It’s been 3 months since the Volume Oscillator T began, and it’s officially over. On April 5, I suggested that we were missing one final detail to confirm that T through July 12, and that T was confirmed on Monday April 6, when the VO and McOsci (McClellan Oscillator) both closed at levels higher than their last low before they travelled down to the late March low. Here is a copy of the chart that was presented at that time:

The above chart shows how we moved from a potential Bear T to a potential normal T. Assuming one entered this T on April 7, the initial move began at 6600.

My next post, offered May 9, showed that we were in a Price T that was destined to last until May 30. That post ended with the following statement:

To summarize, I am expecting this period of strength to last until July 12, with a potential pullback around the end of this month. Right now, the charts are supportive of this outcome, but there are things to watch.

I personally removed my position at 7430 mid-May, and posted here on June 6 that support was located at 7226. I ended that post as follows:

But the market has not broken down enough when reviewed with my tools to force the creation of a Bear T that hasn’t come out of its cave. I am looking for support to hold, and I will consider when to put money back to work.

I was rewarded on June 9, when we reached a low of 7232. As I wrote on elliottwavetrader.net on Tuesday, I closed my long position at Monday’s close, around 7530.

The total points gained on this was roughly 1100 points, or 16%, which outshines the SPX return for this year. The question is–what happens next.

At this point it’s not clear what happens next. While sometimes we have a sharp decline after a T ends, that’s not a necessary outcome. Magic T’s (as Terry Laundry called them) represented a period of increased strength that would last equally long as the period before the Market reached the low that eventually is called the Centerpoint of the T.

Copying from the T-Theory Concepts page of my website:

The main concept of T-Theory deals with the Magic T, a concept which Terry suggested may be a natural law. Magic T’s offer a cash buildup period, followed by a period of equal time that provides market strength. The equal periods of Weakness followed by Strength can be visualized by the two sides of the ‘magic’ letter T. The left side of a T represents cash being taken out of the market, and the right side of the T represents the equal amount of time showing strength. Since the market historically goes up 70% of the time, finding these “50%” heightened gain periods can be very rewarding. During that strength, cash is being put to use in a cash distribution. When a T ends, expect the period of strength to end, and for the return on equities not to exceed that of the ten year Treasury.

There are very few signs of imminent collapse to this market, outside of geopolitical or unforeseen (by me) financial crises. Can they occur? Absolutely. But where are we on the charts?

The present daily T-Companion chart (which I use to search for Price T’s) is showing RSI and MFI to be consistent with a continued rise. Money Flow is unable to move in to a positive–above 50–reading. Resistance is 7686, and support at 7360.

The hourly chart is not overbought, although it’s headed that way in terms of RSI. The other short term indicators are also positive.

The BPSPX is at 63. Any reading above 50 is positive, on a traditional scale. The chart below shows that we have been moving steadily higher since hitting the bottom of the Keltner Channel.

The “Simple Chart” shows that PMO may be about to turn positive, while Breadth and Volume momentum oscillators are both positive.

And now we come to the point where we look forward using the T-Theory concept created by Terry Laundry. Those who read this website regularly may remember that my first post of this year was March 7, when I suggested that we were looking for an upcoming low. My March 15 post was entitled “It’s Now or…”, where I postulated that we were near that bottom. And while my March 28 post failed to capture that low, I threw away my personal confirmation bias on April 5, asserting the T was most probably upon us. I wish that the present chart offered such a clear interpretation.

The present chart does not show weakness. It shows rising support on both the Volume Oscillator and the McOsci. However, there is a potential “blip” coming within 10 days. That “blip” is based on the Point of Recognition that is forming in the McOsci right now.

Using T-Theory, there is nothing other than Terry Laundry’s statement quoted above regarding expecting an equity return no greater than the 10 year bond until the next T is formed. Since short-term Treasuries offer a relatively high return right now, that is where my funds reside.

It’s been a few weeks since my last post. Looking at where Price is today, it would be easy to say that not much has happened. We were at 7408 on May 16, when I wrote my last post, and today we’re at 7383.

That post discussed the Price T within the larger Volume Oscillator T. The Price T was scheduled to end on May 30, and we have had weakness since then, including yesterday’s 2.6% loss in the SPX. As I wrote then, I removed my long position at 7430, and mentioned that I would have no FOMO if the market continued to move higher. I had participated in a 12% rally, and was looking at weakness that could develop any time. Those who saw my numerous posts on elliottwavetrader.net announcing the end of the T, as well as the Point of Recognition visible on the Hourly VO chart, were able to ride the elevator down yesterday. While I participated in that ride, I closed my short yesterday. I am not discounting the Volume Oscillator T that is scheduled to end July 12.

The above daily chart has RSI reaching a neutral area, and MACD has only begun to turn down from its overbought situation. There is no assurance that we have actually created a top. Should we move down further, support is at the mid-Keltner at7226.

The above represents the marked T-Theory chart. While the VO is showing a deep move lower yesterday, that move should be corrected on Monday by StockCharts. The McOsci gives us a better representation of yesterday’s move, and you can see that it left us above the dashed orange line, which I am considering to be support.

The Hourly Price chart has an oversold RSI, while MACD does not offer signs of an immediate reversal. I would be looking for RSI to bounce back above 30 before trusting longs, and that would pair with a rise in Price above the lower Keltner band. That lower band is now resistance:

The hourly Volume Oscillator chart was the key to last week. We arrived at the point of recognition described by the red dashed lines. Passing below the green support line suggested a reversal was imminent, but that reversal was stopped by the neutral line. A move above 250 after such a low suggests an extended period of strength. A move that doesn’t get that high is susceptible to a reversal. A move just to the zero line creates a greater chance of Price breakdown. While we had that breakdown, we have once more reached a point where a reversal can occur. It can be just a dead cat bounce. We’ll see.

The “Simple Chart” shows PMO as having peaked. Breadth momentum is fairly neutral, and Volume momentum is still above neutral, while pointing lower.

The BPSPX is not in buy mode, but it is above the traditional bullish number of 50.

Traditional T-Theory suggests that the July 12 ending marks the end of a period of strength. Finding and using those periods of strength are the true value of T-Theory. Readers of this site know that from the beginning of this T, I have been concerned that this can turn into a Bear T, should the McOsci and VO make lows that are lower than the T’s center-point which were created at the end of March. Time has passed, and for me the outcome is less relevant as I have profited over this period, and have no position at the moment. I can wait to see what the market offers. But the market has not broken down enough when reviewed with my tools to force the creation of a Bear T that hasn’t come out of its cave. I am looking for support to hold, and I will consider when to put money back to work.

Best to your trading.

One of the main features of T-Theory is that it offers the ability to find low risk entries after periods of weakness. As I mentioned last week, the entry at 6600 may not have been made at the recent low, but it was still low enough to offer 800 (12%) profitable SPX points.

That being said, there were some problems that developed this week, which followed concerns which I mentioned last week regarding my personal indicators–the Bullish Percentage SPX chart was in sell mode, the “Simple Chart” agreed, and the Advance/Decline line broke support.

Early on Thursday, I made an executive decision to hedge my investment account when we were up about 30 points. As we continued to rise Thursday, I removed those hedges. It was only a few hours later that I regretted that decision, and became angry with myself for being on such a short leash. I used the pre-market hours Friday to put that hedge back on, and during the day I replaced the hedge by removing all funds from the market. The average price at which I closed out the trade was 7430.

The T-Theory Chart broke the orange trend line on the McOsci, which I noted last week:

We need to disregard the Volume Oscillator’s low from Friday, as Stockcharts will only provide an accurate update on Monday. However, the McOsci broke the trendline, and has the potential to create a Bear T by breaking below -75.

My Companion T-Theory chart has a Price T that continues two more weeks, until May 30. Support will either be found at 7350, or it will break below that to have the next “safe” support at 7038. I have previously mentioned on elliottwavetrader.net that I would remove my investment if we moved below 7350. That statement is now moot, as I have closed my position. RSI and MACD do not show great weakness but seem to be turning lower.

The hourly chart is reaching for support at 7390, which is the same support as the upper Keltner band on the Daily Chart. There is a possibility that both will hold. RSI is at the neutral line, and MACD is negative.

I’ve closed out my T-Theory investments early in the past based on my personal indicators rather than relying solely on T-Theory with mixed results. I will not have FOMO if I am wrong and this is just a one day event. My investment goal is to capture “safe” investment periods and to avoid periods of weakness. Your tolerance for risk may be greater.

Earlier this week I posted on elliottwavetrader.net my concerns that the IWM:SPY ratio might reverse, with IWM faring worse than SPY. This is a chart I have posted here before, as I used that ratio to create low risk trades:

Let’s see if a sticksave can be made at 0.37. My thoughts are that won’t hold.

Best to your trading.

In my previous post of April 5, I noted that we were one step away from confirming the Volume Oscillator T which would extend until July 12. We received that confirmation on Monday April 6, when the VO and McOsci moved above their last peaks (prior to sinking below the zero line) and on Tuesday April 7 we opened at 6600. While that wasn’t the recent price low of 6316, it was a very safe entry into a very volatile market. We are now at 7398, and have captured 800 points or 12%. Our previous T ended October 20 of last year at 6735. Using the simplest form of T Theory, this produced higher returns than that of the SPX by 135 points, or 2%. Instead, investment funds were in short term bonds which improved our return. Using this system, we avoided the downturn from the January 30 high of 7002, if we did nothing else over the last 6 months. There were no concerns of FOMO or its opposite, which would have led us to buy high and sell low. While I presented a case for the possibility of a Bear T, there was never confirmation of that outcome. The present T-Theory Chart looks as follows:

The Volume Oscillator and the McOsci acted exactly as it is supposed to act inside of a T–after reaching a high of 94, the VO returned to the zero line. That is standard procedure. The McOsci has been trying to stabilize similarly, and I am watching that orange trendline as important support.

The Companion Chart dealing with Price and technical indicators has had parabolic movement. It has created a Price T that should last through May 30.

There is considerable strength showing in both RSI and MACD. While RSI is at overbought levels, it has remained there. MACD is positive until the fast black line crosses below the red slow line. Its height is inconsequential, even at this extreme. In fact, the strength in this chart has made me return to the 2024 Bull Market chart regarding Price Keltner band levels. The chart below uses the Nasdaq 100’s Keltner bands, and also comments regarding how RSI acts in a bull market:

The Price T is within the Volume Oscillator T, and may mean a lull around May 30 while the VO T continues.

Other indicators are not as sanguine as stated above. The Simple Chart is showing a lack of Breadth and Volume momentum on an Intermediate time frame. But as we approach the zero line in Breadth, it is possible to reverse up again.

The Bullish Percentage BPSPX chart has moved from above the upper band to inside the band. That is a negative, but the Daily Price chart does not agree, as shown above.

The Advance/Decline line has been retreating recently, which may also be seen as a negative. However it has reached a support level, and not broken it. We will worry more about it should it continue and break below 9160.

To summarize, I am expecting this period of strength to last until July 12, with a potential pullback around the end of this month. Right now, the charts are supportive of this outcome, but there are things to watch.

Best to your trading.

Let’s begin by acknowledging my viewpoint last weekend was incorrect. While my perspective was one where a Bear T was imminent, we actually had a strong rally to put that idea to rest last Monday. In fact, it has the potential at this point to lead to a Positive T until that same date, July 12. But it hasn’t fully developed yet.

While we have an extreme bottom with the move above the zero line on both the McOsci and the Volume Oscillator, we are missing the final confirmation of higher highs (prior to the move below their respective zero lines). Normally, we would expect an extreme move higher on these two indicators after such a strong rally early this week.

Last week, I emphasized the point that we had made a “Complex Structure” below the zero line, which created a bearish formation. Later that day, I emailed Tom McClellan regarding this structure, as in his weekly post he projected a bullish outcome with his article on the Summation Index crossing the neutral level. In response to my question, Tom indicated that while we did have that “Complex Structure”, it was “negated” by his view of the Summation Index cross.

After receiving his email, I advised those on elliiottwavetrader.net regarding his stance, with a link to the above-mentioned article. When we were at 6322 I posted a chart referencing this to be a line of support (noted in last week’s report) which dated back to last August, adding that Pension funds and insurance companies usually have to buy into the market on the last 2 days of the month, and withdraw amounts the next 2 days based on their institutional needs.

None of these acts detract from the fact that the premise of last week’s post was totally off base.

That being said, Price action has been very strong, without similar sharp strength being shown by the VO and McOsi as noted above–the last T-Theory clue will be a further move higher in the Volume Oscillator and McOsci. BPSPX also needs to cross back through the lower Keltner band and move above 50:

It’s interesting to note that in this week’s article on Tom McClellan’s site, he is also waiting for a move higher on the McClellan Oscillator to confirm the uptrend. As he puts it on his site,

The Oscillator can next give us additional confirmation of a bullish change by zooming up to a really high positive reading. Very low negative readings are usually conclusive in their nature. But a very high positive reading is a sign of strong initiation of an uptrend. We have not yet gotten that piece of confirmation. It will be something to look for in the days ahead.

Best to your trading.