When I was forced to retake control of my investment funds after the death of Terry Laundry, I never imagined that I would still be doing it 10 years later. I thought I’d do it for a year or two until I found someone like Terry who I trusted. That never happened. As other circumstances gave me the time to manage my funds full time, I followed the charts that Paula Burke has maintained since he passed, and added my own toolbox to it. Some of his charts such as the Ring Cycle have become outdated, but on balance you can get the overview of different asset classes there.

The basic idea is to identify those periods of market strength which follow a period of weakness, or, as Terry put it, “rest”. It’s well known that markets go up more than 50% of the time, so looking for equivalence in time only works if you are able to identify those lows. As Terry put it (using his time in the Marines for analogy):

“It takes a special state of mind to “sign up” for a short boat trip, in a flimsy
landing craft, to a beach completely controlled by hordes who have anticipated your arrival and have set up every imaginable way to do you in. Buying into major market opportunities presents a similarly discouraging picture. You may have good reason to anticipate profits, but if a great opportunity does indeed exist, nearly everyone will be against you, including your friends, and the predominant opinion expressed by your peers, including people you respect, will be that you are embarking on a foolhardy enterprise.

I believe that T Theory’s major contribution will be to show you why it will always be difficult to buy at major lows, but using its reasoning you may be able to overcome these obstacles. At each and every great buying point you must struggle at the “moment of truth” where you face seemingly overwhelming negative odds. In T Theory this moment of truth is called “The center post of the T”. It represents the point in time where all the bearish negatives of the past have been discounted by the market and is about to be transformed into an emerging, new bull market.”

Another very important comment made by Terry:

“..[B]ut in real time investors often fail to grasp the fact that restraint of the market’s natural rising trend for a long period of time creates tremendous opportunities. In the real world the natural build up is for pessimism, not awareness of cash, and over time it dominates the thinking in a negative way.
A second factor that limits profitability for many is the suddenness of the stampede that develops as the new T gets under way. Often the sharpness of the initial advance, as all that cash buildup tries to get into the market, is viewed as a reason to get out of an “over bought” situation. The Ts I have presented … make it quite clear that once a new bull market has started it is much wiser to be patiently bullish for the equal time projected by the T in order to capture the major profit opportunity. Keeping the full right time span of these Ts in mind is also important because it helps protect against the sudden appearance of the new bear market which the chart shows is likely to begin as the Law of Matched Trend Time expires at the final top.“

In other words, do not leave the T until it ends. You may not get another entry.

There are many other concepts within the twelve page paper Terry wrote in 1997. As it is copyright protected, we have had to remove access to it.

And now, we have a T. Let’s look at the unmarked chart:

The basic rule of creating a T using the Volume Oscillator is having the VO surpass the last high, which in this case was 62. While the high shown in the above chart will be changed after Monday’s open, the McOscillator has confirmed the T. The minimum VO T should last through April 5, Looking at my marked T Chart, you can see that I have additionally drawn in a Price T that should last through April 22. We might see some softening when the VO T ends, but one will have to see how the chart builds from now until that time.

There is also a note on that chart regarding a point of recognition around the same date. In the past, these points have created moves of about 3%. While I have removed the downtrend line that helped create that date, it’s very possible that the end of April will show some volatility.

I created the Companion Chart in order to see the Keltner price values for the band and its midpoint. It shows my notes over the past year and a half. Since the beginning of January, I’ve been noting that we were no longer in a strong market, as RSI was unable to maintain above 50. We’ve broken through that now. We’ve also passed the mid-Keltner line, which presently stands at 4422. These are confirmations of strength.

A closeup review of the Companion Chart reveals we have spent 3 days above the downtrend red line:

Over time, I developed (or borrowed) other tools to guide my investment technique. One of them has to do with Bullish Percentage. We are clearly in a bull stage.

While I normally show the ‘simple chart’, here is its big brother, created by Decision Point. We are still waiting for Intermediate Breadth and Volume to point upwards, but it’s on the right path.

That “right path” is shown on the simpler “simple chart’:

I’m going to close with the Hourly SPX chart. It is showing symptoms of being overbought. I’ve pointed out in the past that when Price moves above the upper Keltner Band, it should move back to the midline when it re-enter the bands. But that is after it re-enters from above the upper band, and RSI and MFI must re-enter their normal areas after being overbought. We aren’t there yet. Keep Terry’s second factor noted above in your mind–you don’t want to outsmart yourself after waiting for the setup by taking profits too soon, but you do want to be aware of where support is.

I know I said I wouldn’t be writing for a while, but the present situation shows the value of T Theory so well that I broke my word. I hope some of you read Terry’s 12 page paper. My blog remains closed.