Today marks the end of a treacherous Bear T. As noted earlier, this gave conflicting evidence since the McOsci had a lower low while the Volume Oscillator didn’t. Based on the quick downward movement of the VO, we should only get a simple, quick reversal out of this area, which will not immediately create a T.

The Companion Chart shows that we will hit the lower Keltner Band this morning. Watch for the RSI and MFI to go below their support and then recover above those supports together.

The hourly Keltner needs to spend at least two full hours inside the Keltners to offer strength.

The Weekly Chart may hold the key to support, should the daily fail. Watch for technicals to either hold the 50 level or move higher.

I will try to keep the Charts in the menu up to date.

Stay safe.

Let’s not beat around the bush–Support is strength. It is an area that is supposed to hold back the force of gravity, or any other kind of attack. And right now that is where we find ourselves on the Companion Chart.

Both the teal and orange support lines were created by the March 2020 bottom in equities. The teal line was placed where support had held at least 4 times. I pointed out when we reached September of 2021 that this support line was hitting resistance. Resistance is a force that is as strong as support, and a battle began that brought us back to the lower Keltner bands. It created a price T that ended just before MFI and RSI peaked above their overbought readings. Those who read my posts and charts know that I feel that when these peak together, the move lower will begin after they move under their oversold peaks. As the chart says, “In a strong market, we may not get a lower than 50 reading” on these technical indicators.

I have added the orange support line this weekend, as we have created another line of support that has held at least 4 times. (In my opinion, you should not create a support line that doesn’t have at least 3 touches.) If support is meant to hold, we should know shortly. But MFI and RSI need to turn around here, and I am presently leery that will be the case. 4460 is the bottom of the Keltner band.

I have re-done the T chart for 2022, removing less important reference notes. As I pointed out last weekend, I intended to use any rally to remove my longs from the T that began in mid-June, which resulted in 10% unhedged gains, and more considering the hedges put on in September, the recognition of the short term T through October 29, and subsequent removal of longs at the beginning of November. That December low became the center of a new T which was due to expire January 12.

When T’s end, Time is up. Price is not acting well, nor are the technicals which I consider important. I have no idea when my investment funds will re-enter the market. As I pointed out in the last few posts, this long term T that is to end this week just barely escaped becoming a Bear T. If my impression is wrong, it may just become a Bear T. It’s too close for me to call, and I am conservatively out of investment longs.

The Bullish Percentage has given a sell longs signal.

The following “simple chart” was created by Carl Swenlin, and Intermediate Term Breadth has crossed negative, in spite of the Volume Momentum Oscillator maintaining an upward trajectory. I am expecting this to hit gravity soon.

I have moved away from Terry Laundry’s weekly SPX chart. In my opinion, the 76 week moving average for this has stopped being useful as the Optimum Moving Average. The OMA should be near the price that holds support and resistance and has multiple hits. As shown below, we haven’t done that for quite a while, and have been “living” way above the top of that envelope, which is now at 4594:

I have moved to a standard Keltner Band for this chart. The mid-Keltner on this chart is close to the top of Terry’s envelope–it is 4584 versus 4594.

The Confidence Index, which is based on the ratio of rates between corporate and Treasury bonds, is stubbornly high. When this chart is pointing lower, Treasury rates are decreasing while corporates are either static or rising. When it is pointing higher, corporate rates are decreasing while Treasuries are either static or rising. When they fall or rise together, the chart shows no change.

The following charts are offered as supplemental material.

NDX Companion Chart:

Here’s an unmarked IWM T-Theory Chart:

Stay Safe.

There are times when charts can simply be read, and times when reading them is obscured by doubt. There are also times when charts are read to confirm one’s biases, and I hope to avoid that for myself. A move in the SPX of 200 points is now about a 5% correction. In 2008, it would have constituted about a 15% correction. Let’s take a deeper look at price movement over the last month, which is approximately how long the shorter term equity T has been in effect:

Perspective is everything.

Here’s a review of what has occurred since the start of the Longer Term T, on June 21.

Having taken precautions prior to both September and November’s move lower (as noted on the Companion Chart), we’ve done better than the SPX, which is the hope of anyone managing either their own money or other people’s money. Recognizing the low in October and the subsequent Price T that followed substantially increased returns.

But this move lower recently has taken me by surprise. Why? Puzzling evidence, and my reading of it.

Here is the T-Theory chart without the T’s noted:

If you trade using Price, Volume, and Time, you look at the above chart and can see that while Price has definitely corrected, Volume is not confirming this move. The green arrows both are based on the MACD of Up/Down Volume, and they have created a complex top that is still above the trending green higher lows. Looking at a previous similar version of this move noted in orange, price corrected and continued to rise. And price is still above support, which is now 4650 as noted on the Companion Chart.

The difference between the green and orange situation is Time. We are approaching the end of a period of strength. Now let’s look at the marked T chart:

We have two T’s that will end over the next 2 weeks. In my opinion that is what makes for a different reaction to the green support on Volume–Time is up. In addition to the end of this T, we have an upcoming inflection point around January 21 based on the McOscillator. Do inflection points always trigger? No. But they are important to note. The last one was scheduled for November 24, where we closed at 4701. On November 26 we closed at 4594, over 100 points lower. Inflection points don’t guarantee large moves up or down, but portend a sizeable move. Or just a lucky guess.

What I would like to happen, and what may happen are two different things. We came very close to invalidating the long term T with the December 1 low. The McOscillator closed 1 point lower than the July bottom, but the Volume Oscillator I have used for 12 years showed a 20 point difference at that time, which kept me from considering a Bear T collapse at the end of January 22 T. Could I be wrong? Absolutely. But let’s remember what happens at the end of a Bear T–we get a rally from hell before a further collapse. I tend to leave T’s a little early. Should we get that rally of one kind or another I will most probably close longs, unless something new comes to my attention.

The rest of the charts show the following data:

My main concern is the Confidence Index. This was one of Terry Laundry’s most important concepts. It is the ratio of Treasury to Corporate Bonds. This chart is refusing to show that Corporate rates are too low in relation to Treasury rates. The stocks that require corporate debt have been taking a beating this week. Both the Russell 2000 and Nasdaq stocks have taken a larger hit than the SP500 (although the Russell 600 has performed best). Is that ratio topping now? In my December 26 update, I noted that I expected confidence to continue moving forward, and it has. But at this point I am looking for a reversal and a drop in this Index. About 12 years ago, Terry Laundry like many others was looking for a massive shift by investors from bonds to equities as conditions improved while rates were low. This would increase rates substantially due to lack of retail investment. While that hasn’t occurred, the markets have given us a taste of what that rotation will look like should it occur.

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Moving on to rates, those who follow my posts on elliotwavetrader.net know that I keep a watchful eye on the German Ten Year rate. There are very close ties to the US Ten Year. This appears to have broken out.

Both MACD and RSI seem to be peaking here, so it may show some temporary weakness before continuing higher. Where can it go? Let’s look at a longer term version of this chart.

Those green dashed lines are the area I used to watch for strong trend changes. Can it get back up to .40%? Absolutely, in my opinion. What does that have to do with US rates? Back at the end of April 2019, when German rates merely as high as they are now, the US Ten year rate was over 2.5%. Do I expect that now? Not in synchronization. But there are higher US rates coming. A live version of this comparative chart can be found here. A static chart is shown:

While we are headlining the fact that rates are rising as the market has moved lower, the charts themselves are talking without the headlines. I believe that is where our attention should be drawn.