits measure rule target 66% of the time.

Industry: Advertising

Industry RS rank: 21 out of 58

Stock RS rank: 75 out of 585

5/16/19 close: $3.28

1 Month avg volatility: $0.18. Volatility stop (for upward breakout): $2.77 or 15.5% below the close.

Change YTD: 25.67%

Volume: 634,200 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Tuesday, and best sell day (most up closes) is Friday.

 

Chart pattern: Flag, high and tight continuation pattern from 03/26/2019 to 05/16/2019

Breakout is upward 100% of the time.

Average rise: 69%.

Throwbacks occur 54% of the time.

Price hits measure rule target 90% of the time.

Industry: Petroleum (Integrated)

Industry RS rank: 46 out of 58

Stock RS rank: 465 out of 585

5/16/19 close: $27.87

1 Month avg volatility: $0.96. Volatility stop (for upward breakout): $25.91 or 7.0% below the close.

Change YTD: 19.15%

Volume: 2,250,300 shares. 3 month avg: 2,218,335 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Thursday, and best sell day (most up closes) is Tuesday.

 

Chart pattern: Pipe bottom reversal pattern from 04/29/2019 to 05/06/2019

Breakout is upward 100% of the time.

Average rise: 45%.

Break-even failure rate: 5%.

Throwbacks occur 44% of the time.

Price hits measure rule target 83% of the time.

Industry: Electric Utility (East)

Industry RS rank: 22 out of 58

Stock RS rank: 188 out of 585

5/16/19 close: $197.11

1 Month avg volatility: $2.58. Volatility stop (for downward breakout): $203.07 or 3.0% above the close.

Change YTD: 13.40%

Volume: 2,116,300 shares. 3 month avg: 1,582,705 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Friday.

 

Chart pattern: Broadening top reversal pattern from 04/10/2019 to 05/16/2019

Breakout is downward 50% of the time.

Average decline: 15%.

Break-even failure rate: 18%.

Pullbacks occur 48% of the time.

Price hits measure rule target 37% of the time.

Industry: Electric Utility (West)

Industry RS rank: 24 out of 58

Stock RS rank: 222 out of 585

5/16/19 close: $95.82

1 Month avg volatility: $1.42. Volatility stop (for upward breakout): $91.90 or 4.1% below the close.

Change YTD: 12.46%

Volume: 554,800 shares. 3 month avg: 665,203 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Tuesday.

 

Chart pattern: Broadening top, right-angled and descending continuation pattern from 04/15/2019 to 05/13/2019

Breakout is upward 51% of the time.

Average rise: 28%.

Break-even failure rate: 19%.

Throwbacks occur 52% of the time.

Price hits measure rule target 63% of the time.

Industry: Aerospace/Defense

Industry RS rank: 26 out of 58

Stock RS rank: 363 out of 585

5/16/19 close: $179.44

1 Month avg volatility: $3.34. Volatility stop (for upward breakout): $170.30 or 5.1% below the close.

Change YTD: 17.01%

Volume: 1,257,300 shares. 3 month avg: 1,302,565 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Friday.

 

Chart pattern: Triangle, symmetrical continuation pattern from 04/25/2019 to 05/14/2019

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price hits measure rule target 66% of the time.

Industry: Retail Store

Industry RS rank: 53 out of 58

Stock RS rank: 353 out of 585

5/16/19 close: $52.69

1 Month avg volatility: $0.87. Volatility stop (for downward breakout): $55.12 or 4.6% above the close.

Change YTD: 17.77%

Volume: 5,239,000 shares. 3 month avg: 4,406,445 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Tuesday.

 

Chart pattern: Head-and-shoulders top reversal pattern from 04/05/2019 to 05/10/2019

Breakout is downward 100% of the time.

Average decline: 22%.

Break-even failure rate: 4%.

Pullbacks occur 50% of the time.

Price hits measure rule target 55% of the time.

Industry: Natural Gas (Distributor)

Industry RS rank: 36 out of 58

Stock RS rank: 418 out of 585

5/16/19 close: $54.23

1 Month avg volatility: $0.76. Volatility stop (for downward breakout): $55.95 or 3.2% above the close.

Change YTD: 1.65%

Volume: 1,661,000 shares. 3 month avg: 686,418 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Diamond top reversal pattern from 05/01/2019 to 05/16/2019

Breakout is downward 69% of the time.

Average decline: 21%.

Break-even failure rate: 6%.

Pullbacks occur 57% of the time.

Price hits measure rule target 76% of the time.

Thursday 5/16/19. Intraday Market Direction: Nasdaq

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 Nasdaq composite on the 5-minute scale.

The index made a wonderful pattern at A to B called an inverted and ascending scallop. It repeated that pattern at BC, too, although this one isn't as well shaped. No doubt there won't be a third in the row. Why? Because too many people have recognized the pattern. Time to confound them and switch to a new pattern.

At DEF, there's a confirmed head-and-shoulders top. The pattern presaged a nice decline. One might quibble about the head (E) being formed because of an opening day gap. Yes, it looks weird, but you can't deny there's a peak at E.

What does all of this mean? My guess is that we'll see a higher close tomorrow, which also agrees with the above probabilities.

$ $ $

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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