Terry Laundry's T Theory Observations

T Theory Observations for May 2008

During May I will be providing the usual Monday morning updates in the daily charts. Wednesday of this week I will post the current Daily Advance-Decline line chart with my notes right here.

Download ADLCashBU080505.pdf

During May we will be looking for any signs of a market turnaround that can be sustained through 2008 via a new A-D T. This confirmation requires we find a new Short Range T developing in the daily indicators, so the short term picture will still be important. Terry Laundry
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T Theory Observations Update for May 12 2008.Download the current PDF file for the updated daily chart.Download SRT080509.pdf

Note the S&P has peaked as expected by the now expired Ts discussed in prior observations and looks to be headed down to the 55 Day MA at mid-Channel, currently list in the chart data as 1372. This level is the minimum correction needed before a new Short Range T can develop. If the correction is halted at mid-Channel and a small base forms at this level then a brand new large T can be generated via the now much longer green cash build up line sketched in the blue oscillator plot.

This bullish outcome is not guaranteed, but if it develops, a new Advance-Decline T will be generated in the plot I posted last week above. It will as a minimum carry the S&P to the old highs. A reason for suspecting this will occur is simply that it is very rare for an initial rally to find the blue volume oscillator already primed for a full cash build up phase even as the old T has expired. Historically it means the market wants to continue the advance in a quick-to-form new T that only need the minimum intervening correction, which in bullish transition periods, is having the S&P only fall back to mid-Channel, never much lower.

The interpretation of this singular pattern is that much more buying power is available than was suggested by the initial T that arose from the key Accumulation Low. When using Short Range T analysis to decode T Theory forecasts this is an inherent problem. Each New T can see the next step, but it isn’t privy to the potential for the a sequence of steps that might comprise a longer term trend. However historical patterns of how Ts evolve in succession can point to the possibilities, and that is what I am concentrating on at this point.

There is a fine point that it might be wise to concentrate on for next weeks action. First, in a bullish transition from an old expired T to a new T, the S&P has always first dropped back to the the 55 Day MA first, therefore providing a buy point criteria that is easy to spot. A slightly complicating factor is that within this bullish transition the blue volume oscillator doesn’t like to spend much time below the zero line.

A glance at the daily chart shows the S&P has not yet reached the 55 Day MA, therefore any new bounce should not be the beginning of a new T. On the other hand the Oscillator has dropped a bit below the zero line, so some sort of bounce might be expected. Taken together this pattern implies the new T is not quite ready to start until the next upside pop fails, and the S&P falls back to the 55 Day MA.

T Theory Observations Update for May 5 2008 All the daily Ts noted in my last weeks update have expired their life time, so they are no longer relevant to the long term picture. Instead I will turn my attention to the current daily chart and focus on the possibility for a new Short Range T that could, under certain circumstances get the market moving up, after corrections, with sufficient momentum to confirm a potential new Advance-Decline T.

Nothing important is likely near term because the expiring Ts will limit any further upside momentum and reasonable corrections will set in. Once these corrections bring the S&P back to its mid channel 55 day MA, now 1367 as noted in the chart data, then the picture gets more interesting. Download the current PDF file for the updated daily chart. Download SRT080502.pdf

The main point is to have the needed corrections back to mid channel but not all the way down to the green dash oversold envelope. During this process the Cash Build Up period, denoted by the dark green descending oscillator peaks trend line, can develop into the left side of a new T that can advance the S&P via a more significant Advance-Decline T.

If the corrections hold around mid channel then the new T could get underway by the end of the month since the cash build up line is already relatively full sized, but certainly by June. If the S&P breaks well below mid channel (the black line) then no bullish A-D T is likely and the bearish trend will likely resume.

Generally speaking history shows the S&P action around mid channel will clearly indicate the outcome, but for now we need to wait for the correction pattern to settle the issue.

T Theory Observations for April 2008

During April I will be providing the usual Monday morning updates in the daily charts. Terry Laundry

T Theory Observations Update for April 28 2008.The market is limping upward to the current Short Range T’s projected peak at month end as noted in the updated PDF chart below. You should download the file now.

Download SRT080425.pdf

Looking over the daily chart we also see another interpretation of the T time symmetry that I discovered in 1973; the simpler Price T. These Time symmetry’s are simple to construct because they only make use of the S&P 500 daily “price” bars, but they may not be completely reliable under certain instances.

Nevertheless this S&P price T says that the rally from the mid January momentum low should only be able to last for as many days as the decline from the mid October true intraday price high, down to the S&P to the Momentum low. Remarkably the Simple T’s projection of its peak date is roughly identical to the volume Oscillator T ‘s projection of a late April peak as you can readily see in the chart.

For this period therefore we can be more confident that a peak is on tap next week and it is more likely to be an important one. Longer spanning Ts are generally more appropriate when the longer term outlook needs to be understood. This price T will be needed as we move along in May.

Looking ahead to next week, it seems possible that the Federal Reserve may disappoint, either by no cut or one last small cut. If so, it might seem that this price T was not the basic cause for a topping. But if we can show some persistence to the late April peak, then the larger Simple T will become the more powerful tool in T Theory to look ahead to the next important oversold condition.

T Theory Observations Update for April 21 2008. Good earnings and a positive market reaction to them has perked the current Short Range T’s advance as noted in the updated PDF chart below. In May I will delve into the criteria for sustainability via a potential new longer term Advance-Decline T, but for now we are getting close to the current T’s project top date which will be near the end of April.

Download SRT080418.pdf

Looking over the daily chart we see, thus far, that the Accumulation low pattern has produced a persistent S&P advance during the right side of the current T. With further time remaining, the S&P 500 should be pushed into the upper red dashed envelope S&P 1428 as noted in the data at the top of the chart. Very soon we will be able to see if the behavior beyond the current T’s expiration during May will allow a new Bullish type of Short Range T to get started within the context of a more important upturn that could become a new, longer range, Advance-Decline T. Any chart of the daily NYSE A-D Line will show a decline from mid 2007 to the last low of about 11 months so that is the maximum duration of any new bullish trend, if confirmed.

Obviously the A-D line needs to become stronger than it has been, but this, in its self, is not sufficient to reverse a downtrend with any conviction. The only criteria that would be very interesting would be a completely bullish pattern that is singular in nature, much like the Accumulation low. A true bullish trend requirers a new Short Range T to develop while the S&P 500 pulls back to the 55 Day MA, S&P 1356 currently, but does not penetrate the 55 day MA to the downside, as the next T completes its left side cash build up phase. In this case the new T can then launch an new uptrend while both stock prices and the A-D Line are firm.

Any outcome that is significantly weaker will result in a half hearted attempt that will ultimately fail. So for now we will only watch the current small T close out its time symmetrical projection then gauge its final performance.

T Theory Observations Update for April 14 2008. On Friday General Electric shocked Wall Street with its unexpected negative causing the S&P to break below the key 55 day MA support level as shown in the updated chart. Download its PDF file from the link below.

Download SRT080411.pdf

This is a sign of weakness as I have noted in the chart by the text “weak” and suggests we may be seeing a topping formation much as we saw in December. If so, one more short term rally is all that this T may be able to provide, followed by resumption of the long term bear market to a lower low in a new June/July oversold condition.

Exactly how this develops will be dictated by the flood of new earnings reports coming out over the next two weeks and the market’s reaction to them.

T Theory Observations Update for April 7 2008. Last week the S&P popped up above the 55 day MA as shown in the updated chart which maybe be download from the link below. This confirms a new very small T as shown in the PDF file which will support the market through the April earnings announcements.

Download SRT080404.pdf

The T is constructed by the usual conservative procedure of splitting the double bottom in the blue volume oscillator to locate the T’s center post location. In this case the twin lows form an accumulation pattern which I define as a rising bottom in the oscillator with a simultaneous lower closing low for the S&P on the second bottom. This ACC pattern is stronger than a simple rising set of bottoms which probably accounts for last week’s sudden break above the 55 day resistance.

To complete the time symmetry for the record; we simply say that this is an example of a so-called bullish type of T, that is one which is characterized by maximum strength coming out of the center post lows followed by diminishing upside momentum as the trend slides towards the T’s right end date. The time projection of this T’s right end date is calculated by the basic time equation which requires the the number days from the second oscillator low to the projected date of the S&P peak will eventually become equal the number of days from oscillator peak at the left end of the T down to the first center post low in the Oscillator. I will detail this calculation in the next update as an illustration. History shows these time projects for tops are OK as a general guide but the channel bounds in the S&P plot will become more informative in the weeks ahead.

As I noted last week, any new strength would likely produce an overbought condition quite quickly and this can be seen as true by referencing the volume oscillator’s condition. However once the S&P has broken above the 55 day MA is becomes support on any corrections within the right side of the T. So being overbought doesn’t mean the S&P will fall below the mid channel 55 Day black line, rather it may sit on it for short periods, then advance further for the T’s duration.

The T’s estimated time peak for the S&P is better interpreted by expecting the uptrend to reach (or come close to) the upper red dashed bound of my envelopes, currently listed as S&P 1439 in the chart data. Knowing what should happen in both price and time provides the better way to monitor the projected T’s trend.

T Theory Observations for March 2008

During March I will continue to focus weekly on the daily chart as the new Bear Market is moving faster now and there are some important T Theory concepts I want to discuss as practical applications to real situations. Updates will usually be made before the market open the first day of the week as usual. Terry Laundry

T Theory Observations Update for March 31 2008. Last week we saw the S&P peak near the 55 Day MA as noted in the new PDF daily chart. Download the PDF file to see the updated daily chart.

Download SRT080328.pdf

If this initial decline continues, a new Short Range T center post low should develop around the old lows and we will have plenty of time to study this picture.

Until then, I will point out some of the alternatives that really depend on pending earnings news as we move into April and technical factors such as the normal peaking of rallies going into the end of a month.
An only significant alternative is Wall Street’s current technical infatuation with the implied bullish prospects of the bottom pattern noted in the chart and the recent rate cuts. This will be pitted against the fundamental negatives that could be forthcoming in the new April earnings reports.

If the market turns up from here it is possible to force a premature T formation that will push the market into an overbought condition quite quickly. However in such cases were real bullish potential has existed historically, the blue Volume Oscillator never dropped below the neutral zero line. Since the level was penetrated on Friday’s decline, don’t believe this is the most likely outcome, but possible.

T Theory Observations Update for March 23 2008.Last week we saw the S&P break below the January lows as noted in the new PDF daily chart, then reverse to the upside, leaving a standard accumulation low as noted in the chart by ACC. This unique pattern is identifiable by the red rising bottoms in the oscillator at the same time the S&P was making the lower low. Download the PDF file to see the updated daily chart.

Download SRT080320.pdf

This is sufficiently positive to allow a new Short Range T to develop and push the S&P up to overhead resistance. However the current rally is unlikely to be the beginning of the new T. It is more likely that the 55 day MA (now at 1360) will mark upside resistance one more time causing another short downward correction. That new correction is likely to end at the center post low for the new T, after which, the S&P should break above the 55 day MA.

Within a long term decline a good rule of thumb is that rallies rarely ever last for more than 7 trading days, primarily because the buying is motivated by traders rather than investors. Also the overhead resistance tends to limit the advance as selling can be expected once it is reached or penetrated.

T Theory Observations Update for March 17 2008. Last week we saw a very volatile market but the S&P was not able to break below the January lows as noted in the new PDF daily chart file below. However the market will open down this week so we will have a chance to see what the expected selloff will produce in the daily chart. Download the PDF file to see the updated daily chart.

Download SRT080314.pdf

This selling wave is the just a piece of the gloomy long term outlook forecast by my discovery of a 40 year cycle that calls for a compressed correction for the whole 1974 to 2007 bull market over the next few years. How to analyze the long term downtrend using T Theory will require another week or two of data to size up the eventual formation of a new T using the developing cash build up sketched in this week’s chart.

T Theory Observations Update for March 10 2008 As projected last week the S&P 500 has dropped to the lower green envelope.

Download SRT080307.pdf

Moving on, the updated PDF file above shows the S&P is also approaching the key “Last Low” noted in black on the chart. According to my 40 year cycle work the S&P will break below this potential support level as part of a very long term correction to the 1974 to 2007 bull market period.

During this 33 year up trend, many financial excesses have developed and this long cycle that I have tracked over the last 200 years will require an exceptionally steep correction over the next few years in order to round out the 5th 40 year cycle in the last 200 years of U.S. financial history.

This basically means there should be no trouble in making a 3rd sharp Down Wave that carries the S&P to lower lows. Once this occurs we can start looking to the center post low for the next Short Range T which will begin some sort of recovery, but only after the green Cash Build Up line has matured further.

T Theory Observations Update for March 3 2008.For this week I am continuing the theme of my pure price “Envelope Theory” vs pure time “T Theory” concept introduced in last week’s update. Last week’s projection of a rally failure near the 55 day MA has come to pass and the S&P has begun a new decline.

Download SRT080229.pdf

In the updated PDF file above which you may download we see that small blue T sketched in the volume oscillator has expired its alloted price time from the mid January center post low because the S&P rally was limited to the same time period as the prior green cash build up time. Looking ahead I have sketched a new green Cash Build Up phase using the current declining tops pattern in the volume oscillator, which in time will define the left side of a new T. We will just wait on this pattern to evolve.

In the meantime the failure of the S&P rally at the 55 day MA implies a quick decline to the lower dashed green envelope of my adaptive channel in the upper portion of the chart. The data at the top of the chart lists the target value for the lower envelope as S&P 1297. Once we see this level being approached we will have to watch the rally attempts more closely.

T Theory Observations for February 2008

During February I will continue to focus weekly on the daily chart with updates coming on Monday morning, usually before the market opens. My current major research however is on the 40 year cycle and I hope to introduce this new subject when it is ready later this month or in March. Terry Laundry

T Theory Observations Update for February 25 2008.For this last week in February I am moving on to a discussion of my pure price Envelope Theory vs pure time T Theory in order to refine the near term outlook using the new PDF file below. Looking at the basic T Theory forecast from a price vs Time perspective is helpful because often one or the other will provide the better insight. This is one of those times as the next week will bring some resolution, but the outcome should be bearish in either case.

Download SRT080222.pdf

When you download the PDF file you will see the pure price projection of the A-B-C wave leading into the mid August 07 low. In the Blue Volume Oscillator you can see the small T and its pure time projection that calls to an end to the current rally in a week or so. Together these two concept call for some sort of collision in a short time and I want to discuss it before the trigger sets off what could be a new downtrend.

First lets look at the A-B-C wave going into the mid August low. The key here is that after an oversold condition, a recovery via the B wave nearly always occurs up to the 55 Day MA, at which point a new selling wave is sparked by the neutral channel position that attracts a later group of sellers. Historically this pattern is very common and most C waves are a bit scary but runout quickly. However under certain potentially explosive situations where investors have already become very negative about the equity outlook, the spark of selling produced when the up-wave touches the 55 Day MA can produce a 1987 type of selling climax with the help of the large leverage factors inherent in the ever lurking derivative markets.

This is my major concern over the near term because my 40 year cycle study conclude that by the time we reach the next major low in late 2010 we will either have experienced the relatively slow moving 1973-74 bear market or the much faster 1929-32 bear market. I believe the faster bear market is very possible but we would have to consider all the possibilities and how it could play out in this chart.

The simplest case would be to have the red S&P rise to meet the black 55 Day MA in a second retest of the Overhead Resistance line I have placed in the chart. An alternate scenario is to have the S&P move sideways until the declining black line can meet up the the S&P. Either way a touching of the S&P and its 55 Day MA should trigger a new “late selling wave” that will take the market down hard. Because we are in a long term decline the net result will have to be ugly and damaging, but there would not necessarily be any concrete suggestion of a fast bear market.

The limitation of this scenario is that the small T will be ending its support after a week and small Ts usually get very soft in their support in their late stages time-wise. The best they can typically do is promote a “flash in the pan” rally like we saw in the last hour on Friday. This raises the risk that under extreme conditions the S&P will fail to rally back to the 55 Day MA before falling away in a new selling wave that carries it to new lows.

Any evidence that a new decline is unfolding without an upside retest of the 55 Day MA implies an accelerating decline which may in fact be the faster bear market trend. Confirmation wouldn’t come until the S&P fell well below the old January lows and well under the dashed green envelope but the derivative market can make that happen fast, so it pays to keep an eye on these concepts for clues as to what might be happening.

For the present that is about all I care to comment on, pending another week of data. In the mean time these price vs time alternatives should be sufficient to figure out what is likely, and soon enough to make any necessary decisions.

T Theory Observations Update for February 18 2008. As per my last week’s update, the Nature of the Short Range T picture updated in the PDF file below, has left the market “boxed in” a price range for the S&P 500 roughly defined by the two red horizontal lines Resistance and Last Bear T Low.

Download SRT080215.pdf

Time-wise the next trend is limited by the fact that a new Short Range T is needed and a few more weeks for the “Next T’s Cash Build Up” will be necessary before the new T will kink off the next phase.

It is true that at some point the new bear market, forecast to begin in the late fall by the larger Advance-Decline T should cause the S&P to fall below the lower red line in order to continue the decline into my projected late 2010 bear market low. However rallies along the way are likely so we need to study the possibilities for both a nearer term bearish and bullish outcome, independent of the longer term trend.

When you view the daily trends over a long period, say from the 1974 low, some of the Short Range T patterns have interesting relationships, however so not much is fixed in stone that we can absolutely count on. Essentially the sequence of Ts that we see in these daily charts evolve to adapt to some larger ongoing requirements which are constantly being buffeted by conflicting factors around the longer term trend.

Generally the adapting nature of the Short Range Ts is made possible by the variability in T behavior. In these daily charts, Ts can either be bullish or bearish in nature. The Bear T collapses in it right side while the normal bull T advances in its right side. This variation in behavior from one T to the next allows a a wide variety of trends to unravel.

However the transitions from one T to the next is generally limited in a bear market to two, and only these two need to be watched for in the weeks immediately ahead, as we await the next T’s Cash Build up to grow in time;

either the S&P declines slowly to the lower support level at the old Bear T lows, and holds these old lows, as the new T gets underway in a strong bullish T that can lift the S&P back up to the overhead resistance

or

the S&P declines and breaks below the Last Bear T Lows and the bear market trend continues to much lower levels, then tries a rally from a lower S&P level.

In either case more time is required, so we can watch the pattern develop.

T Theory Observations Update for February 11 2008.For this week I am going to summarize some of the serious problems my T Theory sees for the market as noted in the PDF file below. In later weeks I will discuss these concepts in greater detail.

Download SRT080208.pdf

The first and foremost negative was the projection of the Advance-Decline T of a Fall peak last year thereby ending the early 2003 to late 2007 bull market in line with prior discussions. Note the apparent base defined by the Jan’07 and mid August’07 lows was recently broken and will now act as overhead resistance despite the big Fed cuts. Longer term we are therefore in a bear trend estimated to last until the Fall of 2010.

During these long declines the Short Range Ts are forced to collapse within their right side producing the Bear T as noted in the chart. This collapsing allows down trends to be maintained while the T’s time symmetry still tries to project peaks at the right end. The Bear T’s right end rally ran into the upside resistance as noted in the chart and that move has pretty well been exhausted.

The next requirement for a rally will be the formation of a new T’s Cash Build Up phase as represented by the green line extend to the future weeks. These oscillator declines must start from the highest oscillator peak within the right side of the prior T.

Thus the strong rate rally has left the market boxed in both price and time and without any easy way to get a new T started at least for a some weeks. In the mean time the market will try to hold the old S&P lows at noted, but I don’t see how the market can sustain the holding pattern needed to generate a new T while contained in a well developed longer term down trend.

Therefore I would expect an eventual failure to hold the old lows and a continuation of the down trend, probably into March.

T Theory Observations Update for February 4 2008. Despite my negative interpretation of the volume oscillator the big Fed rate cuts have triggered a strong initial response. For now T Envelope Theory sees only two practical outcomes; A topping at the 55 Day MA currently 1423, or if penetrated significantly, up to the red dash line as a maximum. I will need another week of data to refine the picture.

You can download in the PDF file below to view the current daily chart.

Download SRT080201.pdf

T Theory Observations for January 2008

T Theory Observations for January 28 2008 I still have to take note of the negative declining bottoms trend in the blue volume oscillator as per the red arrowed line for this week’s daily chart. This is getting serious. See the PDF chart link below.

Download SRT080125.pdf

It is possible for a further rally to get under way near term but I would be wary that all we will see is a sideways trend followed by a new very sharp selling wave. Note that the oscillator went very low at the center-post of the last T in March ‘07. Since we have seen no such comparable conditions, the safest conclusion is the usual selling climax that marks a new Ts bottoming, lies ahead.

This is very dangerous because the S&P down trend is accelerating but has never quite washing out. Based on my 35 years of watching this oscillator I would say its current pattern reminds me of the days prior to the 1987 panic.

T Theory Observations for January 21 2008 I am still looking for a rally up to the 55 Day MA. But this week I have to take note of the negative declining bottoms trend in the blue volume oscillator. See the PDF chart link below.

Download SRT080118.pdf

What the market really needs to produce any sustainable rally is a rising bottoms pattern as noted by the rising green line at the August ‘07 low. Any time the oscillator makes a rising pair of lows while the market averages remain under severe selling pressure, it is likely the potential sellers have become sold out, at least temporarily, so a decent recovery can get underway. The current declining bottoms suggests an acceleration in selling which could lead to a greater panic near term before a good rally.

Generally it would be safer to see a rising oscillator bottom pattern before anticipating any decent rally due to the steepness of this decline. Regardless, the 55 Day MA will prove a difficult upside resistance level since we are in a long term down trend.

T Theory Observations for January 14 2008 We appear to have entered the long term bearish trend projected by the Advance Decline T based the recent weakness. As a result rallies are expected to peak at the 55 day MA in the PDF chart below.

Download SRT080111.pdf

As noted in the chart by the black arrow this MA is definitely trending lower and rallies should peak just above the 55 Day MA, currently 1467 and falling slightly over time. The S&P is clearly oversold, and a rally can be expected at some point during January.

Also I am in the process of placing all the sites copyrights under the Creative Commons license. Click on the link at the upper left.
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T Theory Observations for January 7 2008 As we have been discussing in the regular Monday updates, the daily indicators have been weakening in line with the Long Range T Theory forecast, which for this period is based on the NY Advance-Decline Line T coming out of the late 2002/early 2003 low, and which technically calls for a September 2007 peak. This concept is, to my knowledge, the best example of the time symmetry I call the Law, or more politely, the Theory of Matched Trend Time. It has no serious time projection errors since 1929, so as we begin the new year I have to say my T Theory is absolutely and unambiguously bearish for the next few years, most likely into late 2010.

To add perspective I have presented the average bear case in the table at my first posting for the year (see below) summarizing the last 14 serious (-34%) bear markets. Of primary interest at this time is the frequency of the 14 declines over almost 80 years for an average interval of 5.7 years. Thus it would not seem unusual to be starting a new bear market some 7 years after the last. The second point of the table, that might not be clear to experienced long term investors, is that basic math can be a big help in growing money from two vantage points.

Very Long Term, that is over your adult life time, the biggest math helper is compound growth. This needs to be assisted by a discipline that insures steady, even if unspectacular gains, with no serious losses to interrupt the compounding over some 30 to 50 years. The second math helper, illustrated in the table is the major profit opportunity that arrived at each of the major lows noted here. As we all know, suffering a 50% loss requires a subsequent 100% gain to “get even”. But with the Advance-Decline T forecast of key peaks, one should avoid the worst, and if patient, concentrate on identifying the next major low. I will work on this aspect with special long range studies to be posted at the first of the month during the new year.

In the meantime let us look at the daily chart which can be downloaded at the link below.

Download SRT080104.pdf

The “Bears” would say this PDF chart shows an “ominous top formation” up around the S&P 1530 + level, while the “hopeful Bulls” might point to a potential triple bottom near 1410, that could be “Bull Market Support”. I say my last small A-D T couldn’t hold the market up, so I expect an eventual break down which will confirm the Long Range A-D forecast is underway. However before we get going with the more serious work, it is worth while letting the bearish confirmation develop next week.

In a few cases the A-D T projection got hung up in a trading range before the major decline in the table got under way. It is always possible the US Gov’t will try to bounce the market from this critical triple bottom level. They could, for example, reduce $100 Oil concerns by opening the Petroleum Reserve or perhaps make a major effort to prop up housing. But I wouldn’t be overly influenced by any rallies at these levels because I think the bear case is fundamentally and historically sound.

By next Monday the outcome should be clearer from this support level, and we can get to work on new Short Range Ts, etc .

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January's Long Term Comments As we begin the new year I plan to continue Monday morning postings here of the Short Range T and daily Indicator charts in PDF format. Also starting this year I will also post long term charts and table that represents my current research efforts for the very much longer trends, with these charts being posted only at the beginning of each month.

So as we start January 2008 I have posted below my first long term table showing the summary of major swings in the S&P 500 benchmark since the 1929 peak. You may download this table in PDF format and consider some of its long term conclusions. The data is being reviewed for accuracy but I don’t believe there are any serious errors.

Download asic_sp_swings080102.pdf

During the year we will be working with my Long Term Mega-Ts and the daily Advance-Decline Ts since 1929 to explain this history. The table make use of the common definition that a bear market can be defined by any 20% decline in the benchmark S&P 500 from a prior peak. This table shows peaks from which there was at least a 25% decline to the next low. The percent decline and approximate number of months to the next low follow. The table then goes on to record the subsequent bull market recovery, summarizing the duration and percent gain in the S&P 500.

As usually the weekly updates will come on Monday morning, usually before the market opens. Terry Laundry

T Theory Observations for December 2007

T Theory Update for December 31 2007 As per the PDF chart below which you should down load, I believe the S&P is only poised for a short rally during the first week of 2008, after which the weakening Advance-Decline Line chart readily evident in the chart will begin to roll the market downward into a new long term, 2 to 3 year bear market amounting to some 35% or more in the popular indexes.

Download ADT071228.pdf

We will have plenty of time to study and refine the technical picture during the new year. The critical point I am noting in today’ chart is the very weak green A-D line trend in the chart which confirms, at least in my mind, the Big A-D Ts forecast from the late 2002/early 2003 double bottom of a projected peak in the late Fall of this year is gradually beginning to take affect.

The small Last A-D T is my best current judgement for a T Theory time projection of a final market top, but in a weak environment, all that can be expected is 2 or 3 day rally in the blue volume oscillator before a new overbought condition halts the recovery attempt. After that we may lose the long term momentum which is becoming dangerously negative.

During 2008 I will produce a long series of such T forecasts starting back from 1929 in order to summarize the bear market history from a long historical perspective. In general once an A-D T has been confirmed, the market usually begins the new bear market, but sometimes the market hangs up in a trading range before the major down trend begins. Subsequent declines average over 35% on any of the general market averages and takes some 2 or 3 years to be completed. We will check this out next year.

Next update Monday Jan 7 2008.

T Theory Update for December 24 2007 Best wishes for the Holidays. Upside progress is satisfactory as per the latest chart below. Next update Dec 31.

Download SRT071221.pdf

T Theory Update for December 17 2007 This week the S&P has corrected severely but I believe there is still enough upside left in the recent recovery to bring the market up to an important peak in line with normal seasonal and end of month characteristics which I discussed last month. I would look for the peak at year end or early January based on the daily Advance-Decline T shown in today’s posting below but would further refine it in terms of the S&P 500 red dashed upper envelope which looks for a high around 1542 on the cash price during an expected price surge into the new year.

Click on the link below to download the December 14th daily PDF chart.

Download SRT071214.pdf

Also included in the chart is the horizontal blue line with arrows at each end representing the much longer range Advance-Decline T coming out of the late 2002/early 2003 double bottom and its precise theoretical daily projection of a September 17 2007 long term peak. The October peak, just above 1570, is the actual level which I would take as the most optimistic benchmark high for this completed T and therefore a probable historic peak for this bull market. It could be retested on any new rebound from a late February or March low but otherwise I will stand by it as a T Theory long term projected peak reference level for the S&P.

If you wish to read my long winded version of this T, go to the long term discussions link at the left and read the 2005 A-D T General Discussion. Otherwise I will summarize the current picture in next weeks discussion and during the 2008 observations will lay the ground work next year’s long range bearish T Theory forecast. Three years ago I assembled the continuous Advance-Decline history from 1926 and convinced myself that their were no serious errors in its contention that when the market averages rallied a time equal to the prior decline in the A-D line, the the bull market in effect was “dead on arrival”.

This will be our first new project during the new year. In the meantime we will watch the smaller A-D T’s projection of one more surge into year end.

T Theory Update for December 6 2007 Contrary to my expectations, the S&P 500 broke well above the 55 day MA resistance level thereby confirming the Short T sketched into the new Chart below.

Click on the link to download the December 6th daily PDF chart.

Download SRT071206.pdf

As long as any set back holds at the black 55 Day MA, the trend should remain up throughout most of the right side of the T. The upside price objective is the red dash line which marks the normal upper envelope which typically contains advances. Note this rally will be quite short in duration.

T Theory Update for December 3 2007 The S&P has made its expected bounce up to the 55 Day MA of the S&P as noted in this weeks chart. Click on the link to download the most recent daily PDF chart.

Download SRT071130.pdf

I do not expect the recent bounce to develop into a sustained move to the upper red channel (via any new Short Range T) because there is as yet no recognizable rising bottom in the blue volume oscillator nor any sign of a selling climax to have washed out potential sellers. I will comment of these factors later in December as I continue my weekly Monday morning updates.

In the meantime any sign of near term topping around the 55 day Ma implies a return to the recent lows with a final washout that could set the stage for a stronger recovery into the new year.

T Theory Observations for November 2007

T Theory Update for November 26 2007 The S&P has been in a correction mode long enough to begin an sharp upside “pop” as we close out this month, perhaps continuing into early December, but probably only up to the 55 Day MA of the S&P.

Click on the link to download the most recent daily PDF chart with key my oscillator trend lines and the current S&P moving averages.

Download SRT071123.pdf

I still do not believe we have found a basis for a new Short Range T’s more sustainable rally but the triangle pattern of declining peaks in green (a potential cash build up line) is running into a shallower declining bottoms pattern and should have produced enough downside compression over recent week to require an upside technical bounce of a week or two. This rally in the S&P (etc) should begin as we close out November, but will likely peak in early December around the S&P 55 Day MA because the declining bottoms pattern in the blue volume oscillator does not show the required accumulation pattern (rising bottoms) needed for a sustained rally.

Last month I had an interesting conversation with Peter Eliades (www.stockmarketcycles.com) on his extensive research of Norm Fosback’s initial discovery of the historical significance of end of month rallies. Eliades concluded from his recent research that if one looks at market trends from 1929 to the present, nearly all the overall equity profitability of this 78 year period is in fact compressed within the abbreviated segments beginning a few days before the end of any month and ending a few days into any new month.
In terms of my chart, Peter is saying that most market gains, from the very narrow short term traders standpoint, occur starting just from the left side of the monthly division markers that I have programed into my chart to separate one month’s data from the next, and lasting a few days to the right of this marker.

Like all concepts, including my own, there are exceptions to any of these hard and fast rules. For example the probability of gains beginning from late October and lasting to early November did not materialize as well as the average case would expect. From T Theory perspective this would be expected because the small Advance- Decline T was expiring at the end of October in an overbought, toppy fashion so the market was in this instance vulnerable. See the prior updates.

However the situation is now completely reversed and a sharp recovery would be expected as we move to close out November and enter December. Next Monday I will comment further as I hope to see this recovery pattern develop.

T Theory Update for November 19 2007 The S&P is in a normal, but yet incomplete correction mode, as illustrated in the PDF file below. Click on the link to download the most recent daily chart.

Download SRTSMTO071116.pdf

Strictly speaking, T Theory has no detailed insight into the nature of a market decline once one of these Ts expires near its right end date. It does however claim that no new significant rally can occur until we see the conditions being set up for a new T which we can determine over the next few weeks.

In the present case the big blue T and the small Advance -Decline T, discussed in earlier updates, together produced two peaks before the full decline set in. So we know the market buying power (which is assumed to be generated during the Cash Build Up phase of the T in its left side) has been near term exhausted. Thus a significant decline in terms of the upper red and lower green envelopes, which generally define the S&P’s trading range, is normal. We also suspect the more significant longer range Advance-Decline T from the late 2002/early 2003 lows, which have always contended that some sort of top in the market’s much longer term will occur during late Fall 2007, is probably correct, since the A-D Line was weak on the last rally into October.

However, based on history of long term peaks, it is also likely that any important top be completed as a series of sequential S&P peaks and valleys which technically can be interpreted as a “distribution zone” prior to the beginning of a more serious long term decline, usually into the next sequential 4 year cycle low, which I have previously interpreted to be roughly Oct 2010. This long term possibility will be my primary topic for my weekly T Theory Observations during 2008. Generally, I see one more rally in a new Short Range T whose left side cash build up is represented by the green descending line in the updated chart above.

If so, we can now put into place some of the T Theory conclusion that we will need next month to prove (or disprove) my thought that one final rally will begin, once the blue volume oscillator can break above the green descending cash build up line and trigger the initial rally of a new T.

I believe this new T’s “purpose in life” is to “suck in” the last upside potential for this major top, probably using a December surprising rate cut, once the Fed recognizes the impending real estate driven recession potential looming into 2008. According to T Theory this negative fundamental will more likely last into late 2010 as the many diverse negatives in the US economy (declining real estate values, ascending power of Asia, and the declining influence of the US due to mismanagement at the highest levels, etc) begin to snowball into 2010.

But near term, if all goes well with this thesis, the S&P will rally from an eventual low near the green envelope or the 200 day MA (or slightly lower) and then “blow off” on the news into the new T’s rally early in the new year that will be at the red upper limit of the channel. Beyond, the more fundamental negatives will likely exert their downside influence thereafter.

The near term problem in this scenario is the lack of a climatic volume selloff in terms of the Arms Ratio, invented by Richard Arms, but also referred to as TRIN, an acronym for the “Traders Index”. From its perspective, oversold conditions require a selling volume “wash out” of potential sellers before any important rally can begin. None has occurred in this decline, but should occur by December, or at least before the new Ts gets underway.

A sharp selloff could occur this week but with “Turkey Day” coming, investors might let this needed piece of the puzzle be delayed. In any case, if it happens it will produce one low, but perhaps not the final low. In the meantime I am finishing my historical charts on the Arms Ratio and should have it and its conclusions ready for my next Monday’s Update.

Any near term rally from an oversold condition, no matter how it is defined, should peak at the 55 day MA, now listed in the Friday chart date at 1502 (cash price), but declining over time in line with the ongoing correction. Only after this secondary decline from the 55 day MA runs its course, can the year end rally develop via a brand new T.

So the time for any major advance is not likely during November, however a bounce can occur to the 55 Day MA on any selling climax.

T Theory Update for November 12 2007 The completion of the Small Advance-Decline T discussed in last weeks posting has started the S&P 500 slide which we now find approaching the normal green low envelope around the 1460 level as per the updated chart. See the PDF file below for the current chart.

Download SRT071109.pdf

In order to find an actual low with enough of a basing pattern to begin the next Short Range T’s advance, we usually need to first find the rising volume oscillator bottoms pattern denoted in the chart by the red rising arrows. This requires a new rally that fails, as a minimum, so we need to watch the blue oscillator pattern evolve.

In the mean time the S&P 500 could reach down to its old August lows, but I am not looking for at repeat scenario, just on a contrary opinion basis. It is true that the long term A-D T (detailed in the long term Archives) could be expiring and eventually this should prove negative for the primary trend.

But it has been my experience that serious long term peaks for equities try to pull everyone into a bullish stance at the final peak. This is usually accomplished using a shorter than normal T that produces a short, but powerful, upside blow-off. This may not happen, but I would look for it based on prior history. Such a rally could begin in December.

T Theory Update for November 5 2007 Last week saw the completion of the Small Advance-Decline T discussed in the The October 15 2007 posting.

See the PDF file below for the updated chart.

Download SRTADL071102.pdf

Looking ahead it is likely we will see a decline to the lower end of what looks to be a sideways trading range since the A-D line has made a lower peak at what presumably is the the end of the small A-D T.

In any case we need to let the next oversold condition develop naturally before looking for the next Short Range T that might be expected to produce the normal year end rally. It usually develops after tax loss selling for the calendar year has run its course.

Terry Laundry

T Theory Observations for October 2007

The October 29 2007 Short Range T Update Last week saw the S&P begin its final rally for the current T coming off the 55 day MA support level. See the updated chart at the link below.

Download SRT071026.pdf

The peak for this phase is likely to be in the early November period after which a correction should occur as we move further into November. Next week I will begin the theory of the new T which should provide a good rally to finish 2007.

The October 22 2007 Short Range T with Envelope Theory Update Last week saw the S&P drop to 1500 near the 55 day MA support level 1510 which should provide its normal support for a brief ( like 5-7 days or so) rally. See the updated chart at the link below.

Download SRTSMTO071019.pdf

Two weeks ago I wrote that the recent history for this bull market has been to see the up-trend signal its topping by first falling to the black 55 day MA line at the mid channel of the envelopes, then rally back up to the old highs near the upper red envelope and finally fall more seriously to the lower green dashed line marking the lower envelope. This sequence can be seen during the earlier June/July period in this chart.

The new piece of information from last week came on Friday when the Arms Ratio (also known as TRIN) rose to the extreme high of 3.5, in line with its extreme oversold reading that occurred at the mid August Low. This technical overbought/oversold indicator was developed by Richard Arms and can be searched on the web for a more complete description if you are interested.

I have produced many long term studies of this indicator in the past and finally concluded that its usefulness was largely confined to the very rare cases when its value deviated very far from its neutral reading of 1.00. This occurred in mid August and again last Friday so some sort of rally is likely if the S&P can gain footing not too far below the 55 Day MA.

So for this week I will be looking for evidence the S&P can stabilize at the 55 DAy MA then mount a sharp rally into the old highs for a brief period, typically a week or so. Next Monday I will repost and we will see if this indicator is worth adding to the bottom of the current chart for those rare times when it has something important to say.

The October 15 2007 Short Range T with Advance-Decline Line Update The general status of the indicators in the updated chart below continues to be an overbought market but one with sufficient upside momentum to reach the current T’s projected early November peak. Note the S&P 500 is steadily riding against the upper envelope limit.

Download SRTADL071012.pdf

Also note in this update I have replaced the lower volume oscillator plot with a simple green Advance-Decline Line plot for the NY Exchange and added a simple time symmetrical Advance-Decline T in red. Both the regular Volume Oscillator T and this simple T project a late October or early November peak.

The October 8 2007 Short Range T and Envelope Update The general status of the indicators in the updated chart below continues to be an overbought market but one with sufficient upside momentum to reach the current T’s projected early November peak.

Download SRT071005.pdf

As long as any significant corrections hold the 55 day moving average at the black line in the chart, currently 1497 and rising, the projected up trend is OK from a historical perspective. In the recent past the pre-warning of a more important correction has come when the up-trend weakened to the point that a correction down to this key support level was necessary, after which, a bounce up to a retest of the old highs followed with greatly diminished enthusiasm.

If no such weakness sets in during October, a better way to confirm this Volume Oscillator T’s projection, which you can see is derived from the distant March 07 low, is to switch over to a shorter term Advance-Decline T with its center post in the mid August period. This very much to be preferred because the projection time is much shorter.

You can do this on your own for now, but I will switch to a daily chart of the cumulative NY Exchange Advance-Decline Line in my next next Monday posting, and from then on, I will work out the more precise time symmetry in order to illustrate the basic T Theory time symmetry as a real time example.

The October 1 2007 Short Range T and Envelope Update The S&P 500 plot relative to its Red and Green (Max and Min) envelopes and the Volume oscillator as noted in my updated chart at the PDF link below are both in typical market over-bought conditions, so minor corrections can be expected within an overall up-trend. T Theory sees the momentum lasting into early November via the current T’s peak, at the right end time period of the T.

Download SRT070928.pdf

During October this would be the basic forecast from the long spanning T that has seen a serious, but not fatal dip, within its right side. It is believed that the August dip and subsequent the recovery so far is part of the long range Advance-Decline Ts projection of a major peak for equities in late 2007, with a decline beginning into the next 4 year cycle low previously estimated in the general October 2010 period.

See the PDF Download;

Download 10_year_sp_40_week_ma.pdf

We need to monitor this eventuality, but for now the daily swings within the envelopes are key. A successful early November peak could represent one major top for equities.

Any correction back to the black 55 day Ma is not likely to be serious, but a rally from this key resistance level, if it occurs, should be sold. If the current rally hangs tough during October and does not see a correction back to the 55 day MA, then a correction thereafter, can still recover using the alternate T construction for a year end peak as per my last update.

The issue here is that the long range T could produce a series of peaks into the Fall, any of which could represent the final topping phase of the A-D T. Most of my future analysis will concentrate on the possibility that a major peak is developing over this general time period.

So in the end, the major work for October, November and December will be to confirm (or not) the long term Advance-Decline Ts major peak forecast for the late 2007 period has occurred and whether its forecast of long term decline into the next 4 year low (roughly Oct 2010) looks to be developing normally in technical trend terms.

Terry Laundry

T Theory Observations for September 2007

The September 24th 2007 SRT and Envelope Update Last week the S&P climbed well above the 55 Day MA, currently 1482 as noted in my updated chart at the PDF link below.

Download SRT070921.pdf

The blue Volume Oscillator continues to be overbought, but it shows very strong upside momentum, so corrections are likely to be brief as the S&P resume its original trend into the the right end date of the current T. Any sharp correction should hold at the 55 day MA just to confirm the up trend as usual.

I would also point out that it is possible to interpret this new upside momentum as being driven by a new T, not shown, that uses the cash build up period from the mid March volume oscillator peak to to a center post around the oscillator rising bottom in late July and mid August. This would call for a December peak. I will construct and consider this T possiblity next month.

A further important point for T Theory, is the likelihood that the end of year topping combined with the June/July 2007 topping will complete the long range Advance-Decline Ts projection of a Fall peak for the bull market that began from the double bottom in late 2002/early 2003. To confirm this likelihood we will need to start tracking the A-D line strength to see if it has lost its very strong momentum by year end.

The September 17th 2007 SRT and Envelope Update Last week the S&P climbed above the 55 Day MA, currently 1476 as noted in my updated chart at the PDF link below. However the blue Volume Oscillator continues to be overbought so more corrections are likely before the S&P can stabilize and resume its trend into the the right end date of the current T.

Download SRT070914.pdf

The Federal Reserve announcement next week will probably dominate the picture. Positive news will quickly make the Oscillator very overbought but it would provide the momentum needed to complete this Short Range T come early November.

The September 10th 2007 SRT and Envelope Update The S&P fell out of its marginal upside breakout last Friday and so the the next recovery will be needed to confirm a sustainable rise above the 55 Day MA, currently 1477. The interesting observation is that the volume oscillator peaked at the highest level for the current chart history which you can see by downloading my updated chart at the PDF link below.

Download SRT070907.pdf

This has bullish longer term consequences and so we might expect the sharp decline on Friday was more related to the market’s overbought nature than the news of a sluggish economy. In any case, it’s bullish longer term and so estimates of this coming weeks carry over should be estimated by standard bullish potential behavior.

If the trend is actually bullish going forward, then it is generally required that any correction hold at or above a prior low (1435 in the chart), and last only a few days. Also, in order to sustain a bull market trend into the late Fall, support must generally occur at the 200 day moving average, which the chart shows to be 1444 currently. This is only 9 S&P points below Fridays close and is likely to be the worst outcome.

September 3 Update: During September I will post updates of the daily Short Range T (SRT) and S&P 500 Envelope chart on Mondays in order to keep up with the market volatility. Over the last week the 55 day MA at 1478 has been limiting the upside rebound as can be seen by downloading the PDF file below.

Download SRT070831.pdf

Before developing the forecast let me review a few envelope theory principles I have uncovered. The most interesting aspect of the Envelope T Theory, is that while the upper red envelope is nearly always an overbought condition, and the lower green envelope is nearly always an oversold condition, but the 55 day MA which is right in the middle is never a neutral condition. Rather this level is either a clear overbought or clear oversold condition and can be represented as a "binary state" at the 55 Day trend level for the S&P. This can be seen in the chart at the letters G and H.

In late June when the S&P sat on the 55 Day MA, at point G, the trend clearly acted as though it was oversold, ever while the Volume Oscillator would not have reached that conclusion. In early August at point H in the chart, the MA clearly acted as an extremely overbought condition while the Blue Oscillator did not register any particularly significant overbought reading. I have therefore concluded the market's technical condition can either be overbought or oversold at the 55 day MA, but never some neutral or other average condition. This puts the market's state as being "binary" in nature, much the same as a coin tossing experiment where the outcome can only be either be a head or a tail because we don't expect the coin to land on its edge.

To develop the forecast for next week, we find ourselves about on the 55 day MA and so the question from an Envelope Theory perspective is simply which of the two possible states exist now that we are testing the 55 Day MA. In theory only these two diametrically opposite states can exist, making next week's outcome critical and therefore worth watching. The blue Volume Oscillator is clearly near a peak reading as noted by the horizontal blue dashed line that extends back to prior peaks, so the odds favor a failure to break out next week. Also, with the 55 Day MA sloping down, the odds generally favor the S&P 1478 level will act as resistance. However there are always switches in trend being made, so a simple observation of the trend next week relative to this 1478 tipping point, will confirm whether the MA is acting overbought or oversold.

A couple of prior examples in the chart might make the outcomes clearer to visualize next week. The example of a temporary topping at the 55 day MA, followed by a later successful upside breakout into a sustainable advance can be seen starting at point A in the chart. Here the S&P fussed around the black 55 day MA until strength petered out, causing a correction back to the green line at B to set up a new oversold condition but with a rising bottom Volume oscillator accumulation pattern. The rise to C resulted in an upside break out followed by a correction back to the MA to D which held, allowing resumption of a sustainable up trend.

Another historical bullish breakout alternative we need to keep in mind is the rise into E and successful retest of the MA at F in March. The E/F and the C/D patterns are the most typical way for an upside breakout to occur based on history. So, if for example, investors come back from Labor Day weekend all enthusiastic because they believe the Fed will to take care of any sub prime problems, then it is possible for a sharp S&P rally to break well above the 1478 S&P tipping point. If so, history suggests the breakout will be followed by a pullback to the MA, which if it holds, is a sign of a sustainable rally developing, probably into late Fall.

On the other hand if the extreme enthusiasm needed to punch the S&P over the tipping point, and the volume oscillator to an all time higher peak is not forth coming, then a peaking is the likely outcome, and we can expect a correction back to the green line currently 1420 as noted in the chart. By next Monday I expect the outcome will be clear because there really are only two possible theoretical outcomes; the 1478 has either become resistance for a top or support for a breakout. Since these outcomes are easily referenced to a simple S&P level the oscillator complexities and other ambiguities are eliminated.

Terry Laundry

T Theory Observations for August 2007

During August I will post updates of the daily Short Range T (SRT) chart on Mondays in order to keep up with the market volatility.

August 27 2007 SRT and Envelope Update- As per last weeks observation the S&P has rallied above the 200 Day MA to the normal upside resistance at the 55 day MA. Current values are given in the updated Short Term Chart which can be downloaded below. The current 55 DAY MA has come down to 1481 vs Friday's closing value of 1479. Normally the 55 Day MA provides upside resistance as it did in the recent past so some sort of correction or hesitation from here would be expected.

Download SRT070824.pdf

But generally the outlook for the current Short Range T is improving relative to its projected right end date of November. It is unusual to see a bullish type of T make a full correction of its initial advance, but by holding at its prior center post low, the T still can finish out its normal requirement that the S&P reach an higher high come late Fall.

There are only two key requirements that need to be full filled for this bullish scenario to stay on track. First, any near term correction caused by resistance at the 55 Day MA must hold above the 200 Day MA. Second, once the S&P breaks above the 55 Day MA, no correction should bring it below the 55 Day back center line in the chart.

The August 20 2007 SRT and Envelope Update During last week the S&P broken down in a way that is not consistent with a typical bull market correction as suggested by the 10 year history posted on August 6th. The major observation that needs to be made on the current rebound is whether the 200 day MA, the red line in that chart, will act as upside resistance and by year end be in a down trend. It would then be suggesting a long term bear market beginning from a double top in the S&P 500 relative to the key 2000 peak. Specifically 1553 for 2000 vs 1556 for 2007.

Download SRT070817.pdf

On a shorter term basis in the daily chart above, the normal expectation is for a rebound higher than the 200 Day MA (1441) to the 55 day MA (1485) on Friday. The critical issue to be settled relative soon is where the bull market remains intact for now. The best outcome would be if the S&P can get above the 200 day MA and stay above it thereby returning the trend to at least a trading range as per 2000. The worst outcome is that either the S&P can not reach the 55 day MA and turns down, or it just reaches the 55 Day MA and then turns down much as it did about 8 days ago.The issue could be decided this week.

The August 13 2007 SRT and Envelope Update: Over the last week we have seen exceptionally and confusing volatility based largely on the mortgage securities problem, but the wild swings did honor the two key envelope levels at the 55 day MA for a top after the early rally last week and the 200 day MA of the S&P for the correction low into last Friday, where we now stand.

Before moving on I want to say that the ability of the three channel bounds that are shown in the daily PDF chart below, which you can download, can be thought of as the three basic "quantum states" for the equity market's S&P 500. That is the market can be assumed to be very volatile but only within the a natural tendency to produce turning points at one of the three levels shown in the chart by the red, green, and black levels. These only need to be updated weekly because they are slow moving and actually not exact. The additional 200 day MA is also key to the very long term 10 year picture which I posted last week and you can refer to this as part of the T Theory forecast for this update.

Download SRT070810.pdf

To illustrate, when the market fell sharply on August 3 and landed on the 200 day MA one would have expected a bounce up to the 55 day MA which in last weeks daily chart was around the S&P 1501 level. On Wednesday the S&P reached this level and closed up looking positive. But the next morning, reports of further mortgage securities problems put the market down from the start and eventually into a climatic Dow 380 point decline.

Once returning to the 200 day MA and stabilizing after a small penetration on last Friday we find ourselves again saying if the basing at the 200 Day MA holds further corrections, then the market will eventually try for the 55 day MA once again. If you look at the ten year chart, say during the year 2000, then you can see once the 40 week MA acts as persistent support to successive selling waves, then eventually the S&P is driven back up to its old highs.

August 6 Update: I have provided a 10 year history of the S&P 500 on a weekly basis with its 40 week MA as a timing tool and a few notes in the chart that I will elaborate on during the month. Download the longer term PDF file below for this import bottom criteria.

Download 10_year_sp_40_week_ma.pdf

The main point is that when the trend is rising, all important low points along the up trend, develop when the S&P drops just a bit below the 40 Week MA shown here as the thin red line. The only serious exception are the well known periodic 4 Year Cycle lows I have noted and aren't presently significant to our time period. The point is that the S&P on Friday closed just below the 40 week MA (1451) so a bottom is expected over the next few days.

Also note in the middle of the chart that I have calculated from my daily data with an exponential moving average of 200 days. This should be equivalent to 40 Weeks since 40 times 5 = 200 market days. However my data sees the 200 day MA 10 points lower at 1441. I like my numbers for reference but prefer the 10 year chart for perspective and lessons on how to find lows, etc.

The next file is my basic daily SRT and envelop chart. Note the 200 day is provided each week and is the important reference we need to watch. Buy points or bottoms are confirmed by a rising bottoms volume oscillator pattern at the 200 Day MA.

Download SRT070803.pdf

We seem to be in good shape here so I would look for a bounce up to the 55 day MA mid channel line then perhaps a retest of the 200 day MA to expand the strength of the eventual correction low.

Terry Laundry