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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
Getting Started in Chart Patterns, Second Edition book.
Trading Basics: Evolution of a Trader book.
Fundamental Analysis and Position Trading: Evolution of a Trader book.
Swing and Day Trading: Evolution of a Trader book.
Visual Guide to Chart Patterns book.
Encyclopedia of Chart Patterns 2nd Edition book.
Bulkowski's Blog: ThePatternSite.com
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Busted
Patterns
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 07/25/2017
21,613 100.26 0.5%
9,489 61.28 0.6%
716 -3.16 -0.4%
6,412 1.36 0.0%
2,477 7.22 0.3%
YTD
9.4%
4.9%
8.5%
19.1%
10.6%
Tom's Targets    Overview: 07/14/2017
21,850 or 21,000 by 08/01/2017
9,950 or 9,400 by 08/01/2017
740 or 685 by 08/01/2017
6,450 or 6,175 by 08/01/2017
2,525 or 2,400 by 08/01/2017

  Written by and copyright © 2005-2017 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 7/26/17. 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 index continues to rise and the indicator backs this trend. The vertical green bar on the far right shows this.

The thin blue indicator line beneath the red and green signals shows gathering strength, too. That's the first time in several weeks that the indicator has turned higher.

From this chart, the bull market seems solid.

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, 23% of stocks in my database are in bear market territory (down at least 20% from their 1-year high).
A week ago, it was 23%.
The fewest was 14% on 12/09/2016.
And the most was 36% on 11/03/2016.
Shown as a blue line on the above chart...
The 503 stocks in my database are down an average of 12% from their yearly high.
A week ago, the average was 12%.
The peak was 9% on 12/09/2016.
And the bottom was 18% on 11/03/2016.

The two lines went nowhere from a snapshot done a week ago. That's not unusual. The red line is the more sensitive of the two lines. You might think that after today's 100 point gain in the Dow, the stocks would rejoice and the lines would move up. But my take on this is today's move only affected a few stocks, leaving the majority of stocks on the sidelines, licking their chops, hoping for a tasty treat.

$ $ $

The IRS phone scam is back in business. You'll receive a phone call demanding money or else the IRS will file a lawsuit against you.

The government busted the ring running this scam several months ago and the calls stopped. Apparently, the scammers made bail and the calls have restarted. Do yourself a favor and either hang up or delete the recorded voice mail message.

-- Thomas Bulkowski

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Tuesday 7/25/17. Intraday Market Direction: Dow

The index dropped by -0.3% or -66.9 points. Since 10/01/1928 the index made 1023 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.6% on 483 occasions.
     Average loss was -0.7% on 540 occasions.
Expect the index to close lower 52.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 140/240 or 58.3% of the time.
     The prediction of the index closing lower has been right 32/64 or 50.0% 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.

I had to search for this descending triangle.

Point A doesn't quite make it up to the top trendline, so that's a concern, but not a big one. It's close enough, I think.

So we have three touches on the top trendline and two on the bottom, all of which is sufficient to form a valid triangle. The breakout from descending triangles is downward 47% of the time, according to my book, Chart Patterns: After the BuyChart Patterns: After the Buy.

And that means it breaks out upward more often. Notice, however, that the index was falling in the few minutes before the close.

$ $ $

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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© 2017 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  20,979.48    
 Monthly S1  21,246.32  266.85   
 Weekly S2  21,357.97  111.65   
 Weekly S1  21,435.57  77.60   
 Daily S2  21,447.38  11.81   
 Monthly Pivot  21,463.93  16.55   
 Daily S1  21,480.27  16.35   
 Low  21,496.13  15.86   
 Close  21,513.17  17.04   
 61.8% Down from Intraday High  21,527.32  14.15   
 Daily Pivot  21,529.03  1.71   Yes! The Daily Pivot is close to the 61.8% Down from Intraday High.
 50% Down from Intraday High  21,536.96  7.93   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  21,546.59  9.63   
 Weekly Pivot  21,548.74  2.15   Yes! The Weekly Pivot is close to the 38.2% Down from Intraday High.
 Daily R1  21,561.92  13.18   
 Open  21,577.78  15.86   
 High  21,577.78  0.00   Yes! The High is close to the Open.
 Daily R2  21,610.68  32.90   
 Weekly R1  21,626.34  15.66   
 Monthly R1  21,730.77  104.43   
 Weekly R2  21,739.51  8.74   
 Monthly R2  21,948.38  208.87   

Monday 7/24/17. Market Monday: The Week Ahead

My Prediction

Picture of the Nasdaq on the daily scale.

I show a picture of the Nasdaq composite on the daily scale.

My eye is drawn to the consolidation region highlighted here by the two nearly parallel red lines. I'm not sure why but it's an interesting pattern.

When the two lines converge and descend, the pattern is a falling wedge.

When the two lines are parallel, it's a channel.

Some may claim that it's a bull flag but I don't think so. It's too long to be a flag.

Regardless, let's turn our attention to points A and B. B is the prior high. A is a new high but it's also where price appears to have stalled. At least for the last few days.

This could be a 2B pattern, where price in an uptrend sets a new high but fails to continue higher. A retrace follows. To me, that's what it looks like will happen.

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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 8.02 points.
Tuesday: Down 54.99 points.
Wednesday: Up 66.02 points.
Thursday: Down 28.97 points.
Friday: Down 31.71 points.

For the Week...

The Dow industrials were down 57.67 points or 0.3%.
The Nasdaq composite was up 75.28 points or 1.2%.
The S&P 500 index was up 13.27 points or 0.5%.

Year to Date...

Dow Industrials
     0.5% down from the high of 21,681.53 on 07/14/2017.
     9.7% up from the low of 19,677.94 on 01/19/2017.
Nasdaq
     0.2% down from the high of 6,398.26 on 07/20/2017.
     18.3% up from the low of 5,397.99 on 01/03/2017.
S&P 500
     0.2% down from the high of 2,477.62 on 07/20/2017.
     10.1% up from the low of 2,245.13 on 01/03/2017.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 07/21/2017, the CPI had:

14 bearish patterns,
28 bullish patterns,
280 patterns waiting for breakout.
The CPI signal is 66.7%, 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  21,470  21,525  21,559  21,614  21,648 
Weekly  21,380  21,480  21,571  21,671  21,762 
Monthly  21,002  21,291  21,486  21,775  21,971 
S&P500 (^GSPC): Daily  2,463  2,468  2,470  2,475  2,478 
Weekly  2,440  2,456  2,467  2,483  2,494 
Monthly  2,380  2,426  2,452  2,498  2,524 
Nasdaq (^IXIC): Daily  6,357  6,372  6,381  6,396  6,404 
Weekly  6,252  6,320  6,359  6,427  6,466 
Monthly  5,973  6,180  6,289  6,497  6,606 
  • 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) 1 week down 28.5%   The trend may continue. 
 4 months up 21.5%   Expect a reversal soon. 
 S & P 500 (^GSPC) 3 weeks up 22.5%   Expect a reversal soon. 
 4 months up 28.3%   The trend may continue. 
 Nasdaq composite (^IXIC) 3 weeks up 27.6%   The trend may continue. 
 1 month up 46.3%   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.

Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
15Double Bottom, Adam and Adam
11Triangle, symmetrical
11Pipe bottom
6Rising wedge
6Big W
4Triangle, ascending
4Rectangle top
4Head-and-shoulders bottom
3Broadening top
3Broadening 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. Semiconductor Cap Equip.1. Semiconductor Cap Equip.
2. Medical Supplies2. Medical Supplies
3. Semiconductor3. Semiconductor
4. Internet4. Homebuilding
5. Homebuilding5. Precision Instrument
50. Apparel50. Food Processing
51. Food Processing51. Apparel
52. Natural Gas (Diversified)52. Petroleum (Integrated)
53. Petroleum (Integrated)53. Natural Gas (Diversified)
54. Retail (Special Lines)54. Short ETFs
55. Short ETFs55. Retail (Special Lines)
56. Petroleum (Producing)56. Petroleum (Producing)
57. Oilfield Svcs/Equipment57. Oilfield Svcs/Equipment

-- Thomas Bulkowski

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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.