The Daily Chart is updated for T Theory Forum members after the close each Wednesday and Friday evening.  The chart below was provided to Forum members on November 4, 2011.

Daily Chart Nov 4 2011

The Volume Oscillator hit a high of 119 on August 31 that started a cash build up phase.

The rising bottoms pattern in the Volume Oscillator was -91 on September 22 and -86 on October 3.

My studies have shown that splitting the rising bottoms pattern as a center post produces a target that’s usually a couple of days early, and using the actual price low (October 3) as a center post produces a target that’s usually a couple of days late.

So the split bottom target top is October 24.

The October 3 center post target top is November 2.

I would not be surprised if the top occurred somewhere in the middle.

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The small gold extension discussed in the midweek update looks to be holding gold up near its record high with potential to move higher.

As of the Wednesday, July 6 close we are beginning to see market toppy signs. This topping is likely to last another week or two, thereby finishing out the short time duration T at cycle low number nine (#9) in today’s Daily Chart.

A warning that this topping had begun at this relatively early stage came from Parker’s chart posted earlier, of the Arms ratio on a weighted basis. Whenever this daily indicator drops to very low numbers, like 0.8 to 0.5 over a five-day stretch, an Arms Sell Warning is developed. This implies “too much” money has been spent in an emotional buying panic resulting in an unhealthy condition. Typically this warning produces a couple of weeks of churning in a top pattern. This is what I would expect going into mid-July.

This warning implies that a real top is forming. Therefore we should expect that in time a new decline will result into a new oversold condition during August. It wouldn’t hurt to start thinking about how one might take advantage of this upcoming change in trend.

A new project we are working on is forecasting equities based on commodity cycles.  One conclusion we have reached is the stock market decline may be very sharp in line with its ongoing negative view.  We are working to resolve the “How and Why” of this  technology but it appears  that a low should occur in the first half of August.

The TRIN (Short-Term TRading INdex) or Arms Index (discovered by Richard Arms in 1967) is the ratio of advancing to declining issues divided by the ratio of advancing to declining volume.  As a breadth oscillator, it can be used as an overbought-oversold indicator.

The 5-day average TRIN is a popular way to smooth the indicator.   You simply add the final daily TRIN for each of the last 5 days and divide by 5.  Accordingly, each day counts the same in the 5-day simple TRIN average.

Some people prefer to use a 5-day exponential moving average of TRIN, which weighs the TRIN days in order of recency.

However, neither method accounts for volume.  I will update the Volume-Weighted TRIN chart on a weekly basis, and will update the TRIN data daily.

For today’s post we see my Daily Chart brought up to Wednesday’s very violent close. In the upper right-hand portion of the chart the green S&P bars show a bounce off of the mid-channel (S&P 1324). Yesterday, it looked possible to actually continue higher because the volume oscillator had a big spike up on Tuesday. Yet the market collapsed on Wednesday.

My interpretation  is that we are very likely seeing the beginnings of the decline off the  A-D Mega-T#3′s projected April 27 peak and during June we will see the market headed down to the July 1 low at cycle low #9.  I think it could be a rough ride to perhaps S&P 1200 by August/September.

In other matters I would be bullish on gold here because the evidence today is that ugly-looking equity markets drive investments towards gold and I we still have upside time at least into the mid-June time period. For gold movements within the daily bands we should get to the upper shaded  bound in my Public Gold Chart, and if panic sets in, then perhaps all the way to the more distant dotted line outer envelope. Under favorable conditions gold could reach the 1600 level.

Treasury Bonds are doing extremely well on the capital appreciation front and can make substantial progress going into the Fall.