May 2004 – T Theory® Update

Short Range T Update May 28 2004

This week saw a Bullish Surprise in the blue volume Oscillator in the Updated Daily Chart below. Click on the image for a larger view.

day040527

The rise of the oscillator to new higher highs and a very high level historically is characteristic of an upturning trend and so this T may turn out to be bullish nature after collapsing initially. This is rare but possible. However the confirmation process needs to be worked out on the next pullback to be sure.
Remember any bullish T rally must see any and all future corrections hold at the 55 day MA. If in the days ahead this MA does not hold then the T is not bullish.

As to a strategy for any buying there is none for now because the volume oscillator is very overbought and a correction can be expected. The usual scenario can be seen at the very earlier of this chart coming out of the March 2003 low. After a momentum peak the conditions for buying the pullbacks are typically to see a 5 day correction that bring the oscillator down out of it overbought condition to the zero level and at the same time see the S&P come back to the 55 day MA but not break below.

As of this writing the S&P is not much above the 55 Day MA (1112) so it is possible that any near term top will see a breakdown leaving the T’s status as bearish. However if the rally continues for a few more days the S&P could get high enough to pullback but still hold the MA. Then the T may be bullish.

In any case the picture should resolve itself in a few more days.

Short Range T Update May 21 2004

This week I am interested in the Short Range T picture as it relates to the 39-week Adaptive Channel’s more general “big picture” conclusions. Click on the image for a larger view.

day040520

Last week I made the point that market corrections for the S&P 500 have historically produced only two outcomes after a peak has formed at the upper envelope in my Adaptive Envelope Chart. The critical division between the normal bull market correction of some roughly 10% from an overbought high or the more bearish, roughly 20%+ correction, will be whether the 39 week MA can hold in the weeks ahead.

So far the 39-week MA (currently at 1073) has held due to the short-term oversold condition, but the rebound so far doesn’t look particularly enthusiastic. I still expect this very long spanning Short Range T will let the market slide lower in its right side as it collapses under the pressures of negative fundamentals.

However the more important task over the next few weeks will be to see how the rebound from the oversold condition in the blue volume oscillator is progressing. Ultimately I will have to verify that the 55-day MA (currently at 1113) is providing upside resistance to whatever rally develops. If so, then the T will be reconfirmed as a bear type of T that collapses again from the next overbought condition.

Because this T has such a long time span (into September) the downside danger is that recoveries only set up prospects for new declines to lower lows. Over the long time allowed by this T, is it possible for selling to accelerate, and under worst case, to produce a panic sell-off. This doesn’t have to occur but the nature of this T is such that it can easily happen.

Adaptive Channel Update May 14 2004

This week I simply want to make the point that market corrections for the S&P 500 have historically produced only two outcomes after a peak has formed at the upper envelope in my Adaptive Envelope Chart. Click on the image for a larger view.

39wk040514

A decline to the 39-week Moving Average (MA) is the normal ongoing bull market outcome. Support at this key level is very common in long up trends but the actual bottoming process can push the S&P a bit below the MA so it is important to watch the action around the current S&P 1073 neutral level for signs of any bottoming that might suggest this modest decline outcome is taking place.

The more serious, but less common outcome, is the full decline from the upper envelope of my adaptive channels, colored red as a warning of a peak, then down through the 39-week MA to the lower projected oversold condition, colored green as a warning of a tradable low. This outcome is suggested by the nature of the Short Range T detailed last week.

The envelope theory that I have developed generally concludes that these two outcomes are the only two practical outcomes an investor need consider for say the next 6 to 12 month period. This may be an over simplification but it is the major point of my 30 years of research. We are getting close to the point where the market will decide the outcome based on its view of the fundamentals.

The major outcome for the future should be reliable and I might add a “non-biased” determination of whether or not the March 2003 low was an important turning for a new bull market or not. In general, a healthy ongoing bull market will not see the S&P break to the lower extreme. So, if the trend breaks down, unfolding then one should adopt a bear market strategy.

On the other hand, if the S&P can limp along at the 39-week MA then a normal bull market correction may be unfolding which has bullish implications for the next 6 to 12 months.

The market’s decision from this perspective should be forthcoming in the next few weeks.

Short Range T Update May 7 2004

The trend of the S&P continues to weaken despite the presence of a Short Range T. This implies we are in an ongoing correction mode that has some weeks to go before completion, so T Theory is targeting potential low points in the charts that follow. Please click on the chart for a larger image.

day040506

In the chart we see the updated status of the new Short Range T with its 55-day adaptive channels. The fact that the S&P has fallen below the 55 day MA suggests this T is of the bearish type and therefore will not support a rally in the right side, which extends quite some weeks ahead beyond this charts time limit.

These types of Ts are termed bearish because they allow a decline to persist through the T’s right side, which normally of course, should see a rally phase for as many weeks as the prior cash build up. The historical danger is that on occasion the bear T collapses into a severe decline. This is my main concern for the duration of this T.

So far the breakdown below the 55-day MA is slight, but bearish nevertheless. A further weakening would conclude that a declining trend will last for the better part of this T’s lifetime which extends into Fall. The short-term downside price target is basically the 39-week MA as per my prior updates and it remains a very constant 1072 as of now.

However, an alternate way to track this 39-week target is to simply recognize the short-term channel limit for the lower extreme (1085 for now) eventually amounts to the about same price level. This more detailed view provides better tools for verifying lows and will become important once a real oversold condition develops.

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All Rights Reserved By The T Theory® Foundation ©

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For a complete understanding of the T Theory® and how to successfully use Terry’s unique methods, order the Encyclopedia from Paula at the above link.  There is additional material in the encyclopedia not covered here.  Paula will be more than happy to answer your questions too.

Many thanks to Paula Burke for her permission to re-post Terry’s old T Theory® explanations.  The period re-blogged on these pages are some of Terry Laundry’s best work and was published here from public domain.

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I claim no credit for the material found under T Theory® on this blog.  All of this material is the creation of Terry Laundry and was downloaded from Terry’s free blog site (TypePad).  I have created a mirror of Terry’s original material and now there is a second site containing Terry’s T Theory®.  One or both of these websites hopefully will survive through time as Terry’s material is too important to be lost to the ravages of time.  This site is simply a memorial to his lifetime work.

The page content re-blogged here is exactly as Terry created on his original webpages (saved on my computer with ScrapBook)).  Nothing has been left out from the period Dec 2003 to June 2011.  From Terry’s site, I made a lot of formatting changes, creating a more easily readable webpage appearance.  The PDF chart duplicates of the JPEGs have been omitted for ease and speed of recreating Terry’s pages.  References to PDF charts should be ignored (but no chart was left out).

After June 2011, Terry created a paid subscription website. None of that material is found here.

There were many many, many hours spent on this project; downloading Terry’s individual charts & audio files, followed by the uploading of Terry’s charts and audio to my WordPress blog library, after which I had to insert the uploaded material into my new T Theory® webpages (hopefully in the correct places).  This was a dull and arduous project and I hope you enjoy it.  I don’t believe there remains any more of Terry’s material in free domain, so my T Theory® project is probably finished.  If I’ve missed something, you can leave me a comment.

If you find an uploaded reference error (chart or audio in the wrong place), please note the month and year of the webpage, plus the exact name of the referenced error file.  Include any other info that will help me locate the problem file and where it occurs on the webpage.  Leave a comment for me with the info and I’ll fix it.

Terry’s material is very long and will take many weeks for you to finish.  Don’t hurry, it’s not a marathon and you will absorb more if you go through it at a reasonable rate.  This is especially true for those who don’t invest in the T Theory® reference encyclopedia.  The encyclopedia is a written reference for T Theory® and includes everything of importance for Terry’s T Theory®.  Without the reference encyclopedia you must depend on your memory and Terry’s method carries some rules that you could easily violate.  The encyclopedia also includes new information never seen on his website.

You are welcome to save any or all of my blog material to your computer.  You also have my permission to re-blog my information, but you must (1) credit me and my blog in an obvious manner and (2) don’t change my material.

FYI – I find the best way to save a webpage is using “ScrapBook” (it’s an add-on for the FireFox browser).  ScrapBook saves a webpage to your computer EXACTLY as it appears on the day you saved it.  You can’t tell the difference between the internet webpage and your ScrapBook saved webpage.  The saved pages are not pictures.  Instead the pages consist of HTML and page functionality remains identical on your computer.   There is also a second method for using ScrapBook, where you can save all of the webpages down to a defined link depth.  This optional method means all links will function on your computer to the link depth specified (meaning you can click on links on your saved webpages and tunnel down into pages within pages).  Saving the normal way will only save the top webpage but the links that exist could continue to  function by taking you to the website on the internet instead of on your computer.  But sometimes the linked website doesn’t exist anymore.  I’ve had this happen on some very good webpages with unique information (they just disappear into the internet void).  That’s a bummer when you lost some really good info and thus rose my need for ScrapBook.  You can also filter the pages saved using the optional ScrapBook method, which can exclude all pages not coming directly from the specified website (filtering is recommended using this method otherwise you wind up with a LOT of useless stuff).

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