T Theorem Experiment Results

Below are two charts. They are a "before and after" of a short term T analysis that I presented earlier in this blog and of its follow-up. Link.
The prediction called for 1) a 3 day T and 2) a peak in MFI at the midpoint of this 3 day span. Both came true. (In a post following my original analysis, I erroneously anticipated that there would be no peak in MFI at the midpoint.) This validates the theorem that the right arm of a T will/should? have a peak in MFI at its midpoint. The practical application of this theorem is that it can be used to verify a T construction.

Some quick notes: MFI shown in the follow up chart has parts of its graph removed. This was to make viewing clearer because the MFI before the right arm of the T is irrelevant and the MFI after the midpoint would not be known in real time. One odd thing is that later on in the T, there were two new peaks in MFI. I circled those in pink. I am not certain of their significance, if any.

These T Theory™ based posts are dedicated to John C. for his encouragement of my development of shorter term T analysis and forecasts.

S&P 500 Intraday Bias, 10:00 AM

Positive but Overbought

As such, as I interpret it as neutral to negative. (For what it's worth, yesterday's, which was not published, was positive, lending to the overbought.)

post

won't be available this morning to post intraday bias

I "invalidated" the T too soon. The midpoint was 12:45 AM. By 11:30 AM, MFI was near a low, so I assumed an hour was not enough for MFI to make a new high. Within an hour, the market staged a powerful, unusually high volume rally that brought MFI to a new high! Boy did I feel foolish. I'll show a chart and explanation later.

3 Day T Invalidated

For the T presented in Friday's post to be valid, a peak in MFI should have occurred at its midpoint. We are in the vicinity of the midpoint and MFI is far from being near a peak. Also, the downward sloping OBV line was never broken to the upside. From this, I conclude that the S&P 500 is in the structure shown below. (The rally stopped at the .618 retracement.)

S&P 500 Intraday Bias, 10:00 AM

Positive

S&P 500 P&F Price Target - 1640

The Point & Figure "count" above is so obvious that I am sure I may have been the last person to have done this analysis, but I also presume that a price target as audacious as 1640 has inhibited its wide publication.

Doing a count and price target on a P&F chart is relatively simple once you learn the rules. First, count the number of columns spanning the consolidation-breakout area, shown in a horizontal blue bar above. There are 21. Then, multiply that count by the box size and the reversal size: 21 x 10 x 3 = 630. Add this to the July 2010 low of 1010 on the S&P yields the target of 1640.

The consolidation phase, which began in February 2011 and has yet to be resolved to the up or downside, will also allow a count and a target. An upside breakout on the next column of Xs would yield a 1490 target, 8 x 10 x 3 + 1250. The target on a downside breakout would be 1160. To repeat, these targets are tentative since the pattern has yet to complete.

"The only true global macro play is the price of money, set by the US Central Bank."