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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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Busted
Patterns
Candles Chart
Patterns
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Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 07/02/2015
17,730 -27.80 -0.2%
8,123 18.64 0.2%
561 7.55 1.4%
5,009 -3.91 -0.1%
2,077 -0.64 0.0%
YTD
-0.5%
-11.1%
-9.2%
5.8%
0.9%
Tom's Targets    Overview: 06/30/2015
18,100 or 17,300 by 07/15/2015
7,800 or 8,500 by 07/15/2015
523 or 578 by 07/15/2015
5,200 or 4,850 by 07/15/2015
2,120 or 2,030 by 07/15/2015
Wilder RSI: -3.6%

  Written by and copyright © 2005-2015 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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Monday 7/6/15. Market Monday: The Week Ahead

My Prediction

Picture of the S and P 500 index on the daily scale.

I show a picture of the S&P 500 index on the daily scale.

The two parallel red lines show an upward channel from which the index has pierced, heading down.

That suggests a trend change from up to down.

The down-sloping green lines form a new channel. It suggests that the index will touch the top of the green channel and then move lower.

With the world in the throes of political and economic turmoil, anything could happen so expect the unexpected.

 

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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 350.33 points.
Tuesday: Up 53.16 points.
Wednesday: Up 108.4 points.
Thursday: Down 27.8 points.
Friday: Holiday or other weird event!

For the Week...

The Dow industrials were down 216.57 points or 1.2%.
The Nasdaq composite was down 71.3 points or 1.4%.
The S&P 500 index was down 24.71 points or 1.2%.

Year to Date...

Dow Industrials
     3.4% down from the high of 18,351.36 on 05/19/2015.
     4.1% up from the low of 17,037.76 on 02/02/2015.
Nasdaq
     3.0% down from the high of 5,164.36 on 06/24/2015.
     9.8% up from the low of 4,563.11 on 01/16/2015.
S&P 500
     2.7% down from the high of 2,134.72 on 05/20/2015.
     4.8% 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
Trade balance8:30 TC+Signals balance of exports & imports.
Consumer credit3:00 TD-Measures auto, credit card and other debt.
Crude inventories10:30 W?My guess: Measures oil inventory.
FOMC Minutes2:00 W?Minutes of the prior Federal Reserve meeting.
Initial jobless claims8:30 ThC+Counts people filing for state unemployment benefits.
Wholesale inventories10:00 FD-Wholesale sales and inventory statistics.

Options Expiration

No options expire this week.

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Swing and Position Traders: Chart Pattern Indicator

As of 07/02/2015, the CPI had:

10 bearish patterns,
3 bullish patterns,
148 patterns waiting for breakout.
The CPI signal is 23.1%, 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.

IndexS2S1PivotR1R2
Dow Industrials (^DJI): Daily  17,610  17,670  17,748  17,808  17,886 
Weekly  17,388  17,559  17,748  17,919  18,108 
Monthly  17,219  17,475  17,832  18,087  18,444 
S&P500 (^GSPC): Daily  2,064  2,070  2,078  2,084  2,092 
Weekly  2,035  2,056  2,077  2,098  2,120 
Monthly  2,014  2,045  2,088  2,119  2,161 
Nasdaq (^IXIC): Daily  4,972  4,991  5,009  5,028  5,046 
Weekly  4,911  4,960  5,005  5,055  5,100 
Monthly  4,835  4,922  5,043  5,130  5,251 
  • 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) 2 weeks down 16.2%   Expect a reversal soon. 
 1 month up 52.8%   Expect a random direction. 
 S & P 500 (^GSPC) 2 weeks down 14.4%   Expect a reversal soon. 
 1 month up 53.4%   Expect a random direction. 
 Nasdaq composite (^IXIC) 2 weeks down 17.7%   Expect a reversal soon. 
 1 month up 48.2%   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: bearish.
Dow Utilities: bearish.

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Earnings, Chart Patterns & Industries

Earnings season will be starting in about 10 days.

 Found Chart Pattern Name
21Triangle, symmetrical
9Channel
6Rectangle top
5Falling wedge
4Broadening bottom
4Triangle, descending
4Double Bottom, Adam and Adam
4Broadening top
3Rising wedge
3Rectangle 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. Cement and Aggregates1. Cement and Aggregates
2. Furn/Home Furnishings2. Furn/Home Furnishings
3. Human Resources3. Human Resources
4. Retail (Special Lines)4. Retail (Special Lines)
5. Homebuilding5. Homebuilding
50. Oilfield Svcs/Equipment50. Oilfield Svcs/Equipment
51. Electric Utility (East)51. Electric Utility (East)
52. Trucking/Transp. Leasing52. Trucking/Transp. Leasing
53. Electric Utility (Central)53. Electric Utility (Central)
54. Electric Utility (West)54. Electric Utility (West)

-- Thomas Bulkowski

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Thursday 7/2/15. Nasdaq: 38% Fib Retrace

The index climbed by 0.5% or 26.25 points. Since 02/05/1971 the index made 513 similar moves on a percentage basis. After those moves, the next day's...
     Average gain was 0.9% on 358 occasions.
     Average loss was -0.9% on 155 occasions.
Expect the index to close higher 69.8% of the time.
Weekly, since inception on 6/14/2011:
     The prediction of the index closing higher has been right 89/148 or 60.1% of the time.
     The prediction of the index closing lower has been right 30/62 or 48.4% 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 Nasdaq composite on the 5 minute scale.

$ $ $

I show a picture of the Nasdaq composite on the 5-minute scale.

I didn't see anything of value on this chart. Then a new thought occurred to me. How far had price retraced?

The peak on the chart is about 5160 (A) and the low is about 4960 (B), for a 200 point spread. If I did the math right, C is at the 38% Fibonacci retrace of the AB move.

Does that mean we can expect the index to continue moving up? The above probabilities say yes. I'm not so sure. But with Greece in a holding pattern until Monday, up is probably a good bet.

My holiday research suggests there is a 47% chance of a higher close on Thursday and a 44% chance of a higher close on Monday. In other words, the likelihood is that the indices will close lower. Go figure.

$ $ $

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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© 2015 ThePatternSite.com    Metric  Value  Diff  Close (within 10% of the high-low range for the day)? 
 Monthly S2  4,860.96    
 Monthly S1  4,937.04  76.08   
 Daily S2  4,971.29  34.25   
 Weekly S2  4,975.89  4.61   
 Daily S1  4,992.20  16.31   
 Low  4,994.46  2.26   Yes! The Low is close to the Daily S1.
 Weekly S1  4,994.51  0.05   Yes! The Weekly S1 is close to the Low.
 61.8% Down from Intraday High  5,011.30  16.80   
 Close  5,013.12  1.82   Yes! The Close is close to the 61.8% Down from Intraday High.
 Daily Pivot  5,015.38  2.26   Yes! The Daily Pivot is close to the Close.
 50% Down from Intraday High  5,016.50  1.13   Yes! The 50% Down from Intraday High is close to the Daily Pivot.
 38.2% Down from Intraday High  5,021.71  5.20   
 Open  5,029.05  7.34   
 Daily R1  5,036.29  7.24   
 High  5,038.55  2.26   Yes! The High is close to the Daily R1.
 Monthly Pivot  5,050.70  12.15   
 Daily R2  5,059.47  8.77   
 Weekly Pivot  5,079.43  19.97   
 Weekly R1  5,098.05  18.61   
 Monthly R1  5,126.78  28.73   
 Weekly R2  5,182.97  56.19   
 Monthly R2  5,240.44  57.47   

Wednesday 7/1/15. Chart Pattern Indicator: What's It Say?

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.

This chart shows bullish divergence. That means the indicator is making higher peaks but the index is making lower peaks.

The theory is that the index will follow the indicator higher. No time element is set to that, so the index can continue to drop for weeks, even months. But it has been my experience that we'll see a rebound.

Expect continued volatility until the Greece issue is settled.

Picture of the chart pattern indicator

This is another view of the CPI only it shows signal changes.

$ $ $

A few nights ago, my smoke detector went off at 4:30 AM. It didn't just beep as if needing a battery change, but sounded its horn for about 10 seconds. Then quit.

I checked the house for smoke and flames, but didn't see or smell anything. This happened once before, a few years ago. A false alarm. Or was it?

The next night, I woke up to open my windows and noticed that one of my security lights was off. The plug for that is in the same room where the smoke detector is. I've had problems with that outlet in the past. You have to insert the plug just right or it won't work. So I suspect that the outlet was shorting and the detector caught a whiff of that.

Anyway, I replaced the outlet this morning.

Years ago, I had a problem with my hall lights flickering. It took a few years before I walked by a wall switch that controlled those lights and heard it shorting. After I replaced that switch, no more flickering lights.

-- Thomas Bulkowski

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Written by and copyright © 2005-2015 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You and you alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.