Written and copyright © 2011 by Thomas N. Bulkowski. All rights reserved.

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Tuesday 11/29/11. Trading Tuesday: Dow

First, I released new research on a long-term forecast of what the Dow industrials will look in the coming decade. Click on the link to see that next year is going to be bumpy, but later years will turn into a buy-and-holder's dream.

Second, I show a picture of the Dow industrials on the 5-minute scale from Monday's trading.

The large move up in the morning compressed the picture. Looking at the chart pattern, I see three tops at A, B, and C (and another peak after 2:00, but who's counting?).

It's a triple top. The index confirmed the pattern when it closed below the red line, which is the lowest low between the valleys. Shorting the index then would work well. At D, the index came closest to completing the measure rule target (the height of the chart pattern projected downward).

Looking forward, the flat move at D and to the right suggests a support area. It's been my experience that these types of intraday support levels don't work well. So, the index could drop below it easily enough. Nevertheless, I expect the index to close higher. It might retrace the tall candle posted near the close and European news might sabotage things anyway, but I remain hopeful.

On a longer-term view (the next week or so), the pullback I've been waiting for appears to be underway. That's not entirely clear because we could see a massive down move tomorrow (Tuesday). In other words, the index could move horizontally and then down. However, I think this is just an example of a pullback to a symmetrical triangle.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

Monday 11/28/11. Market Monday: The Week Ahead

• My Prediction
• A Brief Look Back
• Economic Reports
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Buy-and-Hold: 12-Month SMA
• Earnings, Chart Patterns & Industries

My Prediction

I show the Nasdaq composite index on the daily scale. Price has been dropping for too long, and I think the markets are over sold. How can I prove this?

I can't. I applied the three Fibonacci retraces, 38%, 50%, and 62%, and found that the index had slipped below all three. Of course, there are other Fib ratios that traders use but that's like taking a number and dividing it in half and in half again and again until you get something close to what you want, and then yelling "Eureka! I found it!"

Instead I show a three point channel. Begin by drawing a trendline along two peaks, which I show as the top trendline. Then add a parallel line touching the first major bottom (the October low). That gives the bottom trendline. We have a little bit more of a down move ahead before we hit bottom.

Of course, this is just a guess. I have found that price will not return to the launch price very often. In other words, I feel it's unlikely that the index will drop all the way to 2300 (the October low).

Another view is to think of a mirror placed at the October low. A reflection across the mirror would show two valleys appear soon, at 2350, mirroring the two August lows.

Time will tell how this plays out. Clearly, Europe is going to be a thorn in our side for a while longer, keeping markets volatile.

# # #

Now that the holiday period is here and you want to shop Amazon.com, please do so using this website as a gateway. Come to this website first, then click on a picture of one of my books on the far left (you may have to page down) and that will take you to Amazon.com. If you buy anything while there, I get a small referral fee that helps support this website.

Each time you shop Amazon, you have to use this website as a gateway first or the referral fee does not apply.

Thanks for helping reduce the cost of running this site.!

A Brief Look Back

The following are economic reports that moved the markets last week. The numbers refer to the close-to-close move in the Dow industrials.

For the Week...

Year to Date...

Economic Reports

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

Report	Time	A-F Rating	Description
New home sales	10:00 M	C+	Shows sales of single-family homes.
Consumer confidence	10:00 T	B-	Surveys 5,000 households for trends.
Productivity & costs	8:30 W	D+	Cost of producing a unit of output.
Chicago purchasing managers index	9:45 W	B	Monitors regional manufacturing activity.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
FEDs Beige book	2:00 W	?	Reports on economic conditions.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
Construction spending	10:00 Th	D	Covers residential/non-residential/public spending on new construction.
Auto & truck sales	3:00 Th	C-	Monthly sales of domestically produced vehicles.
4 Employment reports	8:30 F	A	Nonfarm payrolls, unemployment rate, avg workweek, hourly earnings.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 11/25/2011, the CPI had:

The chart pattern indicator is bearish 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.

• 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 indexes, 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

Earnings, Chart Patterns & Industries

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

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

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, indexes, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

The following industries, of 52 that I follow, were the best (1) and worst (52) performing.

-- Thomas Bulkowski

Thursday 11/24/11. Market Holiday: Stories!

To Linda: Here's your pic...

I decided to post some of my fiction work here. The stories will take you less than 10 minutes to read if you're interest. It helps if you have a heart. Below are may favorites among the 14 posted. I especially like these *.

• Green Soap. Reading time: 1 minute. This story is about getting a kid to wash his hands.
• Red Truck. Reading time: 1 minute. This story is about what happens to a kid's toy truck.
• Soul Ambulance. Reading time: 5 minutes. This is a Christmas story about something that happens at the airport.
• * That which cannot be said. Reading time: 7 minutes. Lovers discover a common connection between them.
• * The invitation. Reading time: 6 minutes. The prettiest girl in school gets bullied.
• Twenty at a Time. Reading time: 5 minutes. A CEO steals money and has to repay it in an unusual way.
• What Does Bequeath Mean? Reading time: 5 minutes. A little girls believes she's a princess.

Have a happy holiday!

Tuesday 11/22/11. Trading Tuesday: Dow

I show a picture of the Dow industrials on the 5-minute scale from Monday's trading.

If you were paying attention to the futures values before today's (Monday's) open, you should have been positioned to the short side.

After that, it was a waiting game to see what type of reversal chart pattern would appear. In this case, it was a head-and-shoulders bottom. I show that as A, B, and C on the chart. From what I can see on this chart, the index didn't close above the right armpit until after bottom D. That bottom looked like a double bottom (CD) or triple bottom (BCD). Regardless, they were bullish patterns.

The close above the horizontal blue line after 2:00 was the buy signal with an exit near the close when the measure rule fulfilled.

Looking to Tuesday, I believe the drop in the indices has been too swift to continue for long. It's overdone. On the daily chart, the index is in the middle of a support zone that I highlighted on Monday (point B on that chart).

Look for the index to close higher tomorrow, which also agrees with the probabilities.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

Monday 11/21/11. Market Monday: The Week Ahead

• My Prediction
• A Brief Look Back
• Economic Reports
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Buy-and-Hold: 12-Month SMA
• Earnings, Chart Patterns & Industries

My Prediction

I show a pic of the Dow industrials on the daily scale. Price at A has formed and broken out of a symmetrical triangle.

Immediately below A is a region of support (B) formed by a small knot of price congestion. Will this area hold and repulse the drop? That's a good question.

If the answer is "No," then worst-case, look for the index to drop to D. That matches the low at C. In most cases, it will stop short of actually returning to the launch price of C, so maybe 10,800 would be reasonable. If Europe melts down, then D is likely.

If the index goes higher, which I think it will, look for the index to climb to F, matching the resistance setup by the twin peaks near E.

A Brief Look Back

The following are economic reports that moved the markets last week. The numbers refer to the close-to-close move in the Dow industrials.

For the Week...

Year to Date...

Economic Reports

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

Report	Time	A-F Rating	Description
Existing home sales	10:00 M	C	Counts sales of used homes.
Gross domestic product	8:30 T	B	Measures economic activity; GDP deflator measures inflation.
FOMC Minutes	2:00 T	?	Minutes of the prior Federal Reserve meeting.
Initial jobless claims	8:30 W	C+	Counts people filing for state unemployment benefits.
Personal income & consumption	8:30 W	C+	Measures sources of income to predict future demand.
Personal consumption expenditures	8:30 W	C+	Covers durables, non-durables, and services.
Durable goods orders	8:30 W	B	Measures orders, shipments of goods with lifespans >3 years.
Michigan sentiment	9:55 W	B-	Consumer sentiment: Measures strength of consumer spending.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.

Options Expiration

No options expire this week.

Thursday is a market holiday.

Swing and Position Traders: Chart Pattern Indicator

As of 11/18/2011, the CPI had:

The chart pattern indicator is bearish 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.

• 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 indexes, 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

Earnings, Chart Patterns & Industries

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

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

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, indexes, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

The following industries, of 52 that I follow, were the best (1) and worst (52) performing.

-- Thomas Bulkowski

Sunday 11/20/11. Confirmation Research Released

Just a quick note to say that I released a study on confirmation. This has nothing to do with religion. 

Rather, it tells how likely price is to confirm a chart pattern if you buy before the squiggles turn into a valid pattern.

-- Thomas Bulkowski

Saturday 11/19/11. Saturday Supplement: New Throw/Pull Research.

I show two drawings. The first one is a throwback and the second is a pullback.

When I was working on busted chart patterns, I took the opportunity to redefine how I measured when a throwback or pullback ends. Instead of stopping at the first congestion area (such as a minor high or low), I extended it to the end of the primary trend. That redefinition, I believe, more accurately reflects what happens after a chart pattern ends.

With additional samples (about 10,000), the new throwback and pullback models appear in the above charts.

After price returns to the breakout price or trendline boundary in a throwback, price resumes the rise 65% of the time.

For pullbacks, the resumption of the downtrend happens less often. Only 47% of the time will price make a sustained move lower.

Thursday 11/17/11. Trading Thursday: Nasdaq

I show a picture of the Nasdaq composite on the 5-minute scale from Wednesday's trading.

The only pattern worth commenting on is the three falling peaks pattern, cleverly labeled 1, 2, and 3.

I hardly ever look for the three falling peaks because it occurs so frequently. The pattern confirms as valid when the index closes below the lowest valley in the chart pattern. I show that as a red line.

After confirmation, the index made a nice run down, offering plenty of opportunity to profit.

If you draw a trendline from Monday's trading (5 min scale, from about 1:00, not shown), it will approach today's close. Thus, it should act as support.

Going back a week ago, there was also support below where we currently are. Thus, the index might drop in the morning, but should find support. My guess is it will close higher but the probabilities disagree. It's been right 67% of the time.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

Tuesday 11/15/11. Trading Tuesday: Dow

I show a picture of the Dow industrials on the 5-minute scale from Monday's trading.

The chart shows a target rich environment. A double bottom appears first at DE, confirmed when the index closed above the peak between the two bottoms at F. The chart pattern didn't amount to much of a move after confirmation.

Following that, a double top at AB signaled a reversal when price confirmed at C. Another double top appeared later in the day, at GH, confirmed at I. The targets from the double tops (the height of the pattern) appears to have been fulfilled.

The index at the end of the day climbed up to a resistance level, about 12,080. If you look at the 10-day chart (not shown), you will see a big move up two trading days ago. That mirrored the big down move four days ago. Friday's and today's drop appears to be a retrace of the big move up at the open on Friday. I think that retrace is over. Thus, I look for the index to close higher tomorrow. Developments in Europe, can influence the outcome, of course. And I'm just guessing anyway. The probabilities are nearly even, too, with a slight edge to a higher close.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

Monday 11/14/11. Market Monday: The Week Ahead

• My Prediction
• A Brief Look Back
• Economic Reports
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Buy-and-Hold: 12-Month SMA
• Earnings, Chart Patterns & Industries

My Prediction

I show a chart of the S&P 500 index on the weekly scale.

I drew a red trendline along the peaks. It's been my experience that when a stock reaches such a trendline it reverses there. Whether that happens with indices, I guess we'll find out.

I think it will and I show that by the green bent arrow. That's my guess of what will happen in the coming weeks. And that means we have more up-moving to go before the index hits overhead resistance.

If the index performs as I expect, the chart pattern will resemble a descending broadening wedge.

Yes, it's going to be an exciting time.

A Brief Look Back

The following are economic reports that moved the markets last week. The numbers refer to the close-to-close move in the Dow industrials.

For the Week...

Year to Date...

Economic Reports

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

Report	Time	A-F Rating	Description
Producer price index	8:30 T	B-	Measures wholesale goods cost. An indication of future inflation.
Retail sales	8:30 T	A-	Reports total retail sales (not services). Are people spending?
Business inventories	10:00 T	C-	Reports manufacturing, wholesale, retail inventories.
Consumer price index	8:30 W	B+	Inflation report. Measures cost of goods and services.
Industrial production	9:15 W	B-	Production of utilities, mines, and manufacturers.
Capacity utilization	9:15 W	B-	Gauges economic activity, hints of inflation.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
Housing starts	8:30 Th	B-	Number of homes beginning construction.
Building permits	8:30 Th	B-	Measures building permits for new construction.
Leading indicators	10:00 F	D-	Summary of already known reports.

Options Expiration

The following is courtesy of the Options Industry Council.

Many options expire this week, so traders will be looking to close out their positions ahead of that, and that suggests increased volatility (large daily price swings).

Swing and Position Traders: Chart Pattern Indicator

As of 11/11/2011, the CPI had:

The chart pattern indicator is bullish 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 indexes, 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

Earnings, Chart Patterns & Industries

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

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

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, indexes, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

The following industries, of 52 that I follow, were the best (1) and worst (52) performing.

-- Thomas Bulkowski

Thursday 11/10/11. Trading Thursday: Nasdaq

I show a picture of the Nasdaq composite on the 5-minute scale from Wednesday's trading.

The Nasdaq composite formed a head-and-shoulders top at ABC, confirmed when the index closed below the right armpit at D. I use the armpit as confirmation because the neckline slopes downward, resulting in a tardy or non-existent entry signal.

Selling short at D would have been profitable, as the chart shows. The index tumbled in a straight line run down and bounced when it reached support around 2620.

Looking ahead, I think that support will hold and I expect a strong move up in the morning. Today's drop (in the Dow industrials, at least) was on very low volume, suggesting the plunge was from buyers standing aside, and not strong selling. Of course, for every share sold there is one bought. I'm talking about selling pressure and buying demand.

Anyway, I expect the index to close higher tomorrow.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

Tuesday 11/8/11. Trading Tuesday: Dow

I show a picture of the Dow industrials on the 5-minute scale from Monday's trading.

Looking at this chart, you can see the large, rounding turn, or rounding bottom from A to B. Others will see a cup with handle. The cup begins on the left at A and the right cup lip is at B. The handle, at C, is short compared to the width of the cup.

In a true cup with handle, price is supposed to rise by 30% leading to the start of the cup. Price does rise, beginning last Tuesday. That, of course, is well short of a 30% gain.

I don't like cup with handles in stocks because price tends to rise by 10% to 15% (above the high at B) and then die. In an index, I'm not sure how a cup behaves after the breakout.

Looking at the 10-day chart, the index is at overhead resistance. That means the index may have trouble moving higher tomorrow (Tuesday). One clue I see today is a higher bottom to the cup from the low on Friday. Thus, even though Europe is now targeting another country (Italy) with financial problems, I look for the Dow to close higher tomorrow.

If Italy melts down or if the markets fear it will have debt problems, then the index is going down. A check of the news before the open, including the futures, will help determine market direction.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

Monday 11/7/11. Market Monday: The Week Ahead

• My Prediction
• A Brief Look Back
• Economic Reports
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Buy-and-Hold: 12-Month SMA
• Earnings, Chart Patterns & Industries

My Prediction

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

A head-and-shoulders top appears during the last few weeks. It is unconfirmed as yet and that means price has to close below the horizontal red line. In this situation, the neckline (shown in blue but it looks black) slopes downward. When that occurs, I prefer the red line to trigger an entry.

Anyway, if the pattern does not confirm, then it's just squiggles on the chart.

The word on the national news is that the Greek situation is calming down. Thus, I expect the markets to react to the news favorably tomorrow (Monday). And that means the head-and-shoulders will not act as a reversal pattern but as a continuation. In short, the index should climb higher over the coming week.

A Brief Look Back

The following are economic reports that moved the markets last week. The numbers refer to the close-to-close move in the Dow industrials.

For the Week...

Year to Date...

Economic Reports

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

Report	Time	A-F Rating	Description
Consumer credit	3:00 M	D-	Measures auto, credit card and other debt.
Wholesale inventories	10:00 W	D-	Wholesale sales and inventory statistics.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
International trade	8:30 Th	C+	Import/export prices, trade balance. US economy vs others.
Trade balance	8:30 Th	C+	Signals balance of exports & imports.
Treasury budget	2:00 Th	D	Tracks budget deficit. Important in April (tax filing).
Michigan sentiment	9:55 F	B-	Consumer sentiment: Measures strength of consumer spending.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 11/04/2011, the CPI had:

The chart pattern indicator is bearish with 1 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 indexes, 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

Earnings, Chart Patterns & Industries

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

Mutual funds will begin dividend distributions and rebalancing their portfolios for the approaching year end (starts in late November).

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, indexes, and long-only exchange traded funds I follow during the last month are shown in the adjacent table.

The following industries, of 52 that I follow, were the best (1) and worst (52) performing.

-- Thomas Bulkowski

Thursday 11/3/11. Trading Thursday: Nasdaq

I show a picture of the Nasdaq composite on the 5-minute scale from Wednesday's trading.

A double bottom appears in early afternoon, at A and B. The pattern confirms as a valid chart pattern when the index closes above the peak between the two bottoms, at C. Taking a long position at that time would work well.

Now, the move from B to D with a retrace from D to E could mean a move beyond F (it's a measured move up chart pattern). The EF+ move, when it completes, might mimic the BD move. That means another big up move tomorrow.

What gives me pause in this prediction is the lack of follow through at F. Yes, the market closed at F, but the upward momentum seems to have petered out at overhead resistance.

On the daily scale, there is a big gap to fill and these "windows" are suspected resistance areas. They don't work well as resistance, as I recall. That's one of the discoveries I made and documented in my Encyclopedia of Candlestick Charts book (page 11).

I expect the index to close higher tomorrow but it might find weakness at the open.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

-- Thomas Bulkowski

Tuesday 11/1/11. Trading Tuesday: Dow

I show a picture of the Dow industrials on the 5-minute scale from Monday's trading.

Today's Dow industrials shows a target rich environment. If you noticed a head-and-shoulders top in the morning, it confirmed when price closed below the red neckline just after 11:00. A pullback to A gave traders another opportunity to short the index.

If you missed that, then another opportunity came late in the session. An Eve & Eve double top, marked on the chart as A and B, confirmed just after 3:00, at C. That was another short signal. In both cases, the height of the chart pattern projected downward from the breakout price would have made a good exit price.

A strong down draft occurred in the closing 10 minutes, as the chart shows. Will this continue? To find out, I looked at the 10-day chart, 5 minute scale. When I've done this in the past, it always has been a lousy predictor of where support and resistance will be. From the chart, it looks like the index should continue down in the morning before finding support, dropping as far as 11,850. Then it should recover to 12,050 to 12,100. That would complete a measured move down chart pattern with a return to the corrective phase.

If you don't understand that, don't worry about it. I expect the index to drop but recover. I don't know if it will recover all of the drop by the close. My guess is no, it won't. That's different than the probabilities listed above. Also note that the FOMC meets on Wednesday, so this session might be unusually quiet as the markets wait for the announcement the next day.

The following table shows where Fibonacci retrace values of the day's high-low range are plus pivot points, sorted by value. When several are near each other (small differences), the area might act as support or resistance.

# # #

And yes, I voted early today. I had to wake up the workers, too. The good news is that IDs will be required next time. That should cut voter fraud.

-- Thomas Bulkowski

Written and copyright © 2011 by Thomas N. Bulkowski. All rights reserved.