$$ T Theory VO for Week of Oct 25-29

Last week's Volume Oscillator for reference

10/18 =  17

10/19 = -40

10/20 = -11

10/21 = -18

10/22 = -12

This week's VO

10/25 =  0

10/26 = -5

10/27 = -22

10/28 = -24

10/29 = -18

This post will be updated nightly throughout the week, so check back periodically for new information or you can subscribe to this post and receive updates by e-mail.

$$ Studying the T Theory Volume Oscillator

Here's how Terry's Volume Oscillator ("VO") looked in the first half of April 2010:

3	1-Apr-10
26	5-Apr-10
29	6-Apr-10
5	7-Apr-10
12	8-Apr-10
25	9-Apr-10
29	12-Apr-10
9	13-Apr-10
39	14-Apr-10
18	15-Apr-10

The VO turned negative on April 16 and stayed negative for five trading sessions as prices continued to rise, tipping off investors that the up trend was losing strength:

-66	16-Apr-10
-54	19-Apr-10
-16	20-Apr-10
-27	21-Apr-10
-17	22-Apr-10

The VO climbed to 0 on April 23, before turning over on April 26 and becoming vastly negative as the rout ensued:

0	23-Apr-10
-19	26-Apr-10
-97	27-Apr-10
-56	28-Apr-10
-11	29-Apr-10
-71	30-Apr-10
-33	3-May-10
-99	4-May-10
-129	5-May-10
-231	6-May-10
-284	7-May-10

Compare how the VO has been behaving recently:

1	4-Oct-10
52	5-Oct-10
38	6-Oct-10
22	7-Oct-10
39	8-Oct-10
27	11-Oct-10
33	12-Oct-10
61	13-Oct-10
27	14-Oct-10
-2	15-Oct-10
17	18-Oct-10

On October 19, the VO turned negative for four trading sessions:

-40	19-Oct-10
-11	20-Oct-10
-18	21-Oct-10
-12	22-Oct-10

The VO climbed back to 0 yesterday, before rolling over to -5 today:

0	25-Oct-10
-5	26-Oct-10

I thought this was an interesting similarity.  We'll see how it plays out.

$$ A Look Back at T12

This video re-examines T12, including start date and center post options as well as top date projections.

$$ Tweaking T13 - The November 12, 2010 Target End Date

$$ Fibonacci in the S&P

The S&P made an all-time high on October 11, 2007 at 1577. The October 2007 high close was 1565. On March 6, 2009, the S&P bottomed at 667 with a low close of 677 on March 9, 2009.

A 61.8% retracement of 1577 to 667 is 1229. 61.8% of 1565 to 677 is 1226.

We recently reached a high of 1220 in the S&P on April 26, 2010, and a high close of 1217 on April 23, both of which are spitting distance from completing the 61.8% retracement.

For several months, Terry Laundry has forecast a May 20, 2010 interim top in the stock market, followed by a decline into June, and a subsequent final rally to August 26 to conclude the upswing that began in March of 2009.

Today, the S&P closed down at 1174. With May 20th only 12 trading days away, it's looking like if Terry's May 20 forecast is accurate at all, the best we can probably hope for is double top (compared to the late April peak) or a token new high at the Fibonacci 1225-1230 level.

$$ Terry Laundry's Commentary on My Charts

Terry Laundry of T Theory Observations discusses his confidence indicator, how it compares to the Barron's confidence indicator, and my charts showing fundamental divergence between confidence and stock prices at tops and bottoms.

$GLD - 8 and 11 Year Cycles in Gold

The Aden Sisters have published a very interesting gold chart. The chart shows important lows occurring every 7 to 8.5 years since December 1969. The fascinating thing is that in all cases except one, gold rallied to a significant peak ~11 years after each 8 year low.

Should gold continue to follow this pattern, we'll see an important peak in gold in ~2011-12, followed by an important low in ~2016, with another major peak in ~2019.

The ~2019 projection of a major top is intriguing because Terry Laundry writes about 20 year gold cycles, and forecasts the current gold bull trend to end in ~2020.

Terry also suggests that ~2016 could be the 40 year cycle low in stocks.  If there's a huge sell off in equities, gold could go down for the ride.  See the summer and fall of 2008.

$$ Terry Laundry publishes my charts!

Very honored to have Terry Laundry of T Theory Observations publish two of the charts I made of his Confidence Indicator showing divergence at the last major top and bottom in the S&P. He'll be discussing my charts and his Confidence Indicator more in depth this weekend.

$$ Confidence Indicator

Terry Laundry's T-Theory Confidence Indicator is the ratio of the price of a Fidelity junk bond fund (FAGIX) divided by the price of a Vanguard long term treasury fund (VUSTX). The theory is when confidence rises, money flows from the safer investment to the riskier investment, and therefore the ratio rises. When confidence falls, money flows from risk to safety, and the ratio falls. The concept is similar to Barron's Confidence Index which has been around for decades, but Terry thinks his indicator is better, and I agree.

As it turns out, following what the bond investors are doing is a nice leading indicator of turning points at stock market tops and bottoms. Here are links to charts showing pretty dramatic divergence between the T-Theory Confidence Indicator and the S&P at important tops and bottoms over the last 10 years:

2000 Top

2002-03 Bottom

2007 Top

2009 Bottom

$$ Magic T Theory

Terry Laundry projects a " short range T" (interim stock market peak) ending on October 15, 2009 with the " long range T" (ultimate top) ending on August 26, 2010.

He says the fear experienced in the March of 2009 low should be reflected symmetrically by euphoria at the top in late Summer 2010. After the projected Summer 2010 peak, he expects a major down cycle testing and perhaps exceeding the March 2009 low.

$$ Magic T Theory

Terry Laundry's theory (made famous by Buzzy Schwartz) calls for stock market bull through Aug. 2010. Listen to his latest comments.