T Theory Update

For those who follow Terry Laundry's T Theory (and for those who haven't but might be interested), I thought his comments this morning on the short term condition of the market to be very relevant:

"The small red T and the larger blue T are jointly forecasting an eventual peak time wise at their respective right end dates (by Jan 21?). What is interesting about the red T is that we couldn't get confirmation because initially the rally would not cut the green cash build up line. Now we see an upside breakout in the blue volume oscillator going into the Ts projected peak. This amounts to an accelerating demand going into a top which invariably is caused by "panic buying".

Such acceleration is keeping the Arms ratio very low which warns that when the buying ends, a sharp correction should follow. However it should not break below the mid channel number which is also rising, so the correction is likely to be sharp but brief. The 5% correction can be bought because other larger Ts are still bullish."

I interpret this to mean that a buying panic is an opportunity to sell short-term long positions. The easiest way to do this is simply to wait for range expansion on the daily chart. You can either exit a short term long position after a big range day, or wait until the range contacts or a down day after the range expansion. Either way, you don't want to ride it after that because the risk of a sharp reversal is significant. Better to exit early than late.

The market definitely feels as though a buying panic might be developing. Of course, this fits well with the notion that we are coming into a 5th wave top as well.