Saturday, April 30, 2011

Rahal's Theorem

Disclosure: My interpretation and analysis of T Theory ™ is entirely separate from that of founder, Terry Laundry and his T Theory ™ Foundation. To learn more about T Theory ™ visit ttheory.com

The following is a theorem I have constructed based on principles from T Theory ™ and Money Flow Ts ™ intending to resolve the two. As some of my older readers may know, I have explored the development of Ts spanning intraday or for slightly longer time frames. The following theorems will prove valuable in improving the reliability of shorter time frame Ts.

Theorem:

A T is a comprised of a centerpost, a right arm and a left arm (axiom)
The left arm is the cash buildup phase (axiom)
The right arm constitutes an uptrend (axiom)
A Money Flow T ™ is an uptrend whose midpoint is a peak in MFI (axiom)
Hence, a money flow T is the right arm of a T (theorem 1.)
Hence, a money flow T is equivalent in temporal-length to the left arm of a T (theorem 1.a.)
Hence, there is a peak in MFI at the midpoint of the right arm of a T (theorem 1.b.)

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In other words, a Money Flow T ™ describes a property of the right arm of a T, namely, a peak in MFI at its midpoint.
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One application of this theorem is that if one constructs a T in the traditional fashion, one would expect there to be a peak in MFI at the midpoint of the right arm. If there is a peak in MFI, this confirms the T construction. If there is no peak, then there is some misplacement in the left arm or the centerpost of the T.

Alternatively, if there are a couple of possible Money Flow T ™ constructions, one can extrapolate the left arm of a T for both constructions (theorem 1.a.) and see which one fits best into a cash build up period. Here is a step by step example of such a process:




2 comments:

  1. George:

    Great analysis!!!! I know that you were about the ONLY one projecting a top at the end of April 2010. Not to be critical of Terry, because he has done some great work, but I know he was at the time forecasting a top in mid to late May 2010.

    As one of your "old" readers I can attest that your call for a late April 2010 top was one of the best calls by anyone in 2010.

    I am curious, was the forgoing methodology how you made that call in 2010???

    Thanks again for this blog. Keep up the great work.

    John C.

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  2. Thanks, John. You're too kind. I've had plenty of poorer calls since.

    I discovered these Theorems only a couple of months ago.

    The April peak was based on a simple T construction: I treated the November 2008 low and the March 2009 low as a double bottom. The left arm of the T spanned from the October 2007 top (obviously a logical place to start the T) to the November low. The right arm started at the March low--expiring in April 2010.

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