As of 01/24/2020   Indus: 28,990 -170.36 -0.6%     Trans: 11,060 -83.58 -0.8%     Utils: 932 +3.37 +0.4%     Nasdaq: 9,315 -87.57 -0.9%     S&P 500: 3,295 -30.07 -0.9%	YTD  +1.6%    +1.5%    +6.0%    +3.8%    +2.0%	Targets    Overview: 01/14/2020     29,500 or 28,300 by 02/01/2020   11,500 or 10,700 by 02/01/2020   1,025 or 900 by 02/01/2020   9,600 or 8,900 by 02/01/2020   3,350 or 3,200 by 02/01/2020
Chart pattern indicator: on 1/24/20

As of 01/24/2020   Indus: 28,990 -170.36 -0.6%     Trans: 11,060 -83.58 -0.8%     Utils: 932 +3.37 +0.4%     Nasdaq: 9,315 -87.57 -0.9%     S&P 500: 3,295 -30.07 -0.9%	YTD  +1.6%    +1.5%    +6.0%    +3.8%    +2.0%
Targets    Overview: 01/14/2020     29,500 or 28,300 by 02/01/2020   11,500 or 10,700 by 02/01/2020   1,025 or 900 by 02/01/2020   9,600 or 8,900 by 02/01/2020   3,350 or 3,200 by 02/01/2020
Chart pattern indicator: on 1/24/20

Monday 1/27/20. 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

This chart might seem like a repeat of one I've shown before. Indeed, if you click on the link, you'll see a similar chart in the Nasdaq.

However, this chart is of the S&P 500 index, on the daily scale.

The index is rising in a channel. Look at how long this channel has lasted...almost 4 months! It's fattened my wallet and I trust your portfolio has been helped as well.

On Friday, over concerns about the new China virus dampening commerce, the indices stumbled.

While this concern might linger, I don't think it's a show stopper. It won't hold the indices down for long. A temporary setback is easy to say about the China trade war and other foreign affairs because we've seen them before, and recently. But the virus is new. Of course, I was around for SARS but I don't recall the impact on world markets.

I believe any uneasiness will blow over quickly, and it'll be a buying opportunity when the markets bottom.

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

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.

• 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 1/24/20. 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 16 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 597 stocks searched, or 2.7%. Based on the percentage, the stock market is trending since few consolidation patterns appear.

Excluding ETFs, there were 5 bullish chart patterns this week and 6 bearish ones with any remaining (5) being undecided. The ratio of bullish to bearish patterns suggests the market is hinting of a coming bearish (down) 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 01/16/2020 and 01/23/2020. Many may be still in development. If no securities appear, then I have not identified any new patterns.

Industry: Packaging and Container

Industry RS rank: 46 out of 58

Stock RS rank: 454 out of 593

1/23/20 close: $117.37

1 Month avg volatility: $1.51. Volatility stop (for downward breakout): $122.05 or 4.0% above the close.

Change YTD: 1.51%

Volume: 301,000 shares. 3 month avg: 241,254 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: Broadening wedge, ascending reversal pattern from 11/22/2019 to 01/23/2020

Breakout is downward 73% of the time.

Average decline: 17%.

Break-even failure rate: 11%.

Pullbacks occur 57% of the time.

Price hits measure rule target 58% of the time.

Industry: Furn/Home Furnishings

Industry RS rank: 41 out of 58

Stock RS rank: 102 out of 593

1/23/20 close: $15.24

1 Month avg volatility: $0.51. Volatility stop (for downward breakout): $17.09 or 12.1% above the close.

Change YTD: -8.63%

Volume: 60,800 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: Double Top, Eve and Adam reversal pattern from 12/20/2019 to 01/22/2020

Breakout is downward 100% of the time.

Average decline: 15%.

Break-even failure rate: 13%.

Pullbacks occur 64% of the time.

Price hits measure rule target 72% of the time.

Industry: Retail (Special Lines)

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

Industry RS rank: 24 out of 58

Stock RS rank: 132 out of 593

1/23/20 close: $5.31

1 Month avg volatility: $0.28. Volatility stop (for upward breakout): $4.64 or 12.6% below the close.

Change YTD: 63.89%

Volume: 305,000 shares. 3 month avg: 99,982 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: Flag, high and tight continuation pattern from 12/12/2019 to 01/23/2020

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: E-Commerce

Industry RS rank: 26 out of 58

Stock RS rank: 381 out of 593

1/23/20 close: $115.51

1 Month avg volatility: $1.72. Volatility stop (for upward breakout): $110.32 or 4.5% below the close.

Change YTD: 4.10%

Volume: 779,700 shares. 3 month avg: 1,143,906 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: Broadening bottom reversal pattern from 12/31/2019 to 01/17/2020

Breakout is upward 53% of the time.

Average rise: 27%.

Break-even failure rate: 10%.

Throwbacks occur 41% of the time.

Price hits measure rule target 59% of the time.

Industry: Telecom. Equipment

Industry RS rank: 21 out of 58

Stock RS rank: 463 out of 593

1/23/20 close: $42.50

1 Month avg volatility: $0.67. Volatility stop (for upward breakout): $40.90 or 3.8% below the close.

Change YTD: -0.45%

Volume: 1,390,500 shares. 3 month avg: 3,226,991 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: Triangle, symmetrical continuation pattern from 12/13/2019 to 01/23/2020

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: Healthcare Information

Industry RS rank: 31 out of 58

Stock RS rank: 10 out of 593

1/23/20 close: $11.28

1 Month avg volatility: $0.59. Volatility stop (for upward breakout): $9.62 or 14.7% below the close.

Change YTD: 24.64%

Volume: 1,297,300 shares.

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

 

Chart pattern: Flag, high and tight continuation pattern from 11/27/2019 to 01/17/2020

WARNING: A dead-cat bounce occurred on 11/27/2019. There is a 26% chance that a 15% or higher decline will occur (or has occurred since then) by 02/26/2020 and a 38% chance by 05/27/2020.

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: Machinery

Industry RS rank: 40 out of 58

Stock RS rank: 472 out of 593

1/23/20 close: $49.09

1 Month avg volatility: $0.79. Volatility stop (for downward breakout): $50.69 or 3.3% above the close.

Change YTD: -1.37%

Volume: 480,300 shares. 3 month avg: 1,457,883 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: Head-and-shoulders top reversal pattern from 01/02/2020 to 01/17/2020

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: Healthcare Information

Industry RS rank: 31 out of 58

Stock RS rank: 516 out of 593

1/23/20 close: $71.76

1 Month avg volatility: $2.12. Volatility stop (for upward breakout): $66.82 or 6.9% below the close.

Change YTD: -3.12%

Volume: 568,100 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 01/02/2020 to 01/23/2020

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: Human Resources

Industry RS rank: 53 out of 58

Stock RS rank: 584 out of 593

1/23/20 close: $92.70

1 Month avg volatility: $1.53. Volatility stop (for upward breakout): $88.13 or 4.9% below the close.

Change YTD: 7.74%

Volume: 340,900 shares. 3 month avg: 131,942 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: Scallop, ascending continuation pattern from 12/23/2019 to 01/17/2020

WARNING: A dead-cat bounce occurred on 11/04/2019. There is a 26% chance that a 15% or higher decline will occur (or has occurred since then) by 02/03/2020 and a 38% chance by 05/04/2020.

Breakout is upward 80% of the time.

Average rise: 31%.

Break-even failure rate: 10%.

Throwbacks occur 58% of the time.

Price hits measure rule target 58% of the time.

Industry: Semiconductor

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

Industry RS rank: 3 out of 58

Stock RS rank: 110 out of 593

1/23/20 close: $63.32

1 Month avg volatility: $0.84. Volatility stop (for upward breakout): $61.12 or 3.5% below the close.

Change YTD: 5.80%

Volume: 39,617,700 shares. 3 month avg: 27,019,903 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: Scallop, ascending continuation pattern from 01/02/2020 to 01/23/2020

Breakout is upward 80% of the time.

Average rise: 31%.

Break-even failure rate: 10%.

Throwbacks occur 58% of the time.

Price hits measure rule target 58% of the time.

Industry: Semiconductor Cap Equip.

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

Industry RS rank: 4 out of 58

Stock RS rank: 136 out of 593

1/23/20 close: $28.18

1 Month avg volatility: $0.53. Volatility stop (for downward breakout): $29.26 or 3.9% above the close.

Change YTD: 3.58%

Volume: 813,500 shares. 3 month avg: 518,337 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: Rising wedge reversal pattern from 11/15/2019 to 01/22/2020

Breakout is downward 69% of the time.

Average decline: 14%.

Break-even failure rate: 24%.

Pullbacks occur 63% of the time.

Price hits measure rule target 46% of the time.

Industry: Semiconductor

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

Industry RS rank: 3 out of 58

Stock RS rank: 15 out of 593

1/23/20 close: $30.04

1 Month avg volatility: $0.77. Volatility stop (for upward breakout): $27.35 or 9.0% below the close.

Change YTD: 12.93%

Volume: 340,700 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: Scallop, ascending continuation pattern from 12/27/2019 to 01/23/2020

Breakout is upward 80% of the time.

Average rise: 31%.

Break-even failure rate: 10%.

Throwbacks occur 58% of the time.

Price hits measure rule target 58% of the time.

Industry: Semiconductor

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

Industry RS rank: 3 out of 58

Stock RS rank: 88 out of 593

1/23/20 close: $59.20

1 Month avg volatility: $1.34. Volatility stop (for upward breakout): $56.35 or 4.8% below the close.

Change YTD: 10.08%

Volume: 25,898,400 shares. 3 month avg: 38,182,855 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: Scallop, ascending continuation pattern from 01/09/2020 to 01/23/2020

Breakout is upward 80% of the time.

Average rise: 31%.

Break-even failure rate: 10%.

Throwbacks occur 58% of the time.

Price hits measure rule target 58% of the time.

Industry: Advertising

Industry RS rank: 35 out of 58

Stock RS rank: 428 out of 593

1/23/20 close: $78.75

1 Month avg volatility: $0.89. Volatility stop (for downward breakout): $80.98 or 2.8% above the close.

Change YTD: -2.80%

Volume: 1,587,000 shares. 3 month avg: 2,548,395 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: Head-and-shoulders top reversal pattern from 11/08/2019 to 01/21/2020

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: Human Resources

Industry RS rank: 53 out of 58

Stock RS rank: 404 out of 593

1/23/20 close: $62.54

1 Month avg volatility: $0.75. Volatility stop (for downward breakout): $64.24 or 2.7% above the close.

Change YTD: -0.97%

Volume: 783,700 shares. 3 month avg: 1,012,069 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: Triple top reversal pattern from 01/02/2020 to 01/17/2020

Breakout is downward 100% of the time.

Average decline: 19%.

Break-even failure rate: 10%.

Pullbacks occur 61% of the time.

Price hits measure rule target 40% of the time.

Industry: Computer Software and Svcs

Industry RS rank: 13 out of 58

Stock RS rank: 577 out of 593

1/23/20 close: $26.63

1 Month avg volatility: $0.64. Volatility stop (for downward breakout): $28.14 or 5.7% above the close.

Change YTD: -0.52%

Volume: 645,300 shares. 3 month avg: 1,378,918 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 ascending reversal pattern from 12/13/2019 to 01/23/2020

WARNING: A dead-cat bounce occurred on 11/08/2019. There is a 26% chance that a 15% or higher decline will occur (or has occurred since then) by 02/07/2020 and a 38% chance by 05/08/2020.

Breakout is downward 66% of the time.

Average decline: 15%.

Break-even failure rate: 20%.

Pullbacks occur 65% of the time.

Price hits measure rule target 32% of the time.

Thursday 1/23/20. 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 is continuing to move higher, following a channel. I drew two red lines outlining the channel.

Notice that at points A and B, the index doesn't drop down far enough to touch the bottom channel line. Thus, we might expect that we'll see a turn upward if the index follows what it's done before. There's no evidence that it'll turn, really. I doubt that it'll be afraid of touching the bottom line.

If it does touch the bottom line, then one could argue that it'll keep going lower. For that, though, we'll have to wait and see.

$ $ $

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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