$$ T Theory VO for Week of Jan 31 - Feb 4

Last week's Volume Oscillator for reference

1/24 = -25
1/25 = -38
1/26 = -25
1/27 = -16
1/28 = -68


This week's VO
1/31 = -41
2/1 =     3
2/2 =  -15
2/3 =   -7
2/4 =  -8

This post will be updated nightly throughout the week, so check back periodically for new information.

$$ January Barometer

The January Barometer looks at the S&P January close versus the prior December close.  Over the last 37 years when January closed higher than December, the market finished positive for the year 32 times.  There were two serious double crosses (1966 and 2001), and in three years (1987, 1994, 2007) the S&P ended flat (+/- 5%).

Today, the S&P closed at 1286.12, which is 2.3% higher than the December 31 close.  So we have yet another historical indicator that projects a high probability of a bullish year. 

As I mentioned earlier this month, the January First Five signal also indicated we have a strong statistical chance of having a bullish year.

The fifth trading day of January closed at 1271.50 on the S&P, or 1.1% higher than the December 31 close.  The last 38 times the 5th trading day in January closed above the prior yearly close, the market had a positive year 33 times with an average gain of 14%.  Among the five exceptions, there have only been three serious double-crosses:  1966, 1973 and 2002.

Also, we have previously discussed that the pre-Presidential election year has not lost money since the Great Depression.

Finally, according to the Stock Traders' Almanac, the hot industries in January usually outperform the S&P the rest of the year.  Here are some industries/sectors that beat the S&P handily in January:

Oil

Natural Gas

Oil & Gas Equipment & Services
Oil & Gas Exploration & Production
Paper
Commodities ex-Precious Metals
Semiconductors

$$ A Note on Recent Cycles

The S&P bull run from November 1, 2009 to January 19, 2010 lasted 47 trading days.

The bull run from February 5, 2010 to April 26, 2010 lasted 54 trading days.

The bull run from August 31, 2010 to November 5, 2010 lasted 47 trading days.

The current bull run started on December 1, 2010.  

For the record, 47 trading days later is February 7.  54 trading days later is February 16.

$$ T Theory VO for Week of Jan 24-28

Last week's Volume Oscillator for reference

1/18 = -3
1/19 = -50
1/20 = -53
1/21 = -41


This week's VO
1/24 = -25
1/25 = -38
1/26 = -25
1/27 = -16
1/28 = -68

This post will be updated nightly throughout the week, so check back periodically for new information.

$$ Question for the Elliott Wave Experts

Pretty clearly, we are in the 3rd Wave (& 2nd Up Wave) since the March 2009 low.  Generally, I understand that Elliott Wave says that there are 5 waves in a motive move, and 3 waves in a correction. 

So my question is:  do the Elliott Wave types expect 2 more waves to make this a 5-wave motive up move?  Or do they see this as a bear market correction (and thus expect C to be "it"), and we start our next down trend once C is completed? 

$$ T Theory VO for Week of Jan 18-21

Last week's Volume Oscillator for reference

1/10 = -28
1/11 = -16
1/12 = 12
1/13 = -6
1/14 = 13


This week's VO
1/18 = -3
1/19 = -50
1/20 = -53
1/21 = -41

This post will be updated nightly throughout the week, so check back periodically for new information.

$$ T Theory VO for Week of Jan 10-14

Last week's Volume Oscillator for reference

1/3 = 29
1/4 = 9
1/5 = 23
1/6 = -5
1/7 = -20


This week's VO
1/10 = -28
1/11 = -16
1/12 = 12
1/13 = -6
1/14 = 13

This post will be updated nightly throughout the week, so check back periodically for new information.

$$ Gold and Confidence

As Terry Laundry mentioned today at T Theory Observations, the T Theory Confidence Index is rising.  During 2002-03 and 2009-10, take a look at how Gold reacted when  the T Theory Confidence Index broke out during periods of generally rising confidence:

Gold has been range bound for the last two months while the T Theory Confidence Index has steadily risen since September 1 and recently broke to new highs.  Based on past history, I would not want to be short Gold in this context. 

$$ Short Term Money Flow Ts

Over the last 6 days, we have seen the Dollar surge and the Euro weaken.  The Money Flow Ts suggest that these moves are potentially due for a rest, if not a reversal.

In addition, the short term S&P Money Flow T correctly predicted the stagnation of the last couple of days, but suggests the next cycle top will not come until the afternoon of January 28.

$$ January First 5 Recap

The fifth day of January closed at 1271.50, or 1.1% higher than the December 31 close.  The last 38 times the 5th trading day in January closed above the prior yearly close, the market had a positive year 33 times with an average gain of 14%.  If the first five days are up, but up less than 1.6% as here, 17 out of 22 years finished positive.

Among the five exceptions, there have only been three serious double-crosses:  1966 (-13.1%), 1973 (-17.4%) and 2002 (-23.4%).

$$ BKX Crushed after Mass. Foreclosure Ruling

The Massachusetts Supreme Court ruled against the banks today on their foreclosure practices, which should halt foreclosures in that state and might invalidate many past foreclosures.

$$ T Theory Volume Oscillator in Negative Territory

Tonight, we got a -5 reading on the VO.  Let's review a few recent tops to see if this tells us anything.

November 5, 2010 Top

The VO turned negative on October 19 and stayed negative through November 2 (11 straight trading days at 0 or below) before turning positive on November 3-5.

August 9, 2010 Top

The VO never went negative before the downtrend started.

April 26, 2010 Top

The VO had 4 random negative days between March 19-31 before turning solidly negative on April 16-26 (seven trading days).

January 19, 2010 Top

Had one negative VO day as warning (January 15).

June 12, 2009 Top

The VO turned solidly negative on June 3 and stayed negative through June 12 (8 trading days).

Conclusion

Unfortunately, the VO by itself turning negative for one day is not particularly predictive.  If it stays negative for a few days, we should probably be on the lookout for other evidence of a topping process over the next week or two.

$$ Silver Support

Silver is in danger of closing below its 20-day moving average for the first time in over four months.

SLV is trading at 28.12 currently.  If the carnage continues, I anticipate strong support at the 50-day moving average which is 27.16 for SLV.  There is also top bottom support in this $27.11 - 27.17 region as these were the high closes in November.  Former resistance becomes support.

$$ 14-Week Cycle Tops

Here's a chart showing 14 week cycle tops (blue lines) going back to January 2010.  If we are to follow this cycle, the next cycle top is mid-February.  

The last two cycle tops were 13 weeks apart, which would project an early February top.  

Generally, these simple price cycles agree with the Money Flow Ts calling for an early February top, as well as Terry Laundry's Volume Oscillator T.

$$ T Theory VO for Week of Jan 3-7

Last week's Volume Oscillator for reference

12/27 = 21

12/28 = 15

12/29 = 13

12/30 = 4

12/31 = -1

This week's VO
1/3 = 29
1/4 = 9
1/5 = 23
1/6 = -5
1/7 = -20

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.

$$ First 5 Days of the Year

According to the Stock Traders Almanac, the first 5 days of the New Year can be a road map for the year.  The last 38 times the 5th trading day in January closed above the prior yearly close, the market had a positive year 33 times with an average gain of 14%.

Among the five exceptions, there have only been three serious double-crosses:  1966 (-13.1%), 1973 (-17.4%) and 2002 (-23.4%).

Further, if the first five days are up more than 1.6%, the indicator is 16 for 16 in predicting up years with an average gain of 17.5%. 

A down first five days is not as predictive.  The last 23 times the 5th trading day in January closed below the prior yearly close, the market had a negative year 11 times.

We'll revisit this post on Friday afternoon.  For reference, the S&P closed 2010 at 1257.64.

$$ Closing out 2010

Very light volume this week.  Hard for me to read too much into the price action, except for two things that stand out:

1.  The US dollar is currently down 2% for the week.

2.  Silver is making new 30 year highs.

As you may recall, I have Gold and the Euro making a cycle high on ~February 8, with the dollar making a cycle low about the same time.

As for equities, I have the S&P and Junk Bonds (equity equivalent) making a cycle high on ~February 1, with volatility making a cycle low about the same time.

These forecasts are based on the Money Flow Ts, and contradict the work of many other cyclists.  However, they tend to "fit" with Terry Laundry's current thinking of a "Short" volume oscillator T expiring in February, resulting in a cycle low in March.

Happy New Year to everyone!   I hope 2011 is joyous and bountiful for you.

$$ Gold Breaking Out this Morning

After quietly basing at the 50MA the last couple of weeks, Gold appears to be breaking out this morning.  The ADX is near 10, and the green line crossed the red line this morning (on GLD).  I always pay attention to ADX crossing signals when the ADX line is low because a low ADX line means there is excellent trend potential.

This is corroborated by the Bollinger Band width which is at a several month low, implying a potential BB squeeze play is at hand.

Should Gold punch through the bearish divergence resistance line on the RSI, it would confirm the break out.  It's not unusual to see a trend accelerate to the upside when such RSI bearish divergence resistance lines fail.

To illustrate, here's an end of day Gold chart.  It won't be updated with today's action until ~5:00 pm central:

$$ T Theory VO for Week of Dec 27-31

Last week's Volume Oscillator for reference

12/20 = 41

12/21 = 54

12/22 = 48

12/23 = 28

This week's VO

12/27 = 21

12/28 = 15

12/29 = 13

12/30 = 4

12/31 = -1

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.

$$ Questions about ZIRP

The Market Ticker posed some interesting questions today:

1.  Can the Fed's Zero Interest Rate Policy "work" in a world where not everyone is following the same course?  For example, China raised their rates again over the holiday.  Or will capital flow to where it's treated best, potentially subjecting the US dollar to a Japan-like carry trade scenario?

2.  Is the Fed's ZIRP primarily about protecting the US citizens from entering another Great Depression, or is it really about preventing the recognition of insolvency of most of the large major financial institutions in the US?  Or are those one and the same?