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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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Bulkowski's Blog: ThePatternSite.com
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 04/27/2015
18,038 -42.17 -0.2%
8,804 -76.32 -0.9%
591 -7.18 -1.2%
5,060 -31.83 -0.6%
2,109 -8.77 -0.4%
YTD
1.2%
-3.7%
-4.4%
6.8%
2.4%
Tom's Targets    Overview: 04/14/2015
18,300 or 17,500 by 05/01/2015
9,000 or 8,200 by 05/01/2015
615 or 565 by 05/01/2015
5,250 or 5,000 by 05/15/2015
2,150 or 2,025 by 05/01/2015
Mutt Losers: None YTD

  Written and copyright © 2015 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You and you alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

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Tuesday 4/28/15. Dow Falling Wedge

The index dropped by -0.2% or -42.17 points. Since 10/01/1928 the index made 1137 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.7% on 569 occasions.
     Average loss was -0.7% on 568 occasions.
Expect the index to close higher 50.0% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 91/152 or 59.9% of the time.
     The prediction of the index closing lower has been right 23/43 or 53.5% 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.

A falling wedge appears on the chart outlined in red.

A falling wedge sports two trendlines that hug a converging price movement, both of the trendlines slope downward.

Breakouts from a falling wedge are upward 68% of the time.

Will this wedge breakout upward, too? My guess is yes, and that agrees with the above probabilities, too.

If I'm wrong, then I would expect to see the index drop to 17,950, or about 100 points lower.

$ $ $

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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© 2015 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  17,314.40    
 Monthly S1  17,676.18  361.79   
 Weekly S2  17,712.21  36.03   
 Weekly S1  17,875.09  162.88   
 Daily S2  17,928.50  53.41   
 Monthly Pivot  17,941.06  12.56   Yes! The Monthly Pivot is close to the Daily S2.
 Daily S1  17,983.23  42.18   
 Weekly Pivot  18,004.06  20.83   
 Low  18,024.66  20.60   
 Close  18,037.97  13.31   Yes! The Close is close to the Low.
 Daily Pivot  18,079.40  41.43   
 61.8% Down from Intraday High  18,082.30  2.91   Yes! The 61.8% Down from Intraday High is close to the Daily Pivot.
 Open  18,097.89  15.59   
 50% Down from Intraday High  18,100.11  2.22   Yes! The 50% Down from Intraday High is close to the Open.
 38.2% Down from Intraday High  18,117.92  17.81   
 Daily R1  18,134.13  16.22   
 Weekly R1  18,166.94  32.81   
 High  18,175.56  8.62   Yes! The High is close to the Weekly R1.
 Daily R2  18,230.30  54.74   
 Weekly R2  18,295.91  65.61   
 Monthly R1  18,302.84  6.93   Yes! The Monthly R1 is close to the Weekly R2.
 Monthly R2  18,567.72  264.87   

Monday 4/27/15. Market Monday: Utilities Ascending Triangle

My Prediction

Picture of the Dow utilities on the daily scale.

I show the Dow utility index on the daily scale.

This is a fun chart because it shows am ascending triangle, outlined here in red.

Ascending triangles form between two borders, flat on the top and sloping upward along the bottom. The breakout from these is upward 70% of the time according to a study of them I conducted for my book, Encyclopedia of Chart Patterns, Second Edition , shown here on the left.

Will this break out upward? That is hard to say but my guess is yes, it will.

That suggests a rising trend for the other indices, too. Temper that with earnings season that could make the ride upward a bumpy one plus the European problem with Greece and everything else that traders worry about.

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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: Up 208.63 points.
Tuesday: Down 85.34 points.
Wednesday: Up 88.68 points.
Thursday: Up 20.42 points.
Friday: Up 21.45 points.

For the Week...

The Dow industrials were up 253.84 points or 1.4%.
The Nasdaq composite was up 160.27 points or 3.2%.
The S&P 500 index was up 36.51 points or 1.8%.

Year to Date...

Dow Industrials
     1.1% down from the high of 18,288.63 on 03/02/2015.
     6.1% up from the low of 17,037.76 on 02/02/2015.
Nasdaq
     0.2% down from the high of 5,100.37 on 04/24/2015.
     11.6% up from the low of 4,563.11 on 01/16/2015.
S&P 500
     0.2% down from the high of 2,120.92 on 04/24/2015.
     6.9% up from the low of 1,980.90 on 02/02/2015.

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Economic Reports

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

ReportTimeA-F
Rating
Description
Consumer confidence10:00 TB-Surveys 5,000 households for trends.
Gross domestic product8:30 WBMeasures economic activity; GDP deflator measures inflation.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Rate decision2:00 W?The Federal Reserves reports on interest rate changes.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Personal income & consumption8:30 ThC+Measures sources of income to predict future demand.
Personal consumption expenditures8:30 ThC+Covers durables, non-durables, and services.
Chicago purchasing managers index9:45 ThBMonitors regional manufacturing activity.
Construction spending10:00 FDCovers residential/non-residential/public spending on new construction.
Michigan sentiment10:00 FB-Consumer sentiment: Measures strength of consumer spending.
Auto & truck sales5:00 FC-Monthly sales of domestically produced vehicles.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 04/24/2015, the CPI had:

23 bearish patterns,
19 bullish patterns,
273 patterns waiting for breakout.
The CPI signal is 45.2%, which is neutral (between 35% and 65%).

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.

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  17,966  18,023  18,066  18,123  18,166 
Weekly  17,726  17,903  18,018  18,195  18,310 
Monthly  17,328  17,704  17,955  18,331  18,582 
S&P500 (^GSPC): Daily  2,109  2,113  2,117  2,121  2,125 
Weekly  2,071  2,094  2,108  2,131  2,144 
Monthly  2,019  2,068  2,095  2,144  2,170 
Nasdaq (^IXIC): Daily  5,072  5,082  5,091  5,101  5,110 
Weekly  4,901  4,996  5,048  5,144  5,196 
Monthly  4,732  4,912  5,006  5,186  5,281 
  • 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 up 43.5%   Expect a random direction. 
 1 month up 52.6%   Expect a random direction. 
 S & P 500 (^GSPC) 1 week up 42.8%   Expect a random direction. 
 1 month up 53.3%   Expect a random direction. 
 Nasdaq composite (^IXIC) 1 week up 44.6%   Expect a random direction. 
 1 month up 48.0%   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.

Buy-and-Hold: 12-Month SMA

This indicator warns of an index moving into or out of a bear market. It's based on a 12-month simple moving average of monthly closing prices, so it only changes monthly. See 12-Month Moving Average for more details.
Dow Industrials: bullish.
Nasdaq Composite: bullish.
S&P 500 Index: bullish.
Dow Transports: bullish.
Dow Utilities: bullish.

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Earnings, Chart Patterns & Industries

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

 Found Chart Pattern Name
42Triangle, symmetrical
15Triangle, descending
12Rising wedge
11Head-and-shoulders bottom
11Triangle, ascending
6Double Bottom, Eve and Adam
6Diamond top
5Rectangle top
3Double Bottom, Adam and Adam
3Pipe 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. Human Resources1. Human Resources
2. Drug2. Retail Building Supply
3. Retail Building Supply3. Drug
4. Biotechnology4. Biotechnology
5. Information Services5. Homebuilding
50. Machinery50. Metals and Mining (Div.)
51. Metal Fabricating51. Metal Fabricating
52. Petroleum (Producing)52. Petroleum (Producing)
53. Short ETFs53. Oilfield Svcs/Equipment
54. Oilfield Svcs/Equipment54. Short ETFs

-- Thomas Bulkowski

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Saturday 4/25/15. Do Tall Candle Shadows Predict Turns?

Picture of a flower.

Does a tall shadow suggest the stock will turn? Yes, but not in the way you expect.

I found that candles with tall lower shadows experience price declines over the coming month. Candles with short lower shadows saw price rise during the next month.

Candles with short or tall upper shadows did not see any difference: price climbed regardless.

If there is one thing you take away from this study it is that short lower shadows strongly suggest price will rise.

For more information on this, read the full article here.

-- Thomas Bulkowski

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Written and copyright © 2015 by Thomas N. Bulkowski. All rights reserved.