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.

Monday 9/26/16. Market Monday: The Week Ahead

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

My Prediction

I show the Dow transports on the daily scale.

I drew two horizontal red lines outlining support and resistance areas on the chart. I chose to connect the peaks for overhead resistance and the valleys for underlying support.

Those areas are where the index turned.

Notice at A that the index didn't quite make it down to the bottom line. That could be a bullish indication.

The dip is a chart pattern I've studied called a partial decline, in this case, in a rectangle top.

It suggests, but does not guarantee, that price will break out upward on the move from A to the top line. But as you can see, it appears the index is turning back down.

And that could mean a trip to the bottom trendline.

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...

Economic Reports

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

Report	Time	A-F Rating	Description
New home sales	10:00 M	C+	Shows sales of single-family homes.
Consumer confidence	10:00 T	B-	Surveys 5,000 households for trends.
Durable goods orders	8:30 W	B	Measures orders, shipments of goods with lifespans >3 years.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
Gross domestic product	8:30 Th	B	Measures economic activity; GDP deflator measures inflation.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
Personal income & consumption	8:30 F	C+	Measures sources of income to predict future demand.
Personal consumption expenditures	8:30 F	C+	Covers durables, non-durables, and services.
Chicago purchasing managers index	9:45 F	B	Monitors regional manufacturing activity.
Michigan sentiment	10:00 F	B-	Consumer sentiment: Measures strength of consumer spending.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 09/23/2016, the CPI had:

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.

• 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 over.

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 9/23/16. 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 11 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 630 stocks searched, or 1.7%. Based on the percentage, the stock market is trending since few consolidation patterns appear.

I found 13 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 13 bullish chart patterns this week and 5 bearish ones with any remaining (1) 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 09/15/2016 and 09/22/2016. Many may be still in development. If no securities appear, then I have not identified any new patterns.

Industry: Medical Supplies

Industry RS rank: 5 out of 56

Stock RS rank: 83 out of 622

9/22/16 close: $52.84

1 Month avg volatility: $1.03. Volatility stop (for upward breakout): $49.71 or 5.9% below the close.

Change YTD: -5.10%

Volume: 128,500 shares. 3 month avg: 152,492 shares.

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

 

Chart pattern: Pipe bottom reversal pattern from 09/06/2016 to 09/12/2016

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: Semiconductor Cap Equip.

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

Industry RS rank: 7 out of 56

Stock RS rank: 31 out of 622

9/22/16 close: $30.29

1 Month avg volatility: $0.59. Volatility stop (for upward breakout): $29.00 or 4.3% below the close.

Change YTD: 62.24%

Volume: 15,650,900 shares. 3 month avg: 12,995,748 shares.

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

 

Chart pattern: Pipe bottom reversal pattern from 09/06/2016 to 09/12/2016

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: Telecom. Equipment

Industry RS rank: 23 out of 56

Stock RS rank: 81 out of 622

9/22/16 close: $29.32

1 Month avg volatility: $0.67. Volatility stop (for downward breakout): $30.87 or 5.3% above the close.

Change YTD: -4.09%

Volume: 2,273,300 shares. 3 month avg: 2,008,798 shares.

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

 

Chart pattern: Broadening top reversal pattern from 08/16/2016 to 09/19/2016

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: Apparel

Industry RS rank: 55 out of 56

Stock RS rank: 617 out of 622

9/22/16 close: $5.91

1 Month avg volatility: $0.36. Volatility stop (for downward breakout): $6.65 or 12.5% above the close.

Change YTD: -40.00%

Volume: 5,624,800 shares. 3 month avg: 2,997,229 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: Dead-cat bounce continuation pattern from 09/20/2016 to 09/20/2016

Breakout is downward 67% of the time.

Average decline: 18%.

Industry: Biotechnology

Industry RS rank: 11 out of 56

Stock RS rank: 121 out of 622

9/22/16 close: $97.45

1 Month avg volatility: $3.28. Volatility stop (for upward breakout): $89.13 or 8.5% below the close.

Change YTD: -6.98%

Volume: 1,053,700 shares. 3 month avg: 1,853,849 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: Triangle, symmetrical continuation pattern from 08/04/2016 to 09/22/2016

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: Precision Instrument

Industry RS rank: 40 out of 56

Stock RS rank: 64 out of 622

9/22/16 close: $51.79

1 Month avg volatility: $0.95. Volatility stop (for upward breakout): $49.61 or 4.2% below the close.

Change YTD: 53.36%

Volume: 463,600 shares. 3 month avg: 372,506 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: Pipe bottom reversal pattern from 09/06/2016 to 09/12/2016

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: Electronics

Industry RS rank: 36 out of 56

Stock RS rank: 202 out of 622

9/22/16 close: $13.62

1 Month avg volatility: $0.21. Volatility stop (for upward breakout): $13.08 or 4.0% below the close.

Change YTD: 21.50%

Volume: 9,047,100 shares. 3 month avg: 4,754,912 shares.

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

 

Chart pattern: Pipe bottom reversal pattern from 09/06/2016 to 09/12/2016

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: Chemical (Basic)

Industry RS rank: 44 out of 56

Stock RS rank: 139 out of 622

9/22/16 close: $48.90

1 Month avg volatility: $1.07. Volatility stop (for upward breakout): $46.62 or 4.7% below the close.

Change YTD: 24.97%

Volume: 542,500 shares. 3 month avg: 1,133,531 shares.

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

 

Chart pattern: Pipe bottom reversal pattern from 09/06/2016 to 09/12/2016

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: Insurance (Life)

Industry RS rank: 17 out of 56

Stock RS rank: 9 out of 622

9/22/16 close: $4.95

1 Month avg volatility: $0.24. Volatility stop (for upward breakout): $4.45 or 10.1% below the close.

Change YTD: 32.71%

Volume: 6,067,200 shares. 3 month avg: 8,772,140 shares.

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

 

Chart pattern: Triangle, symmetrical continuation pattern from 08/31/2016 to 09/22/2016

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: Advertising

Industry RS rank: 38 out of 56

Stock RS rank: 613 out of 622

9/22/16 close: $1.57

1 Month avg volatility: $0.09. Volatility stop (for downward breakout): $1.78 or 13.3% above the close.

Change YTD: -51.54%

Volume: 106,400 shares. 3 month avg: 346,962 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: Triangle, descending reversal pattern from 07/21/2016 to 09/22/2016

Breakout is downward 64% of the time.

Average decline: 16%.

Break-even failure rate: 16%.

Pullbacks occur 54% of the time.

Price hits measure rule target 54% of the time.

Industry: Furn/Home Furnishings

Industry RS rank: 16 out of 56

Stock RS rank: 265 out of 622

9/22/16 close: $41.59

1 Month avg volatility: $1.51. Volatility stop (for downward breakout): $44.96 or 8.1% above the close.

Change YTD: 15.34%

Volume: 529,000 shares. 3 month avg: 230,998 shares.

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

 

Chart pattern: Dead-cat bounce continuation pattern from 09/20/2016 to 09/20/2016

Breakout is downward 67% of the time.

Average decline: 18%.

Industry: Furn/Home Furnishings

Industry RS rank: 16 out of 56

Stock RS rank: 521 out of 622

9/22/16 close: $16.36

1 Month avg volatility: $0.40. Volatility stop (for downward breakout): $17.21 or 5.2% above the close.

Change YTD: -14.52%

Volume: 754,100 shares. 3 month avg: 591,375 shares.

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

 

Chart pattern: Head-and-shoulders top reversal pattern from 08/08/2016 to 09/19/2016

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: Semiconductor Cap Equip.

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

Industry RS rank: 7 out of 56

Stock RS rank: 473 out of 622

9/22/16 close: $69.51

1 Month avg volatility: $1.29. Volatility stop (for upward breakout): $66.73 or 4.0% below the close.

Change YTD: 0.23%

Volume: 1,565,800 shares. 3 month avg: 1,394,648 shares.

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

 

Chart pattern: Triangle, symmetrical continuation pattern from 09/13/2016 to 09/22/2016

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: Metal Fabricating

Industry RS rank: 13 out of 56

Stock RS rank: 564 out of 622

9/22/16 close: $17.38

1 Month avg volatility: $0.52. Volatility stop (for upward breakout): $16.19 or 6.9% below the close.

Change YTD: -25.57%

Volume: 11,800 shares. 3 month avg: 14,708 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 bottom reversal pattern from 09/06/2016 to 09/12/2016

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: Semiconductor

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

Industry RS rank: 1 out of 56

Stock RS rank: 7 out of 622

9/22/16 close: $65.02

1 Month avg volatility: $1.51. Volatility stop (for upward breakout): $61.64 or 5.2% below the close.

Change YTD: 97.27%

Volume: 7,715,100 shares. 3 month avg: 10,185,628 shares.

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

 

Chart pattern: Pipe bottom reversal pattern from 09/06/2016 to 09/12/2016

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: Telecom. Equipment

Industry RS rank: 23 out of 56

Stock RS rank: 93 out of 622

9/22/16 close: $63.52

1 Month avg volatility: $0.91. Volatility stop (for upward breakout): $61.54 or 3.1% below the close.

Change YTD: 27.08%

Volume: 7,895,700 shares. 3 month avg: 8,631,460 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: Pipe bottom reversal pattern from 09/06/2016 to 09/12/2016

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: Natural Gas (Distributor)

Industry RS rank: 15 out of 56

Stock RS rank: 456 out of 622

9/22/16 close: $65.76

1 Month avg volatility: $1.12. Volatility stop (for upward breakout): $62.63 or 4.8% below the close.

Change YTD: 10.69%

Volume: 293,800 shares. 3 month avg: 229,017 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 wedge, descending reversal pattern from 08/23/2016 to 09/22/2016

Breakout is upward 79% of the time.

Average rise: 33%.

Break-even failure rate: 6%.

Throwbacks occur 53% of the time.

Price hits measure rule target 79% of the time.

Industry: Precision Instrument

Industry RS rank: 40 out of 56

Stock RS rank: 215 out of 622

9/22/16 close: $157.66

1 Month avg volatility: $2.22. Volatility stop (for upward breakout): $151.23 or 4.1% below the close.

Change YTD: 11.15%

Volume: 1,599,000 shares. 3 month avg: 1,449,652 shares.

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

 

Chart pattern: Pipe bottom reversal pattern from 09/06/2016 to 09/12/2016

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: Insurance (Diversified)

Industry RS rank: 14 out of 56

Stock RS rank: 235 out of 622

9/22/16 close: $35.51

1 Month avg volatility: $0.63. Volatility stop (for downward breakout): $37.05 or 4.3% above the close.

Change YTD: 6.67%

Volume: 1,420,600 shares. 3 month avg: 1,774,011 shares.

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

 

Chart pattern: Diamond top reversal pattern from 09/02/2016 to 09/20/2016

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.

Industry: Semiconductor

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

Industry RS rank: 1 out of 56

Stock RS rank: 107 out of 622

9/22/16 close: $110.46

1 Month avg volatility: $1.55. Volatility stop (for upward breakout): $107.04 or 3.1% below the close.

Change YTD: 22.95%

Volume: 352,200 shares. 3 month avg: 560,865 shares.

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

 

Chart pattern: Pipe bottom reversal pattern from 09/06/2016 to 09/12/2016

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: Semiconductor

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

Industry RS rank: 1 out of 56

Stock RS rank: 91 out of 622

9/22/16 close: $67.78

1 Month avg volatility: $0.94. Volatility stop (for upward breakout): $65.68 or 3.1% below the close.

Change YTD: 27.21%

Volume: 3,121,600 shares. 3 month avg: 2,746,080 shares.

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

 

Chart pattern: Pipe bottom reversal pattern from 09/06/2016 to 09/12/2016

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: Investment Co. (Foreign)

Industry RS rank: 29 out of 56

Stock RS rank: 314 out of 622

9/22/16 close: $41.96

1 Month avg volatility: $0.39. Volatility stop (for upward breakout): $41.10 or 2.1% below the close.

Change YTD: 9.30%

Volume: 454,700 shares. 3 month avg: 717,666 shares.

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

 

Chart pattern: Broadening top, right-angled and descending continuation pattern from 08/10/2016 to 09/22/2016

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: Investment Co. (Foreign)

Industry RS rank: 29 out of 56

Stock RS rank: 252 out of 622

9/22/16 close: $74.75

1 Month avg volatility: $0.81. Volatility stop (for upward breakout): $72.80 or 2.6% below the close.

Change YTD: 27.47%

Volume: 217,800 shares. 3 month avg: 264,112 shares.

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

 

Chart pattern: Pipe bottom reversal pattern from 09/06/2016 to 09/12/2016

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: Long ETFs

Industry RS rank: 28 out of 56

Stock RS rank: 105 out of 622

9/22/16 close: $87.21

1 Month avg volatility: $1.55. Volatility stop (for upward breakout): $83.58 or 4.2% below the close.

Change YTD: 11.29%

Volume: 900,200 shares. 3 month avg: 1,058,606 shares.

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

 

Chart pattern: Pipe bottom reversal pattern from 09/06/2016 to 09/12/2016

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.

Thursday 9/22/16. 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.

I suppose you can call the combination of red and green lines an ascending triangle. It's not really, though...

The red line highlights support along the bottoms over the last several days. Notice that it trends upward.

I drew the green line near the tops of price, just to highlight that the index pushed through overhead resistance.

We could see the index drop a bit to touch the green line on Thursday (a throwback) before it resumes its upward move.

Today's rally was a surprise for me, a pleasant one. How do you spell green? M-O-N-E-Y.

$ $ $

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

Wednesday 9/21/16. 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.

As the chart shows, the red vertical bar on the far right has been in place long enough to signal weakness.

Look at the indicator line, the blue one. It's still trending down from the July peak.

That trend is a concern for people still bullish.

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).

Both lines on this chart have suffered over the past week.

I think the prognosis is that we're about to see the indices drop, perhaps substantially. One instigating factor is Wednesday's FED meeting result. If they raise rates, the markets will likely drop. I guess we'll have to wait and see what they decide and the re-evaluate.

-- Thomas Bulkowski

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.