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

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Thursday 9/29/11. Trading Thursday: Nasdaq

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

A broadening bottom appeared early in the session (outlined by the blue lines). The chart pattern did not reveal the breakout until price closed below the bottom of the pattern (A) at B (a close below the red line).

A measured move down pattern from CDEF helps define a target for how low the index will drop.

Additionally, extending the bottom of the broadening bottom (which I show as a green line) shows another method to determine where price might reverse. It comes close to turning point D.

For tomorrow, I believe that the index will reverse since it's coming upon a support area marked by peaks during the last four days. The index could coast lower at the open and drop to 2,470 or so before finding a firm ground to stand on. I think that the index will close higher, which places me at odds with the above 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

Tuesday 9/27/11. Trading Tuesday: Dow

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

The only thing of interest I see is a busted double top. A and B form the twin peaks of a potential double top. Price must close below C to validate the chart pattern as a true double top. That didn't happen. Instead, price moved higher. That was a buy signal. Price continued moving higher in a straight line run up to the close. Will it continue tomorrow?

My guess is that the morning will see a retrace. On the 10 day chart, the index is pushing into overhead resistance from 11,000 to 11,150. After that, it's clear until 11,250 where additional resistance builds. The index may wobble up and down going into the afternoon before it closes higher at day's end.

Alternatively, it could drop back to 10.950 (a support area).

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 9/26/11. 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 Nasdaq composite on the weekly scale with two predictions of the future direction of the markets.

The first is the drop from C to D. That move would complete a measured move down chart pattern. The extent of the move (location of D) is not accurate. I just drew D in at an approximate location within the support zone shown between the two blue lines.

The idea behind a measured move down is that the CD move is approximately the same (both in time and price) as the AB move. That would put the destination (D) somewhere in the support area.

Alternatively, the index could just rise higher, into the green resistance area shown between the two green lines. If the market recovers, the index could rise back up to A in the next several weeks.

Keep in mind that September is often the worst performing month of the year. The link shows that's true for the Dow Industrials and the S&P 500, but not so much for the Nasdaq. Mutual funds do their end-of-quarter/year window dressing (buying and selling stocks to make their portfolios look better) and that tends to rattle the markets.

$ $ $

When I tried to view the website this morning (Sunday), a notice saying that the website had been hacked appeared. Perhaps you have seen this message, too. Indeed, a hacker broke into the server where the site is hosted and dropped off a file that made the message appear. I found it on my site and removed it, restoring service. If you see the message again, it's probably because my ISP hasn't found out how it was done or how to prevent it. If I see the problem, I'll fix it if I'm able.

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.
Durable goods orders	8:30 W	B	Measures orders, shipments of goods with lifespans >3 years.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
Gross domestic product	8:30 Th	B	Measures economic activity; GDP deflator measures inflation.
Personal income & consumption	8:30 F	C+	Measures sources of income to predict future demand.
Chicago purchasing managers index	9:45 F	B	Monitors regional manufacturing activity.
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 09/23/2011, the CPI had:

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.

• 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 over.

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 9/22/11. Trading Thursday: Nasdaq

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

Due to the large decrease after 3:00, the chart seems compressed on the linear price scale. A small double top appears at A and B. The chart pattern confirms as a valid chart pattern when the index closes below the low, at C.

Later, after noon, points D, E, and F form a triple top. That confirms as a valid reversal at G when price closes below the horizontal red line. This second pattern was the one to short but holding a short position from the earlier double top would also have worked well.

Looking forward, I feel that such steep declines in the index precede a bounce back up. The above probabilities suggest that's not the case 52.8% of the time. In other words, price tends to close lower the next day after a 2% drop in the Nasdaq.

I expect the index to open lower and then rebound. It is near weak support from 5 trading days ago. Whether that will actually be strong enough to support the index remains to be seen.

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 9/20/11. Trading Tuesday: Dow

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

This is an interesting chart and I hope that some of you were able to recognize the trading opportunity. Many of you may recognize a cup-with-handle as AEB with the handle sliding to C.

It's not a cup because price has to rise 30% leading to the left cup rim (from D to A), according to O'Neil. That, of course, is nearly impossible for an index. You can call it a rounding bottom and be on firmer footing.

The depth of the turn from E to B projected upward from B gives an exit target. I have not done the math, but the target looks close to where the index topped out today in the final hour.

Looking ahead to tomorrow, housing numbers come out in the morning, but the markets might be quiet pending the Federal Reserve's meeting announcement on Wednesday afternoon.

My guess is the markets will suffer in the morning and close the day lower. That's what the probabilities say and with a 100% win record, who am I to argue?

If D begins a 5-wave move higher (DA, AE, EB, BC and C to the peak near the close), then we should see an ABC correction taking place from the peak on down.

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 9/19/11. 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 Dow utilities on the daily scale because the index is leading the market higher.

Price, at C, is approaching the height of the prior peaks, A and B. This is good news since I bought several utility stocks as the index approached the correction lows in August. They are up 11% now.

If you were to look at the Nasdaq composite, you would also see that the index has broken out of the congestion area and is moving higher. The Dow industrials and S&P 500 indices are still struggling to break free.

My guess is that the market will continue to recover in the weeks that follow. We might get a throwback to the congestion area just for fun. The Dow industrials and S&P look as if they have formed head-and-shoulders tops, which is a worrisome sign. Regardless, I look for the index to continue moving up in the short term.

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
Housing starts	8:30 T	B-	Number of homes beginning construction.
Building permits	8:30 T	B-	Measures building permits for new construction.
Existing home sales	10:00 W	C	Counts sales of used homes.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
FOMC Rate decision	2:15 W	?	The Federal Reserves reports on interest rate changes.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
Leading indicators	10:00 Th	D-	Summary of already known reports.

Options Expiration

VIX expiration on Wednesday. No other options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 09/16/2011, the CPI had:

The chart pattern indicator is bullish 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 over.

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 9/15/11. Trading Thursday: Nasdaq

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

Not much occurred today in terms of chart patterns. Price moved up following a nicely formed channel. Notice how the index punched through the top of the channel (A) only to falter and then close below the bottom of the channel (B).

I've started posting my research on busted chart patterns. Today's Nasdaq move is an example of it busting an up-sloping channel. Thus, even though the probabilities suggest a higher close, I am going to say the index will close lower. I believe that the new downward trend shown in the last half-hour will continue. The new downtrend could be the beginning of an simple ABC correction. That suggests the index will drop, retrace, and drop again.

On the 10-day view, 5 minute scale, the close is resting near support at 2560-2570. If that support holds, then the index could post a second higher close. The economic reports due out today are not important ones, but any large shift in the results could influence the closing direction.

So, you can take your pick of a lower or 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

Tuesday 9/13/11. Trading Tuesday: Dow

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

I added a reliability assessment ("The prediction of the index closing...") to the above predictions. That will help you gauge how reliable the predictions have been.

Looking at the chart, we see a descending triangle chart pattern. They breakout downward 64% of the time, and that's what happened in this case. However, the down move was short lived. In fact, the pattern "busted" when the index closed above the top trendline at A. Often when a pattern busts, it shows a strong move in the new direction.

The strength of the new move up suggests a continuation at the opening bell tomorrow. However, the height of the last candle, being so short, suggests a continuation move might be a trap that sees the index retrace before moving higher. In either case, look for the index to finish the day higher than yesterday's 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 9/12/11. 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 along with an inset of the Dow industrials. First, the S&P.

Price has been making higher highs and higher lows. That's the definition of an up trend. As the red lines show, the index has climbed in a tall upward-sloping channel. The index has touched the bottom trendline and closed higher (not up for the day but above the trendline). Will it continue to stay within the channel and bounce higher on Monday?

Let's look at the Dow. It is also following an up-sloping channel, highlighted in blue in the inset. It also has shown higher highs and higher lows...until the last week.

Twice the index dipped below the bottom blue trendline and on Friday it closed below the line. That suggests the index is going to continue lower. That doesn't always happen, of course.

So, you have two views. The S&P shows an intact upward channel, but the Dow has punched through it as if leading the way down.

Since the Dow has pushed through twice, my guess is it could drop more, say, to the August low at B (at least). As for the S&P, it may follow the Dow lower over the coming week, especially if economic reports come in weaker than expected.

Supporting this bearish view is that four of five indices have closed below 12 monthly SMA (see below). In the past, that has signaled the start of a bear market -- but not always. The last time I sold a good portion of my portfolio, the market moved higher. This time around, I'm gun shy. I remain bullish over the long term (longer than 6 months).

For this week, I expect the market to bounce higher on Monday as a retrace of the big move down on Friday. Then on Wednesday and Thursday economic reports come out that will flatten any bulls. All of this, of course, is just a guess.

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
International trade	8:30 T	C+	Import/export prices, trade balance. US economy vs others.
Treasury budget	2:00 T	D	Tracks budget deficit. Important in April (tax filing).
Producer price index	8:30 W	B-	Measures wholesale goods cost. An indication of future inflation.
Retail sales	8:30 W	A-	Reports total retail sales (not services). Are people spending?
Business inventories	10:00 W	C-	Reports manufacturing, wholesale, retail inventories.
Crude inventories	10:30 W	?	My guess: Measures oil inventory.
Initial jobless claims	8:30 Th	C+	Counts people filing for state unemployment benefits.
Consumer price index	8:30 Th	B+	Inflation report. Measures cost of goods and services.
Industrial production	9:15 Th	B-	Production of utilities, mines, and manufacturers.
Capacity utilization	9:15 Th	B-	Gauges economic activity, hints of inflation.

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 09/09/2011, the CPI had:

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.

• 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 over.

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 9/8/11. Trading Thursday: Nasdaq

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

The index moved higher almost from the opening bell. The up trend continued until near the close when it formed a peak (A), dipped, and returned to the prior peak (B). That double peak, to me, is a warning sign. Price could drop at the scent of overhead resistance. Indications of a reversal appear only as a small white candle at B. Based on the probabilities, the index should close lower tomorrow (Thursday). That would be understandable, given that the move up was so large. Thus, I expect a retrace of today's up move.

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 9/6/11. Trading Tuesday: Dow

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

A Eve & Eve double top appears around noon in the index (at A and B). Price confirmed the chart pattern when it closed below the red horizontal line. That line could pose a challenge to the index when it moves up, just as it did at 1:30 and 2:00. However, the resistance will likely be muted since the earlier tests had burned off some of that resistance.

I get the feeling that price will open lower because of the weakness shown near the close (tall black candles easing lower). Nevertheless, look for the index to close the day higher.

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

Thursday 9/1/11. Trading Thursday: Nasdaq

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

Two chart patterns grabbed my attention. First, is a measured move down, shown as CDEA. Leg CD is nearly the length of leg EA and the slope is similar.

The second pattern is an Adam & Adam double bottom at A and B. It confirmed as a valid pattern when the index closed above the peak between bottoms A and B. Now, the index is throwing back to the top of the chart pattern.

I expect the index to continue dropping at the open (although it could just resume moving up) and then close higher.

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

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