I don’t create the T-Theory Chart–that is done by Price and Volume momentum. That doesn’t mean the market can’t go forward, but what it does mean is that one shouldn’t consider that returns will outstrip the returns on a Treasury Bond.

The Unmarked T Theory chart has not created a short term T. Instead, it is stubbornly stubbornly stuck in neutral. By now, I’m sure that your bored with my repetition of the fact that this is a neutral market (but one with an upwards bias). I can’t create what isn’t there.

As I’ve pointed out before, there is the possibility that I am missing a larger T that extends until the end of July. To obtain that T, I would be forced to assume that the high in the VO from last October had a low in Mid-March. My personal view of this is that the low in March did create a T, but one that has its left side beginning in early February, and ending May 1.

Another alternative view of the T as I measured it is perhaps I measured it too short, and that it had its left side beginning on January 12 instead of January 29, and therefore extended an additional 17 days through May 22. Closing Price did peak on that date, so I can’t rule out that my “personal view” was wrong. In any event, it’s in the past. Now my only potential forward view is that a T does exist through the end of July/August 4.

But keeping in mind that the right side of a T represents the expenditure of Cash that was built up from the cash buildup of the left side of a T, the Volume Oscillator and the McOsci don’t suggest that longer T. Cash is not being expended. It’s hovering just below the zero line, which means the expenditure of cash is not complete. And therefore, I can only assume another low before that happens.

What can’t be disregarded is that the Companion chart is showing more signs of a bullish regime than negative one.

I pointed out early in 2022 that we had moved from a period of bullish RSI (consistently above 50) to one where RSI was consistently below 50. That’s not the case anymore. Instead, we have been above 50 RSI, and above the middle Keltner band, for the last 2 months. That’s impressive.

In fact, looking at the weekly Keltner bands using Terry Laundry’s 76 week EMA, we have been above 50 RSI since October.

Whether we are in a T or not, we can’t discount the fact that we are in a positive period of strength, and not overextended in the weekly or daily charts. MACD has been making lower highs, perhaps foreshadowing a move below the zero line. But since this is a weekly chart, it’s not where we would first look for a peak in MACD. In fact, the daily MACD went below the zero line early last week, and recovered to the zero line at week’s end.

We may be overextended on the hourly chart, but that is for short term trading. At this point we may be at an extreme on MFI, but RSI has leveled off below hitting that overbought situation, and Price can travel another 55 points before moving above the top of the hourly Keltner Band. In the past, I’ve pointed out that in such a market it’s wise to wait for those peaks to top and reverse themselves before assuming a tradeable change in direction.

I’m going to leave it to the reader to review my personal charts on the website, but I will note here that neither BPSPX nor the Simple chart are offering buy signals. There is about to be a negative cross on the daily A/D moving averages, unless they recover early this coming week.

Going back to the opening statement in this post, it was Terry Laundry’s opinion that equity returns will not show superior strength when there is no T. Since the equity market usually flows higher more often than the reverse, it can move higher without the expectation of superior returns. But the yields offered by bonds should equal those returns in a non-T situation.

Turning our eyes towards the area that has led recently, the NDX Volume Oscillator has been available on my site for a while. While Price has exceeded the upper Keltner band, the VO is showing the opposite situation relative to the NYSE VO–instead of residing just below the neutral zero line, unable to pass above it, the zero line is acting as support for the Up/Down Volume Oscillator.

The trend has not broken down at this time.

While I do keep a chart showing the ratio between IWM and SPY on the website, I think a look at the QQQ/SPY ratio is in order. In January, this chart reached support, and it is now at 83%. That is about 4% from its long term peak. I would expect that area to be resistance. Personally, I have used these ratios in the past to trade being long and short indices at the same time. That’s why the IWM/SPY chart is shown on my chart list.

The following chart uses Parker Binion’s method of reviewing relative strength–both in terms of relative strength to itself, and then to SPY:

It really does appear to be at an extreme, but trends last until they change. That hasn’t happened yet.

Moving to bonds, I did purchase some TLT this week. I’ve been suggesting since January that I expect TLT to remain range bound, and right now I believe it is in the lower end of that range. For me, this is a trade unless I see a path beyond 109 in the near future, which I don’t expect.

A look at the way TLT responded to the Debt Crisis of 2011 would explain why I’ve taken this stance. I’m willing to risk 3% here.

GDX is looking very close to a bottom in my eyes as well, as it is reaching the support area defined by the lower Keltner band on an equity trade or investment (as opposed to GLD, which is an asset investment). GLD is about a month away from a cycle low, as shown on the website chart, but I find these lows can come a bit early.

Have a great holiday. For those who served, thank you for your service. For those who gave the ultimate sacrifice for their country, may their memory be a blessing to their family.

There are times when markets show strength, weakness, or calm. We read the technical indicators on a chart to verify Price. Before I answer the headline question, please keep in mind that this site is dedicated to T-Theory, but also acts as my journal.

There can be lengthy periods as the market moves slowly where there is no T while Price moves higher, and over the 11 years I have been using T Theory for my investments, I have found that I must accept FOMO until a T develops. You can try to force the issue, you can bend rules, become a passive investor, etc. In the end, the T that finally is created usually makes up in delayed strength for whatever gains the market makes between those T’s.

When there is no T, there are no periods of suggested superior returns shown on the T Theory main chart. As Terry Laundry put it, “the practical purpose of the theory is to anticipate the runs of “superior returns”.”

If one is bothered by the lack of an investment T, you can look at the hourly T chart for shorter periods of strength. That is what I did as I traded the weak hourly T that ended May 8 (while it is no longer showing on the live chart, the chart on the left is taken from my May 7 post).

In the above chart, I posted at the close on April 26 here (and on elliottwavetrader.net) that we had reached the point where we could expect a rally, as we had arrived at the lower hourly Keltner band support of 4060. This also corresponded to the daily middle Keltner support of 4046-we held 4049 that day as the low.

As we approached the upper Keltner band I posted here (on April 30) that I would be closing my position fairly soon. On May 1 (marked on the above chart as it occurred) I closed that trade for about 110 SPX points. The April 30 post also contained information that the T would fail below 4120, which it did on May 2. I followed that by posting on May 4 that the Bear T was due to have a rally from hell, and we were once again at 4060 support. That was followed by a 100 point move higher before receding to the middle Keltner. But where have we been over the last 7 weeks?

This market had shown intraday turbulence, but little weekly movement.

Where Are We Now

I believe there is no investment T. If I am wrong, we have created a T through July, one that I discussed in my posts of April 26 and April 30.

Right now, the unmarked T Theory main chart shows a consolidation of the Volume Oscillator and McOsci below the zero line, trying to somehow float back above the zero line with no success.

Additionally, what we see on the Simple Versus Complex Structure–as noted on the right-sided chart–is a sign of strength that began on April 12–the same day I noted the potential building of a new Cash Buildup side of a T. Since then, we have seen the neutrality of moving around the zero line. There is no T, just an upwards bias based on a Complex Structure that is fading into the past. We are in one of those periods where the calm masks some technical problems with Price.

Calm seas don’t last forever. If you’re a sailor, you need a steady wind to find your way, whether you’re sailing with or against the wind.  We’ve been lacking that over the last few months in the equity market, and lacking that we have had to tack to the wind.  While Price on the weekly basis has moved higher, it has not created directional support. 

This can be seen by the horizontal shape of the weekly 76 EMA. Price made its way up to and then through it in March, but it has been meandering within a 3% range since the beginning of April, as it closed March at 4109. That 76 EMA has become strong support. It’s 4044 now, which is very close to where support was for the T that ended May 1. We can see that both RSI and MFI have been running fairly flat, with lower highs in MACD since last December. 

The marked T Theory chart shows a potential T forming as the Cash Buildup line in red. Without a deep thrust lower, it will form a weak T in my estimation. Price has been moving up while this cash has been expended, which is a bullish sign. But the VO and McOsci keep getting stopped at the zero line.

The Bullish Percentage SPX chart gave a sell signal on April 21, and has not offered a subsequent buy signal. Instead of resetting below the Keltner bands, it found support just below the middle Keltner, and has crossed back above it. This support was around the 50% mark. Those who look at BPSPX (which is created by the difference in Point and Figure Buys vs. Sells on all SPX components) in its more conventional use will follow this rule from StockCharts and look for higher prices:

 There is no ambiguity on P&F charts because a stock is either on a P&F Buy Signal or P&F Sell Signal. The Bullish Percent Index fluctuates between 0% and 100%. In its most basic form, the Bullish Percent Index favors the bulls when above 50% and the bears when below 50%. StockCharts

For me, I want to see it either break down below the lower Keltner, or up above the top of the band. Conservatively speaking, a move lower would create more potential for a T to be formed. A move above the top of the band would only create a trading situation until it broke back below the upper band.

The Simple Chart (from DecisionPoint) shows PMO stopped moving higher at the trend line. Breadth Momentum measures right at the zero line, and Volume Momentum looks about ready to turn positive, but still below the zero line. It should be noted that while the Fast measurement on PMO and Volume Momentum have moved above the slow measurement (which is a sign of changing direction), Breadth and Volume measurements are still below the zero line. These will not confirm positive direction until they move positively above the zero line. This chart is meant to look for extreme highs and lows which then create turning points.

As DP points out: The Price Momentum Oscillator (PMO), the Volume Trend Oscillator, the Intermediate-Term Breadth Momentum oscillator (ITBM), and the Intermediate-Term Volume Momentum oscillator (ITVM) can help identify significant overbought/oversold conditions that often precede important trend changes over the course of several weeks/months. Watch for extreme readings in these oscillators that provide “early warnings” for market turns. Also watch for intermediate-term buy/sell signals that are given when these oscillators cross their 10-day EMAs.

The A/D line is declining, and is presently standing right on the 20EMA line. This is in contrast to Price, which has been advancing. That too is a not suggestive of further advancement.

The following chart shows how Price reacts after a VO peak. In a bull market, Price can continue to rise as the VO recedes–the initial buying (cash depletion) may have occurred, but there is new money following it. In a bear market, Price follows the VO down. Deep lows in the lower portion of the chart have usually been short term areas of support, and using this chart with the hourly SPX chart can help in trading decisions. The reaction to the last peak was bullish, and should be interpreted as not suggesting the initiation of a short trade.

As I mentioned above, Terry wrote, “the practical purpose of the theory is to anticipate the runs of “superior returns”.” But in fact, Terry took this statement one step further:

Many contend that the market goes up “most of the time”. The reconciliation of this conflict centers around the broad toppy phases of market trends where a positive rate of return may well develop during a sideways trading pattern but the rate of return in such shallow advances is no better than the yield on risk-less Treasury Bills. For this reason the Law of Matched Trend Time is more accurately stated as: “Superior rates of return (i.e. better than T-Bill rates) can last only as long as the prior period of inferior returns”.

Which brings us to Treasuries. While there is no T at present in the charts as I see them, with rates where they are they become an attractive alternative to equities as they should be considered risk free. A 3 month bill would have netted you about 1.2% since mid-February. The SPX closed at 4136 mid-February, proving Terry’s point regarding a weak market.

The following shows what rates were at the beginning of the year and what they are now. We’re 1.5% higher in 1-month bills, 0.6% higher in 6-month bills, lower in the 2-10 year period and a slightly higher 30-year rate:

There was no post last week, and should I feel I have little to say there may be no post next week. As for this post, I apologize for its length, considering it leaves you with no confirmed equity direction. We are basically in a blue period, as MACD tops are lowering while Price is rising. Once more, that is not conducive to a further advance:

During the week, I do update many of the charts, and I suggest you look there if you are interested in seeing my latest thoughts.