Over the past 4 years, I have been “lucky” enough to find Magic T’s in the Ten Year Treasury that correctly predicted Price movements in strength and weakness. Those T’s kept me on the correct side of the rate environment.
Sometimes looking at older charts can help you “predict” the future. This historical chart on $TNX shows 3 long T’s, and 1 short one that were discovered in real time.
The following chart shows an additional T that I discovered, together with my notes as that T, and the one before it progressed:
I am now suggesting that the T in $TNX that will last until September 18.
There is no T in the 30 Year $TYX, but there is a T in the 5 Year $FVX, and that is scheduled to end November 10.
Rates do not move all at the same time, and of course, they do push and shove on each other. There is no equivalent T in the 2 Year Treasury.
These T’s will be instrumental in deciding when to move funds into longer dates Treasuries, or their equivalent ETFs, and out of the shorter term Treasuries.
It’s a minefield out there, but using systems that work–even when they say “do nothing”–can help avoid mis-steps. There are times when there are no T’s, and right now we are in one of them.
Summarizing my thoughts of last week, we were due for a bounce that could take us up to the zero line on the Volume Oscillator. And with all the ups and downs this week, that is what we are seeing in play. Price moved up 100 points, down the same amount, but closed the week up 36 points.
On the Daily Chart, Price closed just below the 55EMA of 4412. Which way will the Frog jump? Right now, we have parameters that are about 1% higher to the upside (a clear break above 4460–this week’s high) and 2% lower (a break below 4335). We have a higher low on the hourly chart of 4356.
The lower Keltner band is at 4200. For esthetic purposes, it would be great if we hit that line and reversed. I don’t like drawing support lines that have only two hits, but I am hoping that we hit that purple line and make that third hit.
“Esthetic purposes” are what made me draw the red line from the October low that was in play until we hit 4607 (see the red dashed trendline above.) It acted as support through February of this year, and after the move below support it became resistance. Should that 4200 area be touched next, I would expect it to be strong support. But the above are Price charts, and at the moment, they don’t give an edge as to which way we move.
The T-Theory Chart is showing what could be the beginning to a new T, which could last about 3 months. To create that T we would need stronger evidence than we have to date:
As expected, the VO and McOsci have rallied. The VO will be adjusted Monday, and the McOsci has not yet reached the zero line. Both of these are still in areas where I would expect a failure should it reach the zero line. My thoughts are based on the down-trending red line on the VO, and the unmarked downward trending line of lower peaks on the McOsci. We would need to see a break above the zero line for both, and then a VO peak above 35, the last VO peak before it went below the zero line.
The Daily A/D line has come into a support area, and bounced slightly. Is this a dead cat bounce? I have a feeling that it doesn’t move around much over the next week or two. The A/D line is stuck between strong support, and a potential crossing of the 20 EMA below the 50 EMA. It is still below the 50EMA. Keep in mind that in June, it did not cross, but kissed the 50, resulting in a rally.
The hourly NDX chart is also hovering below its middle Keltner point of 367. It too has not crossed the zero line, but has offered a few instances for trading long. We need a peak above 30 to consider a T in this. As I pointed out a few weeks ago, most of these charts may have T’s ending September 4, but Microsoft’s chart has a longer term T into October. The fact that these charts have been moving down since the beginning of August still doesn’t change the T’s.
It’s interesting to note that over the last 50 days, AAPL has had a 70% correlation in price movement to the NDX, while NVDA has had one of 63%, and MSFT about the same. Over the last 20 days, AAPL has had an 83% correlation to the NDX, while NVDA has had a 27%, and MSFT about a 95%. IBM on the other hand, has had a 21% correlation to the NDX. (Just an observation.)
In June, I placed a “Critical Line of Support” reference around 357 on the hourly chart. This is still in play:
The BPNDX is not in buy mode. It tapped the Keltner bands and moved back down. That’s a fairly discouraging move. It may need to hit around the 34 level to sustain a move higher.
The “failed” GLD T ended on Thursday, with a rally (not from hell) to a peak at the top of the hourly Keltner bands. That failed to hold Friday, but GLD is still above its hourly middle Keltner band.
Right now the Daily GLD chart is still showing that “Puff the Magic Dragon” formation. It needs to advance above 181 to put life back into a potential longer term T.
On rates, we’ve started to see some narrowing of the inversion. That’s a good thing, if a painful one. More about that soon.
Last week we were approaching our first levels of support, and this week we moved through those. Let’s be clear–Support is named Support because it’s “supposed” to stop a decline. But when a market is as overbought as this one was, gravity may create a hole that Price continues to move through. And so this week, we broke below that initial level of support in SPX:
My expectation at this time is that the VO and McOsci both attempt a move higher, but get stopped at the zero line.
Back in my post of July 2, I mentioned that I was watching a Point of Recognition that appeared to be headed our way at the end of July, or the first week of August. That is when the T Theory chart broke down, as I noted on the chart on August 1:
[The Simple chart]…is still pointing towards a Breadth point of recognition sometime around the end of July or early August. The Confidence Index and the German 10 year are also creating a point of recognition around the same timeframe.
When a Kiss is Just a Kiss
Both Breadth and Volume momentum indicators have moved below the zero line on the fast part of their indicators, but neither have moved below zero on their longer term segment:
Simple Chart
The CI and the German 10 year both made their way through that Point of Recognition, with an overthrow. German rates went higher, but more surprisingly, the CI is showing Confidence reaching what I have to consider an impossible level to maintain. As these charts are no longer available on my site, I’ll show them here:
The Bullish Percentage Index has moved below the lower Keltner band, but it is at 55, which is still a bullish reading.
Again, I am looking for this to stabilize around the 50 mark, as the VO and McOsci make their way back up to the zero line. That would be a frustrating situation for both bullish and bearish outcomes.
The A/D Line T ended July 23, and the A/D line is now just back to that magic 7600 area, which was strong resistance in the past, and therefore it should be considered support at this time. Should that fail, the next line of support is the dashed green line of higher lows. RSI and MACD can both move slightly lower before these indicators are oversold.
The SPX daily companion chart shows that we’ve broken through that first level of support, with resistance having come right at the red trendline from the October low. Both RSI and MFI are approaching oversold lows, although there is room for a bit lower, and daily Price support doesn’t occur until 4203:
The Hourly chart attempted to break back inside it’s Keltner bands on Friday, but closed just below. However, RSI seems to be weakly rising off the oversold low, while MACD is beginning to turn higher:
My last notes on the above chart were made in the middle of July, as that is when I went short the NDX, via QQQ. I closed half of that trade last Friday, and the balance at 359 on Thursday’s close. That trade captured a 6% move lower in QQQ, but it was accomplished with SQQQ:
The horizontal line marked “Critical line of support” is one that turns red when it is resistance, and green when it represents support. It is a line that goes back to 2021. We went just below it this week. Looking above at the hourly RSI, we are in a weak period until RSI can stay above the neutral 50 range. That’s not evident yet. But I prefer closing a position into strength rather than a weakness. There will be further opportunities for both long and short trades to be made.
We are reaching a point where a low can be formed, as it has often over the last 4 years. But it doesn’t have to be tomorrow.
As for the GLD hourly T that is to end August 24, that has been a failure. I was stopped out for a 1% loss this week, after re-entering at 176.80 after stopping out at 181, for a 5 point gain. But even with that T’s failure, I do expect a move higher into its end this week.
Shifting gears to interest rates, I’ve seen some signs this week that short-term rates may have temporarily leveled off, while long-term rates are finally starting to rise to meet them.
I’ve been of the view that long term rates would be moving higher, as I last pointed out in my July 23 post. Perhaps they stop at 4.75:
We had a problem: the indices were extremely overbought last month. This may sound like a good thing for buy-and-hold investors who look at their daily portfolio and smile, but being heavily overbought against technical indicators (such as the 50-day and 200-day moving averages) usually calls for a correction. The question then becomes whether this is a return to the mean or the start of a new regime.
For traders, the easy part of this decline may be over. We are presently approaching good support. The problem is that while Price may reach support, technical indicators in some instances did not move low enough to compensate for their previous overbought tendencies. In fact, the “Simple Chart” I follow shows that we have barely moved down to the zero line from positive Breadth and Volume levels. Do they stop at zero, or continue lower to form a stronger low?
The Bullish Percentage SPX Index also shows this dichotomy. While it has passed below the upper Keltner band, which indicates a Sell of longs, it is still measuring at 67%. As I’ve mentioned before, the BPSPX is based on a Point & Figure chart of the components of the SPX, and as long as it is above 50, it is a bullish reading.
The SPX Companion Chart may reach the Price Support at 4415. The shape of the 55EMA is changing–it is no longer rising, but turning relatively flat. This should keep the support number viable for a few days.
I’ve mentioned before that RSI tends to stay above 50 during periods of strength, and this has been the case since the March low. However. RSI has gone slightly below the 50 reading to 46. Even though support on Price coming up, the case is really not clear if RSI will support an end to this correction.
And that brings us to the main T-Theory Chart.
There are regular T’s, there are Bear T’s, and there are weak T’s. The end of this T was weak. We were forewarned of this weakness by the action in June, highlighted in red.
As I noted last week, the end of the Advance/Decline T on July 23 seems to have found the recent high. We are teetering right now on the 20 EMA, and the 50 EMA is still above the former resistance at 7600, which means we have fairly good support below us.
Personally, I’ve been trading the NDX Cash Buildup period by shorting QQQ. We should get a couple of months of strength when this left side of the next T ends, which will create a center point.
The QQQ’s Volume Oscillator peaked on July 13. I’ve been short this since the open on July 14 (as I mentioned in last week’s post). It was just…so…overbought, and signs of weakness were beginning to show up.
Finding the end of the AAPL T was an important part of my strategy.
The center point of this T is unusual, in that I took center point between the June 2022 and the December 2022 low. That is something Terry Laundry would do when there were similar lows.
The QQQ chart shown above uses SPX Keltner bands (with a middle Keltner at 363), but in fact on my QQQ Companion Chart, we have the middle Keltner band at 370, and the lower Keltner band at 348. I removed half of my short on Friday. (The Keltner bands are different for QQQ than SPX based on finding the QQQ’s Optimum Moving Average.)
In last week’s post, I wrote that using T-Theory, the NDX should rally until the beginning of September. But in this case I’m not using traditional T-Theory as my guide–I was and am looking at the massively overbought technical indicators starting in mid-July. Of course, this move lower may just be the gravity created by both the re-balancing of QQQ at the end of July, combined with the additional weight based on the end of AAPL’s T.
But since that post, NVDA went through its middle Keltner of 431 like butter, and may be on course to his its lower Keltner of 381. As stretched as it was above its upper Keltner, it could repeat its history and lose approximately 50% from its recent high before recovering. With lots of bounces in-between. The rest of the main holdings of QQQ have reacted in a similar manner. That’s not a healthy situation.
GOLD
I re-entered the hourly GLD T on Friday, at 177.80. I have this on a tight leash, with a 176 stop. Should this T fail, it will create a longer T when it finds the next low, and I’ll be on the lookout for that. Right now 177.06 is the hourly lower Keltner. I’d like to see a move above 179 to know we are on our way.
Rates
Rates have not changed much since last week, and I have nothing new to add about them.
I still haven’t put my charts back on my site, but I will probably start to include a page with just a few of them shortly. I’m involved in some outside projects right now that are taking up much of my time.
T-Theory Thoughts 