Probably the longest update ever from Laundry tonight.
He is getting sqeamish and I don't blame him.
"After posting Sundays Observations I realized the wave concept noted in todays chart, plus the nulled echo concept, could be applied to the current situation and I will be doing so this week. It concludes the recovery on Monday and maybe today will fail and a new sharp decline will see the Volume Oscillator fall to an even deeper oversold condition as noted by the red arrows above.
This should bring the S&P down to the mid channel which the table currents calculates to be 1150. Don't send emails for a few days. This will be a very complicated T Theory analysis because it uses the nulled echo as applied to the 3rd Bull T which calls for the May 20th peak off a one month double bottom. That T can be seen in the last week post below but is not shown here so as to make room for the green waves at the top of the chart.
The first conclusion of significance is that the 2 month+ wave nature of the separate wave advances for this bull market phase has basically ended the recent rally. See the Sundays T Theory Observation for details. In order to begin the next, and final 2 month rally, which is still needed to complete the AD T#13 projection of a late August 2010 peak, a long cash build up phase, represented by the declining green line in the Volume Oscillator needs to be set up now to provide the cash necessary to fuel that summer advance.
What we have so far is not very well developed timewise and the S&P is not even oversold within its channel. So one conclusion is that we are entering a very risky phase probably until June 20th or so according to the nulled echo for the 3rd Bull T. That T comes off a one month double bottom and therefore requires the May 20 projected peak to be followed by a one month decline. This parallels the requirement that the August 26th AD T peak be followed by a 3.5 month decline as discussed on Sunday.
The big technical problems is that the long Arms sell warnings of the past few weeks can now carry out its very negative interpretation of a speculative market that is about to be punished. This will in turn set up the cash build period for the final rally into August via a new 4th T which will produce, in its right side, the final rally of this "bull market" phase.
Near term, all this suggests that the recent oscillator low can not hold and all we might see is a faint lift before the market heads lower and forces the Volume Oscillator down to a very deep level. The approximate duration of this decline and recovery into May 20 can be estimated roughly from the ideal calculation of the other aspect of the nulled echo concept, the pre-peak that is expected prior to May 20.
In this Sundays TTO the August 26th main peak was expected to have a pre-peak early by the width of the double bottom of about 3.5 months. This put an estimated May 9th peak date which is somewhat at odds with the May 20th estimate. In general we can expect a recovery into May and we will deal with that timing issue after we see what damage is done near term. For the 3rd Bull T the pre-peak is ideally April 20, that is one month before the main May 20 peak.
It is likely that last Thursday's peak was the actual pre-peak, and given a final main peak one month later, then the normal course would be for a decline of half a month followed by a rally of half a month so as to satisfy the requirement of the nulled echo to have a peak to peak time which matches the one month spacing of the double bottom in the AD Line. Thus the Volume Oscillator must decline for perhaps another week+ and will likely end up very oversold.
Investors will be very unhappy and so further reductions in holding is called for right now. New buying won't be appropriated until after mid June so the correction can run lose for some time."
(20min delay)