The Ord Oracle - 02/18/2009

Yesterday the SPY traded below the lows going back to 12/1/09.  The 12/1/09 low was where the ARMS index closed at 9.84 and the typed of reading found near intermediate term lows.  Yesterday’s break came on above average volume which is bearish.  However the tick reading on the close came in at -768 which is modestly bullish and the ARMS index closed at 1.69 and also modestly bullish.  Today the market traded below yesterday lows and volume came in about 30% less and shows downside energy has dissipated and a bullish sign.  The Full Stochastics is in an area where previous lows have occurred in the past.   This is option expiration week which normally has a bullish bias; however we have been watching the ISE put call ratio and this ratio shows too much call buying for a bullish outcome.  In our opinion the market may just set here until Friday and waste the call options.  It’s not clear here so we will set on the sidelines for now.  Intermediate term wise, we think there is another rally coming that may test the January highs near 95 range on the SPY.

Sold SPX position on 2/6/09 for 3.4% Gain and now flat.   Long XLF at 9.50 on 1/30/09.
We Bought ASTM at 1.92, Biotech group.   Long POWR at 13.70 on 12/14/07.

The A/D line came in at -1319 and may have pushed the McClellan Oscillator below -250.  The above chart is the McClellan Oscillator from yesterday’s close and is usually updated about one hour after the close.  We try to get our report out before then and therefore we see yesterday’s update.  McClellan Oscillator readings near -250 have produced bounces in the market most of the time (see chart below).   Therefore we believe the market is nearer to a low then a high.  We don’t have a clear signal here and therefore we will stay on the sidelines.

A Head and Shoulders bottom started to develop back in August 2008 on GDX.  In mid January a Sign of Strength was performed through the Neckline of this Head and Shoulders bottom and confirms the pattern and also confirms the Neckline breakout.   Since mid January the market has worked higher and volume has been increasing and a bullish sign and suggests this market has energy to move higher.   Support now comes in near 32 on GDX.  This Head and Shoulders pattern has an upside target near 54 which is the old highs set back in March 2008.  This run in the XAU would equate to 210 area.

Sold PMU on 2/29/08 at 1.20, bought at .81 for gain of 48%.  Long KRY at 1.82 on 2/5/08. We are long PLM at 2.77 on 1/22/08. Holding CDE (average long at 2.77 (doubled our position on 9/12/08 at 1.46). Bought NXG at 3.26 on 6/4/07.  We doubled our positions in KGC on (7/30/04) at 5.26 and we now have an average price at 6.07.