Intraday Market Direction Thursday: Nasdaq Lower…

Wednesday 4/8/20. A Look At Indicators

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 looks like the one I drew in the forecast update for 2020 a week ago. The lines are different, so let’s talk about them.

The indicator at the bottom of this chart buried its head into the ceiling twice. The horizontal red line connects those two peaks.

Now look at the index. It shows two peaks moving upward. That’s bearish divergence. It suggests weakness in the index, but it doesn’t say when the index
will tumble.

Let’s look at the next chart to see what it says.

The red line is the percentage of stocks at least 20% below their 1-year high (plotted upside down). The blue line is the average percentage drop of stocks below their 1-year high (plotted upside down).

This chart also shows divergence, except it’s focused on the blue and red indicator lines. The red indicator line at the bottom of the chart sees a higher peak as denoted by the red up-sloping
line.

The blue indicator line slopes downward (the red line shows the slope, but it’s drawn a bit steeper than it really is. Sorry about that). The index agrees with the red indicator line.
It slopes upward, too. Is it two against one?

I haven’t see this before, where the two indicator lines diverge. The red indicator line is the more sensitive of the two lines and it shows convergence, not divergence with the index.

Combined with the prior chart, I’d say Wednesday is going to be a down day (based more on the trend reversal intraday in the index than anything else), but I also expect weakness when
earnings reports come out. And here’s a sobering thought. Covid-19 won’t end until there’s a vaccine in public distribution. And that could mean well into next year before that happens. Until
then, we’ll have to limit exposure.

— Thomas Bulkowski

Tuesday 4/7/20. Slider Quiz!

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I show a another slider quiz featuring the V top chart pattern.

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In Texas, essential businesses (to remain open) are liquor stores, churches, and gun shops. Craft stores such as Michaels Stores and Hobby Lobby have tried to stay open, justifying that
they were essential businesses because they sold supplies to make masks. Dallas sent one Hobby Lobby store a cease and desist order to close immediately.

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

— Thomas Bulkowski

Monday 4/6/20. Market Monday: The Week Ahead

My Prediction

I show the S&P 500 index on the monthly scale, which is unusual for me. Most times I stick to the daily scale except under certain conditions. This time, I wanted to put the recent movement
into context, hence the monthly scale.

Many people have written in the past few months about the indices forming a broadening top. And that’s what we see here.

I’ve outlined the pattern in red. It’s not ideal. That’s clear when the spike at B plunges through the bottom line and the top line shows the index missing it at A.

It’s like the index used the missing momentum at A to plunge farther below the line at B. Hmm.

Regardless, what does a broadening top tell us about coming price movement? Answer: Not much.

If you switch to the weekly scale, you get a hint of a partial rise. It’s even more pronounced on the daily chart.

A partial rise in a broadening top sees price climb upward for a time, then round over and drop to the bottom trendline. Then price just keeps on going down, staging an immediate downward breakout
from the chart pattern.

A partial rise correctly predicts a downward breakout from a broadening top 52% of the time. That’s random, so it’s not much help. However, it does give us a warning.

Will the index breakout downward? I doubt it, but covid-19 has fooled me before so my guess is as good as yours.

I do expect the markets to tumble but we’re a long way from puncturing that lower trendline. With current volatility, however, that’s a day’s move down!

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.

Monday: Up 690.7 points.

Tuesday: Down 410.32 points.

Wednesday: Down 973.65 points.

Thursday: Up 469.93 points.

Friday: Down 360.91 points.

For the Week…

The Dow industrials were down 584.25 points or 2.7%.

The Nasdaq composite was down 129.3 points or 1.7%.

The S&P 500 index was down 52.82 points or 2.1%.

Year to Date…

Dow Industrials

     28.8% down from the high of 29,568.57 on 02/12/2020.

     15.6% up from the low of 18,213.65 on 03/23/2020.

Nasdaq

     25.1% down from the high of 9,838.37 on 02/19/2020.

     11.2% up from the low of 6,631.42 on 03/23/2020.

S&P 500

     26.7% down from the high of 3,393.52 on 02/19/2020.

     13.5% up from the low of 2,191.86 on 03/23/2020.

Options Expiration

No options expire this week.

Swing and Position Traders: Chart Pattern Indicator

As of 04/03/2020, the CPI had:

42 bearish patterns,

9 bullish patterns,

788 patterns waiting for breakout.

The CPI signal is 17.6%, which is
bearish (<= 35%).

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:

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

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 10 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 4/3/20. Pattern Trading Setups for the Weekend.

Go to Table.

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.

Mr. Bulkowski has excluded any securities he owns from appearing in the list. However, he may add any of the securities listed to his portfolio at any time, just as you can.

There were 8 patterns found this week (excluding pipe bottoms; pipe tops and bottoms are found looking back 2 weeks) out of 595 stocks searched, or 1.3%. Based on the percentage, the stock market is
trending since few consolidation patterns appear.

I found 3 pipe bottom chart patterns, which is neutral. High numbers of pipe bottoms can signal a bullish move (I see many of them just before a bear market ends or during a bear market rally. Often it means the first bottom of a double bottom has formed. Thus, expect a move down to the second bottom).

Excluding ETFs, there were 8 bullish chart patterns this week and 0 bearish ones with any remaining (3) being undecided.
The ratio of bullish to bearish patterns suggests the market is hinting of a coming bullish (up) 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

Definitions

’Breakout is upward/downward 100% of the time’ means price breaks out up/down by definition, not by statistically measuring the rate.

All numbers assume a bull market and are based on the breakout direction that occurs most often.

Industry: Natural Gas (Diversified)

Industry RS rank: 36 out of 58

Stock RS rank: 556 out of 590

4/2/20 close: $7.79

1 Month avg volatility: $1.24. Volatility stop (for upward breakout): $4.60 or 41.0% below the close.

Change YTD: -70.00%

Volume: 24,071,200 shares.
3 month avg: 4,704,349 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: Flag, high and tight continuation pattern from 03/18/2020 to 04/02/2020

WARNING: A dead-cat bounce occurred on 03/09/2020. There is a 26% chance that a 15% or higher decline will occur (or has occurred since then) by 06/08/2020 and a 38% chance by 09/07/2020.

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: Electronics

Industry RS rank: 35 out of 58

Stock RS rank: 527 out of 590

4/2/20 close: $2.35

1 Month avg volatility: $0.29. Volatility stop (for upward breakout): $1.69 or 28.0% below the close.

Change YTD: -45.85%

Volume: 4,116,200 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: Triangle, symmetrical continuation pattern from 03/20/2020 to 04/01/2020

WARNING: A dead-cat bounce occurred on 03/12/2020. There is a 26% chance that a 15% or higher decline will occur (or has occurred since then) by 06/11/2020 and a 38% chance by 09/10/2020.

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: Drug

Industry RS rank: 6 out of 58

Stock RS rank: 125 out of 590

4/2/20 close: $76.87

1 Month avg volatility: $4.05. Volatility stop (for upward breakout): $65.93 or 14.2% below the close.

Change YTD: -15.48%

Volume: 12,254,900 shares.
3 month avg: 11,487,503 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: Broadening wedge, descending reversal pattern from 02/04/2020 to 03/31/2020

Breakout is upward 79% of the time.

Average rise: 33%.

Break-even failure rate: 6%.

Throwbacks occur 53% of the time.

Price hits measure rule target 79% of the time.

Industry: Chemical (Basic)

Industry RS rank: 39 out of 58

Stock RS rank: 418 out of 590

4/2/20 close: $11.44

1 Month avg volatility: $1.48. Volatility stop (for upward breakout): $7.93 or 30.6% below the close.

Change YTD: -33.68%

Volume: 1,999,000 shares.
3 month avg: 1,697,154 shares.

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

 

Chart pattern: Triangle, symmetrical continuation pattern from 03/19/2020 to 04/01/2020

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: Healthcare Information

Industry RS rank: 2 out of 58

Stock RS rank: 117 out of 590

4/2/20 close: $67.31

1 Month avg volatility: $5.74. Volatility stop (for upward breakout): $49.19 or 26.9% below the close.

Change YTD: -17.63%

Volume: 445,700 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: Double Bottom, Adam and Adam reversal pattern from 03/20/2020 to 03/27/2020

Breakout is upward 100% of the time.

Average rise: 35%.

Break-even failure rate: 5%.

Throwbacks occur 64% of the time.

Price hits measure rule target 66% of the time.

Industry: Chemical (Specialty)

Industry RS rank: 22 out of 58

Stock RS rank: 309 out of 590

4/2/20 close: $12.98

1 Month avg volatility: $0.94. Volatility stop (for upward breakout): $10.32 or 20.5% below the close.

Change YTD: -20.22%

Volume: 191,400 shares.
3 month avg: 70,862 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 Tuesday.

 

Chart pattern: Pipe bottom reversal pattern from 03/16/2020 to 03/23/2020

Breakout is upward 100% of the time.

Average rise: 45%.

Break-even failure rate: 5%.

Throwbacks occur 44% of the time.

Price hits measure rule target 83% of the time.

Industry: Trucking/Transp. Leasing

Industry RS rank: 24 out of 58

Stock RS rank: 361 out of 590

4/2/20 close: $64.18

1 Month avg volatility: $7.26. Volatility stop (for upward breakout): $47.51 or 26.0% below the close.

Change YTD: -31.08%

Volume: 282,400 shares.
3 month avg: 163,825 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: Diamond bottom reversal pattern from 03/09/2020 to 03/31/2020

Breakout is upward 69% of the time.

Average rise: 36%.

Break-even failure rate: 4%.

Throwbacks occur 53% of the time.

Price hits measure rule target 81% of the time.

Industry: Cement and Aggregates

Industry RS rank: 46 out of 58

Stock RS rank: 433 out of 590

4/2/20 close: $13.14

1 Month avg volatility: $2.01. Volatility stop (for upward breakout): $8.72 or 33.6% below the close.

Change YTD: -45.02%

Volume: 1,681,200 shares.
3 month avg: 1,204,178 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: Flag, high and tight continuation pattern from 03/23/2020 to 03/31/2020

WARNING: A dead-cat bounce occurred on 03/09/2020. There is a 26% chance that a 15% or higher decline will occur (or has occurred since then) by 06/08/2020 and a 38% chance by 09/07/2020.

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: Computer Software and Svcs

Industry RS rank: 5 out of 58

Stock RS rank: 379 out of 590

4/2/20 close: $20.44

1 Month avg volatility: $1.65. Volatility stop (for downward breakout): $24.34 or 19.1% above the close.

Change YTD: -23.65%

Volume: 1,613,500 shares.
3 month avg: 1,378,918 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: Roof, inverted reversal pattern from 02/28/2020 to 04/02/2020

WARNING: A dead-cat bounce occurred on 11/08/2019. There is a 38% chance that a 15% or higher decline will occur (or has occurred since then) by 05/08/2020.

Breakout is downward 50% of the time.

Average decline: 17%.

Break-even failure rate: 10%.

Pullbacks occur 56% of the time.

Price hits measure rule target 73% of the time.

Industry: Healthcare Information

Industry RS rank: 2 out of 58

Stock RS rank: 57 out of 590

4/2/20 close: $156.16

1 Month avg volatility: $10.85. Volatility stop (for upward breakout): $126.55 or 19.0% below the close.

Change YTD: 11.02%

Volume: 1,278,800 shares.

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

 

Chart pattern: Pipe bottom reversal pattern from 03/16/2020 to 03/23/2020

Breakout is upward 100% of the time.

Average rise: 45%.

Break-even failure rate: 5%.

Throwbacks occur 44% of the time.

Price hits measure rule target 83% of the time.

Industry: Cement and Aggregates

Industry RS rank: 46 out of 58

Stock RS rank: 334 out of 590

4/2/20 close: $107.30

1 Month avg volatility: $9.09. Volatility stop (for upward breakout): $86.14 or 19.7% below the close.

Change YTD: -25.48%

Volume: 2,667,100 shares.
3 month avg: 1,153,271 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: Pipe bottom reversal pattern from 03/16/2020 to 03/23/2020

Breakout is upward 100% of the time.

Average rise: 45%.

Break-even failure rate: 5%.

Throwbacks occur 44% of the time.

Price hits measure rule target 83% of the time.

Thursday 4/2/20. Intraday Market Direction: Nasdaq

Weekly, since inception on 6/14/2011:

     The prediction of the index closing higher has been right 187/334 or 56.0% of the time.

     The prediction of the index closing lower has been right 54/107 or 50.5% of the time.

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

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

Not much going on in this pic. The index pierced the red up-sloping trendline. Outlined in green is a falling wedge chart pattern. I was hoping to show a channel, but…

Falling wedges can breakout in any direction but it’s usually upward. However, as dire as things are now and predictions coming that covid-19 news will get worse, I expect a downward breakout.

That would agree with the above probabilities, too.

On the daily chart, I’m still expecting the index to drop to the value of the March low and I’m concerned it could go lower if the unemployment rate hits as high as 32%, which is what one
news source (PBS Newshour) cited. Ouch. That’s higher than the 1929 depression, according to them. Just wait until corporate earnings come out this month and in 3 months from now.

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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

Wednesday 4/1/20. 2020 Market Forecast April Update

Based on sector performance from Fidelity, the best performing sectors for March were…

0. Health care (-4%),

1. Consumer staples (-6%),

2. Information technology (-9%),

3. Utilities (-10%),

4. Communication services (-12%),

5. Consumer discretionary (-13%),

6. Materials (-14%),

7. Real estate (-15%),

8. Industrials (-19%),

9. Financials (-21%),

10. and dead last is energy (-35%).

I rounded off the percentages.

Here’s the updated 2020 forecast for April.

— Thomas Bulkowski