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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.
Monday 8/21/17. Market Monday: The Week Ahead
My Prediction
Shown is the Dow industrials on the daily scale.
One of the questions I've been asking is how far will the indices drop?
Unfortunately, I don't know the answer. The 2017 prediction makes me nervous.
The chart shows what I call an ugly double top. As it applies to the indices, it's when the two peaks don't line up. In this case, peak B is well below peak A.
The pattern confirms as a valid one when price closes below the valley between the two peaks (below the red line).
I also show what I believe is a support area, highlighted by the two green lines. The support area is between those two lines, but there's a bit of support just above the top line, too,
formed by the horizontal price movement in July (circled).
Maybe we'll see the indices turn around shortly.
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.
Monday: Up 135.39 points.
Tuesday: Up 5.28 points.
Wednesday: Up 25.88 points.
Thursday: Down 274.14 points.
Friday: Down 76.22 points.
For the Week...
The Dow industrials were down 183.81 points or 0.8%.
The Nasdaq composite was down 40.03 points or 0.6%.
The S&P 500 index was down 15.77 points or 0.6%.
Year to Date...
Dow Industrials
2.3% down from the high of 22,179.11 on 08/08/2017.
10.1% up from the low of 19,677.94 on 01/19/2017.
Nasdaq
3.8% down from the high of 6,460.84 on 07/27/2017.
15.2% up from the low of 5,397.99 on 01/03/2017.
S&P 500
2.6% down from the high of 2,490.87 on 08/08/2017.
8.0% up from the low of 2,245.13 on 01/03/2017.
Options Expiration
No options expire this week.
Swing and Position Traders: Chart Pattern Indicator
As of 08/18/2017, the CPI had:
26 bearish patterns,
9 bullish patterns,
280 patterns waiting for breakout.
The CPI signal is 25.7%, which is
bearish (<= 35%).
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.
| Index | S2 | S1 | Pivot | R1 | R2 |
| Dow Industrials (^DJI): Daily | 21,551 | 21,613 | 21,703 | 21,765 | 21,855 |
| Weekly | 21,357 | 21,516 | 21,801 | 21,960 | 22,245 |
| Monthly | 21,067 | 21,371 | 21,775 | 22,079 | 22,483 |
| S&P500 (^GSPC): Daily | 2,409 | 2,417 | 2,429 | 2,437 | 2,448 |
| Weekly | 2,386 | 2,406 | 2,440 | 2,460 | 2,495 |
| Monthly | 2,376 | 2,401 | 2,446 | 2,471 | 2,516 |
| Nasdaq (^IXIC): Daily | 6,161 | 6,189 | 6,221 | 6,249 | 6,282 |
| Weekly | 6,080 | 6,148 | 6,261 | 6,330 | 6,443 |
| Monthly | 6,023 | 6,120 | 6,290 | 6,387 | 6,558 |
- 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
Consecutive Price Trends
| Index | Consecutive
Closes So Far | % | Comments |
| Dow industrials (^DJI) | 2 weeks down | 16.0% |
Expect a reversal soon. |
| | 1 month down | 20.8% |
Expect a reversal soon. |
| S & P 500 (^GSPC) | 2 weeks down | 14.8% |
Expect a reversal soon. |
| | 1 month down | 21.4% |
Expect a reversal soon. |
| Nasdaq composite (^IXIC) | 4 weeks down | 4.0% |
Expect a reversal soon. |
| | 1 month down | 26.0% |
The trend may continue. |
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 |
| 19 | Triangle, symmetrical |
| 14 | Head-and-shoulders top |
| 8 | Double Top, Adam and Adam |
| 8 | Triple top |
| 7 | Double Bottom, Adam and Adam |
| 6 | Triangle, descending |
| 6 | Dead-cat bounce |
| 5 | Rising wedge |
| 5 | Double Top, Eve and Adam |
| 5 | Pipe 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 Week | Last Week |
| 1. Medical Supplies | 1. Aerospace/Defense |
| 2. Semiconductor | 2. Homebuilding |
| 3. Semiconductor Cap Equip. | 3. Medical Supplies |
| 4. Aerospace/Defense | 4. Semiconductor Cap Equip. |
| 5. Homebuilding | 5. Internet |
| |
| 50. Food Processing | 50. Advertising |
| 51. Advertising | 51. Short ETFs |
| 52. Retail (Special Lines) | 52. Petroleum (Integrated) |
| 53. Cement and Aggregates | 53. Retail (Special Lines) |
| 54. Petroleum (Integrated) | 54. Natural Gas (Diversified) |
| 55. Natural Gas (Diversified) | 55. Cement and Aggregates |
| 56. Petroleum (Producing) | 56. Petroleum (Producing) |
| 57. Oilfield Svcs/Equipment | 57. Oilfield Svcs/Equipment |
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-- Thomas Bulkowski
Friday 8/18/17. Pattern Trading Setups for the Weekend.
Go to Table.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 13 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 601 stocks searched, or 2.2%. Based on the percentage, the stock market is
trending since few consolidation patterns appear.
I found 2 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 4 bullish chart patterns this week and 6 bearish ones with any remaining (2) 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 08/10/2017 and 08/17/2017. Many may be still in development. If no securities appear, then I have not identified any new patterns.
Definitions RS is relative strength (where 1 is best). For other definitions, see the glossary.’Breakout is upward/downward 100% of the time’ means price breaks out up/down by definition, not by statistically measuring the rate. All numbers assume a bull market and are based on the breakout direction that occurs most often.
Brooks Automation (BRKS)
Industry: Semiconductor Cap Equip.
Industry RS rank: 5 out of 56
Stock RS rank: 103 out of 593
8/17/17 close: $24.42
1 Month avg volatility: $0.87. Volatility stop (for upward breakout): $22.64 or 7.3% below the close.
Change YTD: 43.06%
Volume: 598,400 shares.
3 month avg: 715,471 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: Pipe bottom reversal pattern from 07/31/2017 to 08/07/2017
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.
DJ 20 Transportation (^DJT)
Industry: None
Industry RS rank is unavailable.
8/17/17 close: $9,152.45
1 Month avg volatility: $98.92. Volatility stop (for downward breakout): $9,560.98 or 4.5% above the close.
Change YTD: 1.20%
Volume: 62,509,300 shares.
3 month avg: 54,929,077 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 07/31/2017 to 08/17/2017
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.
Honeywell International Inc (HON)
Industry: Aerospace/Defense
Industry RS rank: 2 out of 56
Stock RS rank: 174 out of 593
8/17/17 close: $135.85
1 Month avg volatility: $1.61. Volatility stop (for downward breakout): $141.09 or 3.9% above the close.
Change YTD: 17.26%
Volume: 2,994,300 shares.
3 month avg: 2,484,966 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 07/27/2017 to 08/14/2017
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.
Lam Research Corp (LRCX)
Industry: Semiconductor Cap Equip.
Industry RS rank: 5 out of 56
Stock RS rank: 16 out of 593
8/17/17 close: $158.46
1 Month avg volatility: $4.13. Volatility stop (for upward breakout): $150.04 or 5.3% below the close.
Change YTD: 49.87%
Volume: 1,921,300 shares.
3 month avg: 2,591,268 shares. Since 2009 bear market, the best buy day (fewest up closes) is Thursday, and best sell day (most up closes) is Wednesday.
Chart pattern: Pipe bottom reversal pattern from 07/31/2017 to 08/07/2017
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.
Lancaster Colony Corp (LANC)
Industry: Food Processing
Industry RS rank: 50 out of 56
Stock RS rank: 428 out of 593
8/17/17 close: $115.11
1 Month avg volatility: $2.28. Volatility stop (for downward breakout): $127.81 or 11.0% above the close.
Change YTD: -18.59%
Volume: 243,100 shares.
3 month avg: 121,478 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: Head-and-shoulders top reversal pattern from 07/05/2017 to 08/16/2017
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.
Lilly, Eli and Co. (LLY)
Industry: Drug
Industry RS rank: 39 out of 56
Stock RS rank: 339 out of 593
8/17/17 close: $77.80
1 Month avg volatility: $1.14. Volatility stop (for downward breakout): $82.86 or 6.5% above the close.
Change YTD: 5.78%
Volume: 7,240,100 shares.
3 month avg: 3,724,255 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: Triangle, descending reversal pattern from 07/26/2017 to 08/15/2017
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.
Marchex, Inc (MCHX)
Industry: Advertising
Industry RS rank: 48 out of 56
Stock RS rank: 414 out of 593
8/17/17 close: $2.87
1 Month avg volatility: $0.08. Volatility stop (for upward breakout): $2.70 or 5.9% below the close.
Change YTD: 8.30%
Volume: 25,300 shares.
3 month avg: 161,091 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: Rectangle top continuation pattern from 05/10/2017 to 08/17/2017
Breakout is upward 68% of the time. Average rise: 39%. Break-even failure rate: 9%. Throwbacks occur 64% of the time. Price hits measure rule target 80% of the time.
Micron Technology (MU)
Industry: Semiconductor
Industry RS rank: 3 out of 56
Stock RS rank: 24 out of 593
8/17/17 close: $29.62
1 Month avg volatility: $0.89. Volatility stop (for upward breakout): $27.82 or 6.1% below the close.
Change YTD: 35.13%
Volume: 25,933,600 shares.
3 month avg: 29,380,089 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 08/04/2017 to 08/11/2017
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.
PICO Holdings (PICO)
Industry: Diversified Co.
Industry RS rank: 15 out of 56
Stock RS rank: 94 out of 593
8/17/17 close: $16.25
1 Month avg volatility: $0.38. Volatility stop (for downward breakout): $17.27 or 6.3% above the close.
Change YTD: 7.26%
Volume: 191,900 shares.
3 month avg: 94,811 shares. This security may be thinly traded (less than 100k shares)! Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Monday.
Chart pattern: Triangle, descending reversal pattern from 05/31/2017 to 08/17/2017
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.
Portland General Electric Co. (POR)
Industry: Electric Utility (West)
Industry RS rank: 9 out of 56
Stock RS rank: 218 out of 593
8/17/17 close: $46.09
1 Month avg volatility: $0.55. Volatility stop (for downward breakout): $47.78 or 3.7% above the close.
Change YTD: 6.37%
Volume: 349,400 shares.
3 month avg: 580,311 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: Rising wedge reversal pattern from 07/21/2017 to 08/17/2017
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.
Stamps.com (STMP)
Industry: Internet
Industry RS rank: 8 out of 56
Stock RS rank: 6 out of 593
8/17/17 close: $208.85
1 Month avg volatility: $7.23. Volatility stop (for upward breakout): $194.11 or 7.1% below the close.
Change YTD: 82.16%
Volume: 297,900 shares.
3 month avg: 552,017 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: Pennant continuation pattern from 08/07/2017 to 08/17/2017
Breakout is upward 61% of the time. Average rise: 25%. Break-even failure rate: 2%. Throwbacks occur 47% of the time. Price hits measure rule target 60% of the time.
Standex International Corp (SXI)
Industry: Diversified Co.
Industry RS rank: 15 out of 56
Stock RS rank: 381 out of 593
8/17/17 close: $93.10
1 Month avg volatility: $2.00. Volatility stop (for upward breakout): $88.66 or 4.8% below the close.
Change YTD: 5.98%
Volume: 26,600 shares.
3 month avg: 35,965 shares. This security may be thinly traded (less than 100k 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, symmetrical continuation pattern from 07/27/2017 to 08/17/2017
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.
DJ US consumer goods (household goods) (IYK)
Industry: Household Products
Industry RS rank: 26 out of 56
Stock RS rank: 270 out of 593
8/17/17 close: $121.32
1 Month avg volatility: $0.68. Volatility stop (for upward breakout): $119.96 or 1.1% below the close.
Change YTD: 9.57%
Volume: 28,300 shares.
3 month avg: 72,742 shares. This security may be thinly traded (less than 100k 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: Triangle, symmetrical continuation pattern from 06/20/2017 to 08/17/2017
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.
MSCI Germany Index (EWG)
Industry: Investment Co. (Foreign)
Industry RS rank: 14 out of 56
Stock RS rank: 157 out of 593
8/17/17 close: $30.47
1 Month avg volatility: $0.19. Volatility stop (for downward breakout): $31.15 or 2.2% above the close.
Change YTD: 15.07%
Volume: 3,715,600 shares.
3 month avg: 3,316,540 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: Triangle, descending reversal pattern from 05/11/2017 to 08/17/2017
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.
MSCI Switzerland Index (EWL)
Industry: Investment Co. (Foreign)
Industry RS rank: 14 out of 56
Stock RS rank: 173 out of 593
8/17/17 close: $34.01
1 Month avg volatility: $0.20. Volatility stop (for downward breakout): $34.70 or 2.0% above the close.
Change YTD: 15.44%
Volume: 793,300 shares.
3 month avg: 792,926 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: Triangle, descending reversal pattern from 05/11/2017 to 08/17/2017
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.
Thursday 8/17/17. Intraday Market Direction: Nasdaq
The index climbed by 0.2% or 12.1 points. Since 02/05/1971 the index made 652 similar moves on a percentage basis. After those moves, the next day's...
Average gain was 0.8% on 377 occasions.
Average loss was -0.7% on 275 occasions.
Expect the index to close higher 57.8% of the time.
Weekly, since inception on 6/14/2011:
The prediction of the index closing higher has been right 134/234 or 57.3% of the time.
The prediction of the index closing lower has been right 42/82 or 51.2% 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.
$ $ $
I show a picture of the Nasdaq composite on the 5-minute scale.
This will be interesting to see if it plays out as predicted.
Look at the chart. I drew a red trendline underneath price. What struck me is the peak (A) that rises above the calm seas of the last few days.
The measure rule for trendlines says that the peak to trendline distance (A) will be reflected from the breakout downward (B).
It doesn't have to happen in one day nor does it have to happen immediately. But looking at this picture it just calls to me saying that the index is going to drop.
First, though, is the index has to close below the trendline. If it does, then look for the index to drop to B.
I guess we'll find out shortly if it does or not.
$ $ $
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
| © 2017 ThePatternSite.com Metric | Value | Diff | Close (within 10% of the high-low range for the day)? |
| Monthly S2 | 5,956.09 | | |
| Weekly S2 | 6,118.68 | 162.59 |
|
| Monthly S1 | 6,150.60 | 31.92 |
|
| Weekly S1 | 6,231.90 | 81.30 |
|
| Daily S2 | 6,305.69 | 73.79 |
|
| Monthly Pivot | 6,305.72 | 0.03 |
Yes! The Monthly Pivot is close to the Daily S2. |
| Daily S1 | 6,325.40 | 19.68 |
|
| Weekly Pivot | 6,327.62 | 2.22 |
Yes! The Weekly Pivot is close to the Daily S1. |
| Low | 6,330.27 | 2.65 |
Yes! The Low is close to the Weekly Pivot. |
| Close | 6,345.11 | 14.84 |
|
| 61.8% Down from Intraday High | 6,347.19 | 2.08 |
Yes! The 61.8% Down from Intraday High is close to the Close. |
| Open | 6,348.11 | 0.92 |
Yes! The Open is close to the 61.8% Down from Intraday High. |
| Daily Pivot | 6,349.98 | 1.87 |
Yes! The Daily Pivot is close to the Open. |
| 50% Down from Intraday High | 6,352.42 | 2.44 |
Yes! The 50% Down from Intraday High is close to the Daily Pivot. |
| 38.2% Down from Intraday High | 6,357.64 | 5.23 |
|
| Daily R1 | 6,369.69 | 12.05 |
|
| High | 6,374.56 | 4.87 |
|
| Daily R2 | 6,394.27 | 19.71 |
|
| Weekly R1 | 6,440.84 | 46.57 |
|
| Monthly R1 | 6,500.23 | 59.39 |
|
| Weekly R2 | 6,536.56 | 36.33 |
|
| Monthly R2 | 6,655.35 | 118.79 |
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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.
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