7 replies to this topic

[Rogerdodger]

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.

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.

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.

Edited by Rogerdodger, 13 August 2007 - 01:53 PM.

[hiker]

right now, if pressed for the high odds play for a trade profit target of 56 points (the present distance between the 200day sma and the 55day sma)..I would bet short from today's SPX high of 1466 vs. long from today's low of 1453. only because I keep seeing failed rallies for consecutive days..those are the facts in this current correction. Sure, historical patterns from other corrections may repeat, but I am seeing what I am seeing now. many here, it appears would bet the other way. and yes, price is consolidating for now near and above 1432 and 1447 major horizontals....sellers will need to break these levels down to push to new decline lows. -------- some EMA stats posted a while ago here at my TT blog...price vs. the 34-week ema is a simple heads-up measure of current price action - 8/13 intraday basis price now vs. 21week ema - Dow - above...today's low is the 21-week ema SPX - below QQQQ - above ------------- price now vs. 34 week ema - all are now above, at the moment...SPX has been on both sides today -------------- price now vs. 8week ema - all are below now....QQQQ day high so far is approx. the 8week ema the 3 prior weekly closes have been BELOW the 8-week ema for the Dow, SPX and QQQQ, and the 8-week ema's for the three are pointing down, though at different angles of descent.

Edited by hiker, 13 August 2007 - 02:17 PM.

[arbman]

The way I see it the market is still neutral and waiting to see whether there is another selling wave coming. Somebody was mentioning about the Aug 15th cut off for some funds to raise cash. So, it is either tomorrow or Wed that the selling pressure can break the lows one more time, otherwise, probably it will be able to absorb the selling for now. But I would not be too complacent beyond the 50 dma, there is no cyclical target beyond 50 dma, perhaps in a month. I asked Airedale his opinion about a scenario that; if the market declines to 1380 region, it sets up a tremendously favorable cyclical cascade configuration for a sustainable rally well into the winter. He did not get back to me, since I guess he believes the 40 wk FLD was not broken in this decline decisively so the downside will be limited or over... The market did not resolve anything today and still neutral, imho... - kisa

[ogm]

The way I see it the market is still neutral and waiting to see whether there is another selling wave coming. Somebody was mentioning about the Aug 15th cut off for some funds to raise cash. So, it is either tomorrow or Wed that the selling pressure can break the lows one more time, otherwise, probably it will be able to absorb the selling for now. But I would not be too complacent beyond the 50 dma, there is no cyclical target beyond 50 dma, perhaps in a month.

I asked Airedale his opinion about a scenario that; if the market declines to 1380 region, it sets up a tremendously favorable cyclical cascade configuration for a sustainable rally well into the winter. He did not get back to me, since I guess he believes the 40 wk FLD was not broken in this decline decisively so the downside will be limited or over...

The market did not resolve anything today and still neutral, imho...

- kisa

Agree, the market is in a waiting mode here. But so far the close doesn't look too bad. 2 attempts to sell off the market intraday, and we've bounced both times. And the selling pressure has definitely dropped. It still looks vulnerable, and who knows what Opex will be like, but as I said, I think this is a washout week, if we'll have selling.

Edited by ogm, 13 August 2007 - 02:44 PM.

[Sentient Being]

I posted on the 200 day, too. But I didn't say it as "purdy" as he did!

[hiker]

SPY trade size of 500,000 just went through time and sales at 145.05 FWIW

[airedale88]

The way I see it the market is still neutral and waiting to see whether there is another selling wave coming. Somebody was mentioning about the Aug 15th cut off for some funds to raise cash. So, it is either tomorrow or Wed that the selling pressure can break the lows one more time, otherwise, probably it will be able to absorb the selling for now. But I would not be too complacent beyond the 50 dma, there is no cyclical target beyond 50 dma, perhaps in a month.

I asked Airedale his opinion about a scenario that; if the market declines to 1380 region, it sets up a tremendously favorable cyclical cascade configuration for a sustainable rally well into the winter. He did not get back to me, since I guess he believes the 40 wk FLD was not broken in this decline decisively so the downside will be limited or over...

The market did not resolve anything today and still neutral, imho...

- kisa

kis, i didn't get back to you because, well, i just didn't have a chance yet.

at this point in time, any further cycle downside projections if they occur would have to be suspect, since all indications are the time window for the bottom arrived already. i see the current fld patterns as a pause zone before a move to new highs rather than a cascade pattern.

[arbman]

Thanks Airedale, I am seeing longer cyclical periods on many stocks in my scans. So, take a look at this, imagine the market declines to 1380-1390 region, all of the short term FLDs up to 20 wk will line up perfectly for a sustainable rally;

http://stockcharts.com/c-sc/sc?s=$SPX&p=D&yr=0&mn=6&dy=0&i=p53938948079&r=4989&.png

Such a decline would not break the 40 wk FLD (Assuming a late 208 days for this period);

http://stockcharts.com/c-sc/sc?s=$SPX&p=D&yr=0&mn=6&dy=0&i=p29155675187&r=4029&.png

I know cyclically there is no target toward such a low, but this market will be a torture the way it is for months since the resistance at 1500 and then the downside 5 wk FLD that will be most likely broken, if it gets there, and who would be really willing to go through that?!?

... Well, other than you at the moment!

There is even the risk of breaking the 40 wk FLD in any of the coming pull backs...

Of course, I want the easiest setups to trade!

- kisa

Edited by kisacik, 13 August 2007 - 04:37 PM.