Let’s begin with a review of rates since the beginning of 2023:

While long term rates have basically stayed unchanged since the beginning of this year, short term rates have steadily increased, and the 1-3 year rates have succumbed to pressure from those shorter term rates to move higher. Will long term rates creep higher to create more demand?

The monthly TYX chart (shown inversely with its futures–USB) changes direction slowly, but when it does turn it creates trends that last for years. The MACD shown on the chart is for USB futures. This chart captures this change when there is a crossing of short to long term MACD structures. Buys are marked in green, and sells in blue.

Right now, this chart is showing the possibility of changing direction to create lower long term rates, but that is based on the minimal change in the 30 year rate since January of this year.

The long pause on this boat to nowhere can be seen better on a daily chart of TLT:

After hitting an RSI low in October of 2022, TLT has stabilized right around its projected daily Optimum Moving Average. This lengthy pause creates the equilibrium we see in that monthly chart, rather than sentiment (except on hourly or shorter term charts).

So we are forced to look elsewhere for catalysts. One such catalyst may be found in looking at the yield chart for the 5 year Treasury. This is not a bearish chart, and it suggests that those middle term rates have not yet reached their peak.

The 2 year Treasury is showing similar tendencies:

So let’s return to the original question–Where are rates going? Are long term rates ready to turn lower? Not in my opinion. Right now, we need to see some breakdown in rates for those middle and shorter term periods. Can a shock cause long term rates to immediately turn lower? Absolutely, but it will have to bring the rest of the rate family with it.

There was no post last week, and the equity market as represented by SPX advance about 30 points to 4536. This close was almost equidistant between the low of 4504 and high of 4578 over the last week.

This weekend I am looking at my failure to acknowledge what the charts have been telling me. My process was correct, but my failure to move forward with action is evident. Back in April, I postulated that the next step in my T-Theory development should be to concentrate on finding Advance-Decline T’s, as they had the potential to create longer periods of strength than the VO T’s. I posted that we need to see a breakout above 7600 to convince me of this longer T. By June, I should have acted on this concept. And it’s of no benefit to act on it now, as this is scheduled to end this weekend. That doesn’t mean impending weakness–T’s are periods of greater strength, and not the only period of higher prices.

The MACD Trend chart on my Additional Charts page showed the same breakout in June, and again, I must concede to having missed the call.

While I can live with my mistakes, I apologize to any who follow my plan. It obviously makes more sense to follow my charts. I pointed out in my last post that the failures I watched during the first 10 months of 2022 may have poisoned my perspective.

Looking at the market in the most positive of light right now leads us to accept the T that would extend through August 8. I added a note on Thursday that this still has the potential to turn into a Bear T, based on the low in the VO that occurred at the end of June. However, to confirm that we must break down immediately. Neither the VO or the McOsci has broken their uptrending lines begun at the end of June.

Even with the move lower at the end of the week, neither the BPSPX or the Simple chart show signs of weakness.

On the other hand, we have the NDX closing down about 140 points for the week, just slightly off its low for the week, and about 500 points lower than its high for the week. This brings it to just above the Keltner channels, without having broken below. Continued weakness on Monday would bring it below the upper band. Technicals haven’t broken below their very overbought levels at this time either.

While the above NDX chart looks particularly toppy, as of now it has not begun to show any falling technicals on the weekly basis. But a look at the daily chart shows a potential change of direction:

The hourly GLD T continues to perform well, staying above the middle of the Keltner bands.

The daily GLD chart is showing the potential of that long term T through December 2024, but it is still too early to confirm.

I initiated my position in this T at 176, and used GDX puts (which I closed on Thursday) to hedge what I assumed was an overbought situation. 176 is still critical to hold.

See you next week.

This was the last GLD T through May 11:

This is a chart of the hourly GLD T’s that were traded within that last T:

And should we stay above the middle of the Keltner bands, this is the present Hourly T.

Of course, we need to stay above that daily middle Keltner band as well:

And the GOLD chart needs to stay above 1903, as well as showing some strength building in the discount to NAV:

Again, no post this weekend.

The 2023 T Theory Main Chart has become messy. I may remove some of the notes. Right now, I can’t confirm that we are in a T based on my methods, although some students of T-Theory may have a different opinion. Is it still possible that we are in a longer T which will last until the beginning of August? Possibly:

The left side of this potential T would have a beginning date of October 28, a center point of March 17, and an end date of August 8. This T is less viable on the standard Volume Oscillator chart than it is on the McOscillator indicator. The McOsci continues to show higher lows since March, but the VO itself–which for many years was my only tool– has that low in June that is lower than the early May low.

Price has moved as though this T will go on until the first week of August, and that can’t be denied. If I am wrong, it’s based on my personal sentiment rather than a failure of the chart to advise us where we are. I will have to assume that the failures I watched during the first 10 months of 2022 poisoned my perspective.

Looking at the Companion Chart, we are riding the upper crest of the Keltner and resistance line.

The Weekly Companion Chart using Terry Laundry’s weekly Keltner bands is riding the top of that channel drawn from the March low. RSI and MFI are cresting.

There’s not much more to add to last week’s post regarding technicals–they all stabilized after “kissing”.

Moving on to Gold, I’ve been pointing out since my May 21 post that we had a cyclical low due soon, and should this low hold, we could continue on for a gold T through December. This potential T is visible at the bottom of the chart showing the completed May 11 GLD T on the Historical T page of my site. The Main Chart page noted on June 10 that there was a very positive shape to this chart. Allowing oneself a small move below this Optimum Moving Average support could result in a very rewarding risk reward scenario.

There is a very large divergence in sentiment between the two Sprott funds on the following chart showing discount to NAV. The smaller Gold and Silver Trust has a $5.00 discount to NAV. It’s preferable when both are acting in a similar fashion.

It will be important to get the RSI of $GOLD above 50.

I am more confident of a move in Gold than in Miners. I would have to see a sustained move above $32. In my mind, $32 has been a tough nut to crack for GDX almost since its inception.

A long term look at what I consider “The chart to rule them all” may make it clear why in addition to the shape of the above chart, I feel that miners are more sensitive to interest rates than the metal itself:

Miners need capital to drill, and capital has its costs.

The 30 year rate $TYX has not broken out above its recent high of 4.3%. Right now, the monthly MACD of $USB (bond futures) is showing a move higher on its shorter term leg, which means momentum has stopped moving down, or looking for lower futures prices, higher rates. But it has only flatlined at that point. The trend portion of the MACD is its longer term leg, and that has also flatlined. There could be little further change for a while, rather than that imminent decisive move in rates that many are expecting.

The weekly version of the TLT chart shows a similar pattern of minimal potential change in the near future:

It does give a range of 92-113 using the 100 week EMA that Terry Laundry used, and a range of 88 to 106 in the 50 week EMA that I use. (These upper limits are both to the middle Keltner, rather than the upper, as that is as far as the Frog can forecast at this time.)

Keeping in mind that the duration of TLT is about 18, each one point move in rates will result in an 18 point move in TLT’s Price. That is different than TLT’s maturity, which is about 25. Should the 30 year move to 4.5% (or higher by .50 basis points), you can expect TLT to move lower by 8-9 points. Should the 30 year move to 3.5%, TLT would move higher by that same 8-9 points.

I’ve made clear that my Treasury funds are in assets that are 3 years or less.

I will be traveling next week, and there will be no post.

This post will be added to the T-Theory Concepts Page. There will be no post next weekend.

The Historical Chart page on this site is not there to vindicate how T Theory has succeeded in the past. It gives clues as to how analysis moved along with Price and the main tool of T Theory–the Volume Oscillator to change direction as a T progressed. Let’s review the following Historical Chart from 2012-2016:

The above chart shows the major and minor T’s that I discovered during that period. The major T’s were June 2012, with a center point a year later, ending in July of 2014, followed by a T beginning in September 2013, with a center point in October 2014, and a conclusion in early October of 2015. There is one major similarity in these T’s–as noted in blue on the first of these T’s–“Note that this T’s left side began near a Price low”. In other words, price moved higher at the beginning of the left side of a T, while cash was being removed from the market. This means that Price doesn’t have to fall as the Cash Buildup period begins.

Inside these two major T’s, shorter term T’s developed. For the most part, these shorter term T’s did not go lower than the mid-Keltner area. These shorter term T’s offered periods to remove oneself from equities while the market reset technicals inside the larger formation. The chart also includes notations as to why some periods did not create a short term T, such as the note on January 5, 2015 which states that the move back above the zero line which would normally create a T was too swift to create a lasting T–Price vindicated that note as we spent the next month waffling around the mid-Keltner area. An additional note on January 5 pointed out the potential that the larger T scheduled to end in October was going to be a Bear T. This was followed on July 31 with a notation that this second large T was going to conclude as a Bear T, which indeed it did 2 weeks later. The Bear T ended as most do, with a drop followed by a “rally from hell”, only to collapse again.

(If you have trouble viewing the chart in this post, the link to it is noted here: https://schrts.co/NnNFIhND )

What can be learned from the above chart that is relevant at any future point in T creation? The primary point of course is to keep an open mind, and not expect every T to continue on a straight trajectory. We must be open to the changing dynamics on shorter time frames.

I began using T Theory for my investment accounts began in 2012, after Terry Laundry passed. The best way to learn a system is to understand and practice it. Begin by using it with complementary forms of technical analysis until you grow comfortable with it. Since 2013, I’ve been using this system in conjunction with what I’ve learned from Avi Gilburt’s elliottwavetrader web site. While I don’t mention his use of Elliott waves on my site, I do try to emulate his ability to teach others how to use his system on their own. It’s one thing to give a man a fish dinner, but it’s another to teach him how to fish.