As we are now a week away from the New Year, let’s take a look at where we are on significant charts.
The T-Theory Main Chart is showing a T that will continue through January 22, with a shorter T through January 12. The longer term T has a center point in June of 2021. While this longer term T had the potential to become a Bear T at the beginning of December, it avoided that, but just barely. The traditional Volume Oscillator had a low that was 20 points higher than that June low, and the McOscillator low was barely 1 point below its June low. That December low has become the center point of the shorter term T.
The Companion Chart has kept us out of serious trouble by finding the potential short term peaks at the beginning of September and November. These were good hedging points, and show the top of the Keltner bands now at 4794. We are not getting any warning whistles from the technicals on this chart at this time.
The Bullish Percentage Chart refuses to give a buy signal:
The ‘simple chart’, which is a chart created by Carl Swenlin of Decisionpoint, shows mediocre strength in Breadth and Volume momentum. Volume momentum, which is more important to my market outlook, is still below the zero line, and this upturn needs to pass through that zero barrier.
Looking at the Weekly SPX Companion chart, we bounced where we should have bounced in price–4543 is the middle Keltner/20week EMA. MFI on a weekly basis has been weakening since the last week of August. That’s not a positive sign, but it is in harmony with the Volume Oscillator low that we had in early December on the Daily T Theory Chart.
One of Terry Laundry’s main indicators was what he called the “Confidence Index”, which is based on the ratio of a Treasury versus a Corporate bond Mutual Fund. It too exists inside an envelope based on standard deviations. After falling through its midpoint at the beginning of December, it is just at its midpoint–.87. Will this be resistance or support?
Confidence will continue to hold should we stay above .86, looking at this another way:
Looking at a shorter time-frame, the hourly chart is overbought on both RSI and MFI. My usual caution is that once we go back inside the normal area on MFI and RSI, they should reset to 50 on both technicals to prepare the way for the next advance.
Of course, the next few days in the market are known to be seasonally strong. Price is key, volume is secondary, and cycles have a way of changing just when we think they are invincible. I’ve posted this chart before, detailing how institutional money usually flows into the market during the last three days of the month, and begins to be removed to make payments at the beginning of the month. I suggest this is more than standard at the end of the year, when bonuses are paid.
Do Arbitrageurs take advantage of this? Absolutely. But it is just one more of the market’s moving parts.
The projections of the main T Chart are positive, but within the increased volatility we have had lately I am suggesting some caution.
As we are now at the end of this year, I thought I would take an opportunity to review the T’s and points of recognition we’ve gone through over the last year. This site is normally closed for those who were not members of Terry Laundry’s investment website, but as this year draws to a close, I decided to open it up in order to review how finding the power of simplicity can work for you. Only this page is available.
Sometimes, the path to success in investing is not devious. It’s not based on out-thinking the market. It’s based on looking for the simple answers. The simplicity of Time-based structures can be useful when used in conjunction with other methods. One can confirm the other.
Back in November 2020, I recognized the larger equity T that was to last through April 29. 2021.
From November 22 2020
I find this time of year to be a good opportunity to wipe the slate clear, and to look at the T chart with fresh eyes. Doing so, it appears that we have an even longer period of strength that should last until April 29, 2021.
April 2021 T
This T meets all the criteria for a traditional T. We have lower highs on the Volume Oscillator starting from Jan 18, 2019, culminating in a low on March 9, 2020. (This is a ‘special date’, as in 2009 it marked the Haynes Bottom.) It forecasts a regular, positive T lasting through April 29, 2021. The shorter term lower highs in both the Volume Oscillator and the McOscillator (from April 2020) and higher lows (from March of 2020) mean that cash is being expended, with late March of 2021 as an apex for a change of direction.
T-Theory was long equities from that date through the end of April, but as presented in December of that year, it wasn’t going to be an easy ride. We captured about 600 SPX points, in addition to hedging at opportune times.
We have had price T’s since the end of April, such as the one that began in October and ended October 28. I noted that we had a “weak T” that would end September 3, based on the McOscillator rather than the Volume Oscillator. On Sept 2 I noted that Price had been squeezed, and would need to reset. After that I noted on the Companion Chart on November 2 that both MFI and RSI had peaked, and would need to have price reset to at least the mid-Keltner.
We had Volume Oscillator recognitions points for the end of June (discovered in April) and the end of November (discovered in October) that foretold resetting price to at least the mid-Keltner on the Daily chart.
On November 27, I wrote about a T that could last through January 22. I had been looking for an event around the end of November for about a month, as posted on elliottwavetrader.net. While I didn’t get quite the fill I wanted as we meandered up and down for the next month, this T is scheduled to last until January 14. It barely missed becoming a bear T.
Moving on to Interest Rates, on December 20, 2020 I noted the rising interest rates T that I suggested would last through December 30, 2021.
On another note, Treasury prices appear to have a rising rate bias for the next 12 months. This T has a center point on May 25 of this year. When you have a double bottom, you split the time between those bottoms to create your T.
Earlier Ten year T’s were posted in Avi Gilburt’s elliottwavetrader website when they occurred.
But on June, 4, I recognized a new T in TLT.
It may be time to review Interest Rates again as there is a very odd combination of events occurring. If you review the site menu, the only remaining T at this time is the Ten Year Yield T. This is scheduled to progress until December of 2021. But that T has started to weaken, and there appears to be a new T in TLT that requires review. Confirmation would come if price can move above 143.
How can this T exist in TLT (20+ year maturity bonds) if the 10 year bond is showing the opposite? It makes sense if you look at the 10 Year Rate T on a shorter term duration:
For this version of the Ten Year T to be correct we would need to break 1.42 as a low in the ten year. While this seems unlikely on a fundamental basis, it can’t be ruled out, especially if one looks at how the 10 year has reacted since May 7.
That T in TLT was confirmed on June 19. I closed my position in it on October 6. All of this existed in the range I felt TLT would remain in–between 144-152, as pointed out on August 18.
I have decided to close my position in the TLT T. While it should extend til the end of the month, I don’t see enough room for forward progress to remain in this trade. While the chart shows a minimal gain in this investment, those who have followed my posts know that I have hedged it twice around 152, reentering around 144. But for me, it is played out, and I am in cash.
In 2003 Terry Laundry presented a gold Mega-T that was to last for 20 years, ending in 2020. That seems to have transpired. While a new T can be created at any time now, August of 2020 seems to have been the end of his Mega-T. Now we must wait to see strength renewed. For those who think Terry saw a one way street during those 20 years, he became bearish on gold in 2011. While he passed away in 2012, the low of late 2015 early 2016 completed a downtrend for 4 years, and then we closed out the Mega T over the next 4 years with a bang. But strength must be renewed. And while we have had two 25 week gold cycles fail over the last year, the cycle is Terry’s, but the chart is mine. I was able to avoid investing in gold at both cycle lows because the technical indicators did not confirm the lows would be lasting.
One of the highlights of 2021 was the XOM Money Flow T that I presented on October 25, 2020. From a low of 34, we carried a long through 48. Prior to that point I noted that there was a price T that would end January 16, and removed my long, repurchasing when we hit 43, saving myself a 10% drawdown. I closed my position at the end of February at 52, adding another 20%. That is about where price was at the end of the T one month later.
The worst thing for any investor in the market is to have a pre-conceived idea of what one would like to have happen. This is believing that you can make the market do what you want it to do. But where do you get off that train headed in the wrong direction? Using Terry’s concept of Optimum Moving Average has worked for me. Knowing where strength turns into weakness by failing or passing that Optimum Moving Average Line has become a key piece in my conservative investment process. As I am personally at the stage of protecting assets while wanting them to grow, I leave very little room before stops. I try to use charts which simplify technicals to the few areas that always made sense to me–Price, Money Flow, Relative Strength, and Time.
Terry Laundry always looked for opportunity where others were sensing despair. As a money manager, he was constantly searching for the next area of strength. It is at the essence of T-Theory that you are looking for support that holds, rather than waiting for resistance to break, unless you are well along within a period of strength, or, as Terry called it, an ongoing Magic T. It’s worked for me in 2021.
I have decided to close my position in the TLT T. While it should extend til the end of the month, I don’t see enough room for forward progress to remain in this trade. While the chart shows a minimal gain in this investment, those who have followed my posts know that I have hedged it twice around 152, reentering around 144. But for me, it is played out, and I am in cash.
This morning the SPX Trading T was stopped out. I had misgivings yesterday, and at 3PM I updated the hourly T chart to show that I would stop out at 4435. While that wasn’t an option this morning, I was stopped out. It was still a profitable trade, but barely. Recognition of this T came below 4400.
As for the TLT T, today’s range brought TLT slightly below 144, but it has since bounced to about 145. I am hedged, I am waiting for an opportunity to drop that hedge.
I mentioned over the weekend, I am being patient regarding dropping the hedge. You can see where support is on this chart, and I believe it will hold. I am trying not to be stubborn, but I am watching support at 144 on a closing basis. I’ve commented a few times during this T that I expect TLT to stay within a range of 144-152, and I have been playing both sides of that range.
As noted in the last post, I was hesitant to call the daily SPX chart as being in a new T, and mentioned that even if that T occurred, it would only last as long as the Trading T. The present action seems to prove that as being correct, with much less capital having been put into play. The McOsci did not get a higher high than the last descending trend line, even though last night’s Volume Oscillator appeared to be above its last descending trend line. That has obviously changed today.
Today’s selling is not as intense as last week’s selling. We had a 90% down day last Monday, and today’s volume is about 75% on the down side. But again, there is no T, and there is no reason to get long this market. Watch for two hourly bars within the Keltner Bands. Unfortunately, only those of you with a Stockcharts account will be able to see the correct chart, which is in the same format shown at the beginning of this post.
T-Theory Thoughts 
