Perhaps I am just too old, perhaps I’m a victim of being too conservative now. Recognizing a pattern is important, but acting on it is not always easy. I’ve trusted my sense of smell enough times, and that hasn’t gone away. But I smelled something that hasn’t developed. It appears that the T that began in mid-March will have a positive outcome in the first week of June. I have not been a party to much of that positive period, even after recognizing it. It’s a missed opportunity that hasn’t affected my net worth, and sometimes that’s enough.

As this is a holiday weekend, I’ll keep my thoughts short. This good T is progressing as it should, and the period of strength should last until the first week of June. There is also now an apparent good T that is to be built sometime in the future, with a low coming perhaps around the beginning of August. This is due to the manner in which the Volume Oscillator is continuing to descend–lower lows, lower highs. Below you can see a comparison from the chart of last week with the chart as it is progressing.

It means that June 3 should be a cycle inversion–a high rather than a low–ending the consistency of this run of a year of lows appearing on the 3rd of June, August, October, December, February, and (almost) April. Terry used ringing cycles of 75 days in his public charts, which can be found here. Over time, the length of cycles can change, and usually do. Once we have an inversion, as we will most probably have this month, it means we must look at August more critically.

By the way, the first chart on that link to Terry Laundry’s still public charts shows an unmarked Volume Oscillator. That alone is worth the price of admission–free.

What is not free is freedom. It comes with a price, sometimes a heavy one. To all who served, and those who are serving now–Thank you.

As you can see by the dedication, the process behind this site is based on T-Theory. To quote directly from Terry Laundry (from his 1997 Introduction to T-Theory)–

“T Theory is a method of analyzing general investment trends using a time symmetry property I discovered in the early 1970’s. At that time the time symmetry was christened “The Law of Matched Trend Time” because it basically states the duration over which investors can obtain “superior equity returns” will always be equal to the previous time period in which returns were subnormal. A simpler way to put it is to say the market can only “make a strong run ” as long as it has previously ”rested”. As you might expect, the practical purpose of the theory is to anticipate the runs of “superior returns”…

Mr. Laundry was a graduate of MIT, and a Marine. ‘Nuff said. My professional career included a long stint in industrial quality control. My main thesis was built on the Zen premise–“How do you carve an elephant out of a piece of clay?–You remove everything that doesn’t look like an elephant.”

Terry was adept at creating different types of T’s. Initially, T’s were based on Price and the Advance/Decline lines. In the early 2000’s, he created Volume Oscillator T’s. And that is the main tool that I use in my analysis. A simple explanation of the VO is that it is a function of the MACD of the $NYUD–NYSE Advance/Decline Volume. I’m sorry, but you will probably have to read that sentence more than once. As the market advances, cash is being expended. That is why the Left Side of a T begins where the VO begins to create lower highs, as it moves from above the zero line to below the zero line. The amount of time it takes for the VO to move from the recent high to where it reaches a VO low below the zero line gives you the number of days to expect market strength. That low point on the VO creates the Center Line of the T. The right side of the T shows cash moving into the market. But while the future days of strength will be generated from the VO high to low, the confirmation of a new T only occurs when the VO crosses back above the zero line. If it just grazes the zero line and begins to move back down, you can expect a Bear T, with a large crash in price at its completion. At the end of the day, there is some art involved in how one creates a T. As in many analytic methods, the painter’s eye can see or miss many clues. Some people are willing to use T’s on shorter term bases to create trading T’s, others like myself–conservative investors–require certain rules to be met. I like to have at least 100 points from the peak of a VO T to the bottom of that VO. There are times I am not in equities for 8 months or longer. Most recently that occurred at the beginning of 2018. As a money manager, Terry looked to move money to the asset class that he expected to do best at any point in time. That’s a subject for another time.

So where are we now. I am seeing an interesting development in the main T Theory Chart.

I had been expecting a resolution of the above chart in early June. But New Information, or new ways of looking at the growing detail has led me to add a new line, which will complete in early August:

The dashed green line is a support line that goes farther back in time:

At this point, I think we have seen a Price Low in March, but I am looking for Price to revisit the lower Keltner band. Terry used to call this a Frog jump–from a low or high keltner to the center of the band. We’ve thrown a tremendous amount of money to avoid going back down to the lower band. Price is a function of perceived value. And it now has the benefit of 8 Trillion dollars. I should add, worth-less dollars. This is 8 times what Congress added in 2008, and 4 times what the Fed began to add in 2009. If this doesn’t bring inflation, we’re all screwed. Who knows what will be tried next.

As stated in earlier posts, we seem to be getting a great buying opportunity every two months. This has been a cycle that has developed since June 3, 2019. While the April 3 low was not lower than the March low in price, it presented a great buying opportunity. Avi Gilburt, in his April 6 post on his elliotwavetrader.net website, noted that if we pass 2725, we should reach at least 2900 based on his famous Fibonacci Pinball. Mission accomplished. I personally left the party on April 22.Which is about where we are now.

Will the 2-month cycle continue in June? We have evidence in other places that the market is not ‘safe’ right now. But it’s about time for a cycle inversion (a convenient cyclists convention meaning “I’m wrong”). Or the weakness in today’s market can continue until the first week of June. Keep visiting the charts in Analysis Quarantine to follow the clues for yourself. In any event, August is looking to me as to be developing into something special. Will it be as ‘special’ as my analysis after Halloween that we should expect an ‘event’ in February, or my call in February that the Bear T would end March 19? Time will tell.

In the meantime, stay safe out there.

We’ve been warned that it is not a good idea to end quarantine. I agree. I am in a self-imposed analysis quarantine. But my charts still continue their etchings.

BPSPX

Simple Chart

Confidence Index (this has turned down at its 2016 low–prior support)

The T-Theory Chart is showing what looks like a positive T until June 3, but can easily morph into a Bear T. The Volatility Event keeps me from commenting. Successive closes below 2850 would be bad for investors. (My bias is Bear, but I don’t expect new lows in price–I really tried not to say that.)

I don’t remember Terry Laundry shorting the market. I do remember him moving from Treasuries to Corporate bonds. At this point, I’m sticking to cash, waiting for FOMO or fear. But I don’t think we see either one for a while.

I had been comparing where we were in price to around November 2008. But the steady rise over the last five years in the Advance/Decline line is like nothing in history. So I’m going to stop comparing it. 

The Weekly T-Theory Keltner band has been stopped right at the mid-Keltner. That’s not good news. Read it with the Red Volatility reading:

A longer term look at that chart shows how these high Volatility Events take a while to bottom:

So, looking at those last 2 charts, I see that I am still comparing 2008 with now. I have to stop that. Back with more when I can control myself. Stay Safe.

That’s what we all want to do. This blog, like this country and myself, has been closed down for the last month. In my post of March 28, I suggested while I still didn’t trust this market, that Of course, I could be wrong. And that appears to have been the case. At least I left myself an out–“So of course, it goes back to the original question. Am I wrong? The good news is price. It stopped where it was supposed to stop. If we spend 2 days inside the Keltner bands, I will have to reassess. Or just be wrong.”

We had our April 3 low, as “predicted” by the 2-month low that has occurred every 2 months since June 3 of last year. We opened up the next Monday with a bang, and if you have followed this blog and traded from its signals and cycles (combining the $BPSPX and 2 month cycle), you would have gotten invested in early April.

Personally, I am still expecting this Volatility Event to continue to play out. As a conservative investor, if one had followed my second most important chart–the Bullish Percentage on $SPX, you would have gotten long around April 6, and out of longs April 23. While by Wednesday, you would have missed roughly 150 SPX points, you wouldn’t feel quite so bad today. But this isn’t a ‘what if’ scenario. And I’m not running “Other People’s Money.” Whatever I did or didn’t do over the last month is between me and my keyboard. As for where the future is leading, I’ll be back soon. I think there are enough legitimate tools linked in the last 2 major posts (The better to eat you with and Of course..) to give you an idea that I am still cautious about this market. And those links are still active.

Any lay person offering advice for the future is probably missing the enormity of the Volatility Event, the projected moves taken to lessen its effects, and the height of the tightrope we are walking to avoid a Humpty Dumpty type fall.

Any lay person reading this for trading advice should be warned. Do not accept advice from others. Know your biases. Know your plan.