Short Note

Investment accounts are up over 200 SPX points since October 2. There is probably another 1% to go before a meaningful correction. That being said, I have removed those longs today. The risk reward is not favorable for me at this time. I do believe we will continue to rally, but a decent pullback is in order. If I were an Elliotician, I might be looking for a 1/3 pullback on this move. I would be satisfied with that.
This is not what I would call a T-Theory decision. But in the last year my use of the T-Theory chart has led to outsized gains. I’ve marked those periods of investment in the green boxes.

12 months of T’s

On the above chart you can see the end of the Volatility Event in February (that I started writing about a year ago), seeing its formation around Halloween of last year. It led me to safety in February. The other major theme of this year was the ‘coincidence’ of having a low every 60 days from June 2019 through June of this year. This June we had an expected inversion, because we were just too close to the upper Keltner band. And while the August 3 period wasn’t a major low, it was a low of sorts. As was October 2, after a true low 10 days earlier.

While the charts at the top of the menu page will remain active, I don’t expect to be posting much in the next few weeks. For those who want to continue to remain safe, I highly recommend a site run by Avi Gilburt, based on Elliott waves. Not only is the advice consistently clear, but I find he and his analysts truly care about the financial health of subscribers. It’s a wealth of knowledge, and I do post there as well. In fact, every post prior to 2020 (when I began this site) was posted on Avi’s site.

You can get a 2 week trial at elliottwavetrader.net

In the meantime, stay safe.

Possibilities

The BPSPX chart has gone into a swing long mode. The T chart I post is whispering. New T.

There is the possibility that we have a T with an ending date of Jan 6. The left side of this T is June 9, the center post is September 23, and the end date is January 6. 3-1/2 months of lower highs on the Volume Oscillator through Sept 23’s low. Add 106 days. (You may want to note that the dashed red line has been in many previous posts.)

As last week called for a Price T until October 16, we are on the “right” side of this T. Those who follow T theory as described by Terry Laundry will get the joke.

Bullish percentage SPX


Unbelievable

In spite of all the negativity thrown at the market yesterday, the McClellan Oscillator managed to move higher, as did the McClellan Summation Index. There is a price T through Oct 16.

There is no traditional T yet, as I expect the traditional Volume Oscillator to be revised lower as its update is usually delayed until the middle of the following trading day. Both the McOsi and VO are derivatives of Advancing and Declining Volumes. 

The traditional Presidential Election October chart is from the McClellan website. The results call for a low Oct 15 rather than a high. IF the market moves forcefully down Monday to create a lower low on the VO (which I doubt at this time), the T will turn bearish, calling for a low, a sharp rally, and a collapse on Oct 15. While this narrative may sound most likely theoretically, my charts are not showing that this is the preferred count at this time.

Presidential Election October

Update on GLD

Back on August 12, I suggested that GLD had hit upper resistance and needed to move back inside its normal envelope, with the potential to return to the 160’s. Terry Laundy referred to this as being similar to a frog jumping from the upper band to the middle or lower band. On August 19, I reiterated that with the suggestion one might buy cheap OTM puts, as the 160’s were support. GLD has clearly broken below the hourly version of this chart and may have trouble bouncing above 178 before continuing to that support, which is now at 166. The next cycle low is early December.

Hourly GLD

Looking in to the T chart, we still do not have a new T formation although the standard T Volume Oscillator did finally hit the dashed red line. I am thinking that the next T may form in about 10 days. But as there is no steady decline in the VO (rather a weak decline from 40.81 to 35, to 15), I am not sure how strong a T this new one will be, or the length of that period of strength. The easiest T to define has declining tops and lower bottoms, showing cash being depleted into the low center post of a T. That isn’t very clear now.

A Whole Lot of Nothing

I’m sure my anxiousness to be invested is coloring my perception. Would you believe that this is a chart of the last month’s asset class performance?

Minimal Movement

IWM is falling further behind in its ratio correlation to SPY:

But it has finally broken through resistance. I can no longer suggest shorting it vs. SPY:

Stay safe.

There was no Bear T

Unfortunately, by the comments I received (which do not get published, but do get read), it seems some readers thought I was saying we were in a Bear T. These are rare, and can only occur if we are in a T. By any reading of the charts, we are no longer in a T. I am looking for the formation of a new T. I am hoping that the Volume Oscillator makes its way to the dashed red line.

We are resting near the middle of the Keltner bands. We are at a support level, around 3310 if you look at the link to the companion chart in the menu. The last 2 Ts ended mid-June and early September, and were caught by T-Theory. The June T slide ended at the middle of the Keltner bands. Could that happen here?This week should tell us if the worst is behind us.

Stay safe.

Two Things at once

The VO is heading south much faster than I thought. It’s important to remember that the VO represents the MACD of Up Down Volume. The data received from Stockcharts is not correctly updated until the following day. It has been lagging ever since the WSJ stopped posting those numbers on its market page. I have turned to the McOsi Oscillator for the current data, while still posting the standard VO in blue above it.

The standard VO was expecting the end of strength to occur this coming Friday, while the McOsi period of strength ended last Friday. This leads to a major concern for where we go from here. Should the standard VO beak below the June 26 low before Friday, we will have a rally followed by a collapse. That would be what Terry called a Bear T. But according to the McOsi chart, we are just building to a standard, new T. The time period for this is not clear. As I said Saturday, I would like to see the McOsi move to the red dashed line.

The standard VO will be corrected tomorrow.

In any event, if you’ve followed this blog you’ve remained safe. Now is the time to start looking for an entry.

Looking for Light

The basic T-Theory Chart (as I present it) does not paint a truly bearish picture. What it does show is that a T ended, and the timing for a new T has not shown up on the chart. For a new T to develop, I would have to see much lower in the Volume Oscillator than I see at present. One of my personal rules (not from my mentor Terry Laundry) is I would like to see at least -115 on the VO, or 100 points from the top of the last peak in the Volume Oscillator to the center point of the new T. At that point, the VO can begin to move up, but a T is not verified until the Volume Oscillator moves above the Zero Line. We are not there. In fact, the move yesterday, even with a 140 point move from top to bottom, barely makes a squiggle lower. Declining stocks were only 500 more than advancing stocks yesterday.

I would love to see us hit the dashed red lines on the VO and McOsi to know that we are near the creation of a new T. That’s a long way away. While some of the charts I follow in the menu have definitely turned bearish, the T chart is showing neutrality.

Bullish Percentage BPSPX

I missed it. There was a signal to go long in the Bullish Percentage Chart in the menu that would have kept me from missing the opportunity to capture 250 SPX points–from 3250 to 3500. As I did not recognize the T that developed at the same time (which I discovered late and wrote about in the August 23 post), I suffer from Missed Opportunity, not FOMO. But now is the time to look ahead rather than behind. This is now definitely in Sell Territory.

The move on the Companion chart September 3 gave the warning that I wrote about on August 23. That warning occurs when the RSI and MFI both peak above their respective topping zones, and fall back underneath it.

The “Simple Chart” gave a kiss instead of a cross this week. While PMO has definitely crossed negatively, Intermediate Breadth and Volume Momentum are both still above zero, and are deciding between kissing or crossing there. While a strong move up would come if they were both around their respective green lines (in negative territory), that is not the case now. This doesn’t create confidence in making any decisions based on ‘simple’ information, but put it together with the neutrality of the T-Theory chart and the building negativity of my other indicators, I prefer to remain on the cautious side of ‘swing trading’ as a long only investor. And that is what T-Theory is about for me.

+++++++++++++++++++++++++++++

Moving on to yesterday’s post regarding GBTC, I’ve built enough confidence in that daily chart (as it does not show candles, just closing prices) that I bought some yesterday at 11.54, watched it move down to 10.80, and held my breath as it moved back up, closing about 5% higher than my initial buy. I did buy more lower, but profits were taken on that ‘trade’. I may not comment on GBTC again, as a 10% daily move is not something I feel comfortable commenting on. But the link to the live chart is in the post below.

++++++++++++++++++++++++++++++

Following up on TLT, on August 23 I suggested that I thought it would hold support of its rising trend lines. It quickly moved lower, away from that triangle. It did give an opportunity to recoup, but retreated from the lower line of that triangle decisively. 157 is looking attractive.

+++++++++++++++++++++++++++

In the August 19 post, I suggested that both GLD and NDX were showing signs of being overbought, and that perhaps it would not be unwise to buy some insurance on GLD. While we’ve moved down about 12 points on GLD since I pointed out resistance in my August 12 post, we can stay above 164 and still maintain a bullish outcome. Volatility has risen since then, anyone who hedged at that time is probably looking at profits on that hedge. While I think it’s still a viable position to maintain, perhaps we are reaching for a new normal in a times when the Fed has added so many $$$ to the system. With 8 Trillion of newly minted dollars, the dollar is worth less, and stocks and gold are worth…more? Time will tell.

+++++++++++++++++++++++++++++++++++

IWM to SPY ratio

Finally, following up on IWM from August 23, it has continued to stay weak relative to SPY. While I try not to talk about fundamentals, what is the difference between IWM and SPY? If SPY is dominated by Apple and other giants, where can IWM obtain a similar push with a basket of 2000 stocks? The Top 10 holdings of IWM constitute only 2.8% of its components, while the Top 10 holdings of SPY constitute 27%.

IWM sectors and holdings
SPY top holdings

Stay safe.