As of 10/11/2019   Indus: 26,817 +319.92 +1.2%     Trans: 10,292 +224.65 +2.2%     Utils: 867 -5.54 -0.6%     Nasdaq: 8,057 +106.26 +1.3%     S&P 500: 2,970 +32.14 +1.1%	YTD  +15.0%    +12.2%    +21.6%    +21.4%    +18.5%	Targets    Overview: 09/30/2019     27,600 or 25,600 by 10/15/2019   11,100 or 9,700 by 10/15/2019   900 or 850 by 10/15/2019   8,300 or 7,700 by 10/15/2019   2,825 or 3,050 by 10/15/2019
Chart pattern indicator: on 10/9/19

As of 10/11/2019   Indus: 26,817 +319.92 +1.2%     Trans: 10,292 +224.65 +2.2%     Utils: 867 -5.54 -0.6%     Nasdaq: 8,057 +106.26 +1.3%     S&P 500: 2,970 +32.14 +1.1%	YTD  +15.0%    +12.2%    +21.6%    +21.4%    +18.5%
Targets    Overview: 09/30/2019     27,600 or 25,600 by 10/15/2019   11,100 or 9,700 by 10/15/2019   900 or 850 by 10/15/2019   8,300 or 7,700 by 10/15/2019   2,825 or 3,050 by 10/15/2019
Chart pattern indicator: on 10/9/19

Monday 10/14/19. Market Monday: The Week Ahead

• My Prediction
• A Brief Look Back
• Options Expiration
• Swing and Position Traders: Chart Pattern Indicator
• Swing Traders: Pivot Points
• Consecutive Price Trends
• Earnings, Chart Patterns & Industries

My Prediction

The chart of the Dow transports is on the weekly scale, not the daily. I wanted to show the longer-term trend.

I drew two red trendlines, one along the peaks and one along the valleys.

Notice how the index stays between those two lines most of the time. And also notice how the channel slopes downward.

I mentioned earlier in the week about the trendline measure rule, how price moving above a trendline can be reflected by the same amount below the line.

Although I show a channel, the measure rule didn't work in this case, did it? The drop in December 2018 far exceeds the rise in September 2018.

Returning to channel, notice how the index closed about midway up the channel. Also notice that the trends bounce from top to bottom and back again.

The last trendline touch was on the top. So even though the index closed higher by a strong push upward, the chart suggests that the upward move will fail. Price will drop down to the lower trendline.

That's hard to judge, really. The index nearly touched the bottom line yesterday (Thursday), so maybe we're actually going to go higher and tag the top trendline.

If the news about the trade war approaching a settlement is accurate, then perhaps we'll see the top trendline being touched before the bottom one. It could be that we pierce the channel going up, too.

So there you have it. We're either going to touch the top trendline or the bottom one. I feel like Trump. I'm always right even when I'm not.

A Brief Look Back

The following is a brief review of how the markets performed over time. The numbers refer to the close-to-close move in the Dow industrials.

For the Week...

Year to Date...

Options Expiration

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

Swing and Position Traders: Chart Pattern Indicator

As of 10/11/2019, 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 indices, based on the most recent trend of closes.

Low percentages suggest the market is overdue to turn (think of it as the likelihood that next week or next month will continue the trend, based on historical performance). Values of 50% mean random, so most percentages will be lower.

The analysis uses data going back 10 years for weekly percentages and 25 years for monthly percentages (or the start of data, whichever is more recent). Any unchanged closing price is interpreted as the end of the string of consecutive up or down closes.

Earnings, Chart Patterns & Industries

Earnings season will be starting in about 2 days.

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.

-- Thomas Bulkowski

Friday 10/11/19. Pattern Trading Setups for the Weekend.

You can find setups based on a Fibonacci retrace by clicking on the link.

Click the link for a list of symbols from the table.

The following patterns were found manually, so the results may differ from those found using Patternz.

There were 12 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 587 stocks searched, or 2.0%. Based on the percentage, the stock market is trending since few consolidation patterns appear.

Excluding ETFs, there were 5 bullish chart patterns this week and 6 bearish ones with any remaining (1) being undecided. The ratio of bullish to bearish patterns suggests the market is hinting of a coming bearish (down) turn.

In the table below, the red and green colors are based on the historical breakout direction for the associated chart pattern. If a high and tight flag appears, the start and end dates highlight the flagpole only and not the flag.

More...

-- Thomas Bulkowski

Weekly screen for chart patterns ending between 10/03/2019 and 10/10/2019. Many may be still in development. If no securities appear, then I have not identified any new patterns.

Industry: Telecom. Equipment

Industry RS rank: 5 out of 58

Stock RS rank: 553 out of 582

10/10/19 close: $8.81

1 Month avg volatility: $0.40. Volatility stop (for downward breakout): $10.02 or 13.8% above the close.

Change YTD: -17.97%

Volume: 1,686,300 shares. 3 month avg: 348,746 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Tuesday.

 

Chart pattern: Dead-cat bounce continuation pattern from 10/10/2019 to 10/10/2019

Breakout is downward 67% of the time.

Average decline: 18%.

Industry: Chemical (Specialty)

Industry RS rank: 38 out of 58

Stock RS rank: 278 out of 582

10/10/19 close: $97.07

1 Month avg volatility: $2.46. Volatility stop (for upward breakout): $91.54 or 5.7% below the close.

Change YTD: 23.89%

Volume: 102,700 shares. 3 month avg: 82,003 shares.

This security may be thinly traded (less than 100k shares)!

Since 2009 bear market, the best buy day (fewest up closes) is Thursday, and best sell day (most up closes) is Friday.

 

Chart pattern: Triangle, symmetrical continuation pattern from 09/25/2019 to 10/10/2019

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price hits measure rule target 66% of the time.

Industry: Furn/Home Furnishings

Industry RS rank: 34 out of 58

Stock RS rank: 489 out of 582

10/10/19 close: $13.90

1 Month avg volatility: $0.65. Volatility stop (for downward breakout): $16.25 or 16.9% above the close.

Change YTD: -30.64%

Volume: 45,000 shares. 3 month avg: 28,538 shares.

This security may be thinly traded (less than 100k shares)!

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Friday.

 

Chart pattern: Head-and-shoulders complex top reversal pattern from 09/13/2019 to 10/08/2019

Breakout is downward 100% of the time.

Average decline: 23%.

Break-even failure rate: 4%.

Pullbacks occur 67% of the time.

Price hits measure rule target 53% of the time.

Industry: Food Processing

Industry RS rank: 19 out of 58

Stock RS rank: 314 out of 582

10/10/19 close: $28.35

1 Month avg volatility: $0.84. Volatility stop (for downward breakout): $30.14 or 6.3% above the close.

Change YTD: 32.72%

Volume: 3,256,100 shares. 3 month avg: 3,423,360 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Broadening top, right-angled and ascending reversal pattern from 07/11/2019 to 10/10/2019

Breakout is downward 66% of the time.

Average decline: 15%.

Break-even failure rate: 20%.

Pullbacks occur 65% of the time.

Price hits measure rule target 32% of the time.

Industry: Electronics

Industry RS rank: 49 out of 58

Stock RS rank: 568 out of 582

10/10/19 close: $3.38

1 Month avg volatility: $0.28. Volatility stop (for downward breakout): $4.14 or 22.6% above the close.

Change YTD: -20.28%

Volume: 10,313,800 shares. 3 month avg: 5,624,629 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Thursday, and best sell day (most up closes) is Tuesday.

 

Chart pattern: Pipe top reversal pattern from 09/23/2019 to 09/30/2019

WARNING: A dead-cat bounce occurred on 10/03/2019. There is a 26% chance that a 15% or higher decline will occur (or has occurred since then) by 01/02/2020 and a 38% chance by 04/02/2020.

Breakout is downward 100% of the time.

Average decline: 20%.

Break-even failure rate: 11%.

Pullbacks occur 41% of the time.

Price hits measure rule target 70% of the time.

Industry: Insurance (Prop/Casualty)

Industry RS rank: 4 out of 58

Stock RS rank: 82 out of 582

10/10/19 close: $133.92

1 Month avg volatility: $1.92. Volatility stop (for upward breakout): $129.54 or 3.3% below the close.

Change YTD: 14.69%

Volume: 169,000 shares. 3 month avg: 201,215 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Friday, and best sell day (most up closes) is Monday.

 

Chart pattern: Triangle, symmetrical continuation pattern from 09/18/2019 to 10/10/2019

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price hits measure rule target 66% of the time.

Industry: Toiletries/Cosmetics

Industry RS rank: 8 out of 58

Stock RS rank: 25 out of 582

10/10/19 close: $154.32

1 Month avg volatility: $4.21. Volatility stop (for downward breakout): $162.82 or 5.5% above the close.

Change YTD: 17.64%

Volume: 492,200 shares. 3 month avg: 160,343 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Thursday.

 

Chart pattern: Broadening top reversal pattern from 09/23/2019 to 10/07/2019

Breakout is downward 50% of the time.

Average decline: 15%.

Break-even failure rate: 18%.

Pullbacks occur 48% of the time.

Price hits measure rule target 37% of the time.

Industry: Biotechnology

Industry RS rank: 44 out of 58

Stock RS rank: 431 out of 582

10/10/19 close: $28.84

1 Month avg volatility: $1.37. Volatility stop (for upward breakout): $25.66 or 11.0% below the close.

Change YTD: -0.79%

Volume: 304,300 shares. 3 month avg: 906,888 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Friday.

 

Chart pattern: Triangle, symmetrical continuation pattern from 09/24/2019 to 10/10/2019

WARNING: A dead-cat bounce occurred on 08/14/2019. There is a 26% chance that a 15% or higher decline will occur (or has occurred since then) by 11/13/2019 and a 38% chance by 02/12/2020.

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price hits measure rule target 66% of the time.

Industry: Retail Building Supply

Industry RS rank: 17 out of 58

Stock RS rank: 421 out of 582

10/10/19 close: $42.04

1 Month avg volatility: $1.95. Volatility stop (for downward breakout): $46.33 or 10.2% above the close.

Change YTD: 41.98%

Volume: 196,200 shares. 3 month avg: 94,083 shares.

This security may be thinly traded (less than 100k shares)!

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Friday.

 

Chart pattern: Diamond top reversal pattern from 09/16/2019 to 10/10/2019

Breakout is downward 69% of the time.

Average decline: 21%.

Break-even failure rate: 6%.

Pullbacks occur 57% of the time.

Price hits measure rule target 76% of the time.

Industry: Electric Utility (West)

Industry RS rank: 10 out of 58

Stock RS rank: 576 out of 582

10/10/19 close: $7.79

1 Month avg volatility: $0.83. Volatility stop (for downward breakout): $10.09 or 29.5% above the close.

Change YTD: -67.20%

Volume: 44,641,000 shares. 3 month avg: 5,870,049 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Wednesday, and best sell day (most up closes) is Friday.

 

Chart pattern: Dead-cat bounce continuation pattern from 10/10/2019 to 10/10/2019

Breakout is downward 67% of the time.

Average decline: 18%.

Industry: Toiletries/Cosmetics

Industry RS rank: 8 out of 58

Stock RS rank: 63 out of 582

10/10/19 close: $25.75

1 Month avg volatility: $1.11. Volatility stop (for upward breakout): $23.07 or 10.4% below the close.

Change YTD: 2.22%

Volume: 77,800 shares. 3 month avg: 238,602 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Friday.

 

Chart pattern: Flag, high and tight continuation pattern from 08/15/2019 to 10/09/2019

Breakout is upward 100% of the time.

Average rise: 69%.

Throwbacks occur 54% of the time.

Price hits measure rule target 90% of the time.

Industry: Semiconductor Cap Equip.

WARNING: This industry is within the top 7 that Dead-cat bounce often.

Industry RS rank: 9 out of 58

Stock RS rank: 352 out of 582

10/10/19 close: $48.78

1 Month avg volatility: $1.61. Volatility stop (for upward breakout): $44.82 or 8.1% below the close.

Change YTD: 6.34%

Volume: 312,500 shares. 3 month avg: 510,991 shares.

Since 2009 bear market, the best buy day (fewest up closes) is Monday, and best sell day (most up closes) is Wednesday.

 

Chart pattern: Triangle, symmetrical continuation pattern from 09/23/2019 to 10/10/2019

Breakout is upward 54% of the time.

Average rise: 31%.

Break-even failure rate: 9%.

Throwbacks occur 37% of the time.

Price hits measure rule target 66% of the time.

Thursday 10/10/19. Intraday Market Direction: Nasdaq

Since I post this the night before, check how the futures are trading before market open. Large moves can affect the opening direction.

$ $ $

I show a picture of the Nasdaq composite on the 5-minute scale, but only 5 days instead of 10 to zoom into the price action.

Here's a useful tip that might not be all that useful.

I drew an up-sloping red trendline along the bottom of price.

Notice how the move up to A, measured vertically from the trendline, mirrors what happens after, on the drop to B.

In other words, the height of A from the trendline is the same as the drop from the trendline to B.

Way cool, huh? It's the measure rule for trendlines.

Unfortunately, it doesn't always work (63% of the time it works, the last time I checked, that is).

$ $ $

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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