The Ord Oracle - 03/10/2009

In wave labeled in blue the larger Elliott wave count down from the October 2007 top.  The wave labeled in red is the smaller wave count and it appears that wave four (in red) has started and should find resistance near 74 (the previous low).   Once wave four (red) is completed then wave five (red) down should complete the downtrend and then start an intermediate uptrend. 

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Last Thursday a -1123 downtick was recorded which was a sign of an exhaustion move to the downside and was a clue that small wave three was ending.   Today’s rally implies smaller wave four has started but upside is limited to the previous low of November near 74.   There are positive divergences setting up such as the weekly RSI and Stochastics (not shown).  The sentiment charts on the next page also suggest the current low is not the final bottom.  Also the tick index closed today at +1462 and is an exhaustion move for the short term and a bearish sign.  The 640-650 range may still be seen.

We Bought ASTM at 1.92, Biotech group.  Our leader signed a bill recently to allow stem cell research. We still own ASTM a biotech stem cell reach company (but does not do stem cell research on embryo’s).
 
The ISEE Sentiment Index is a unique put/call value that only uses opening long customer transactions to calculate bullish/bearish market direction. Opening long transactions are thought to best represent market sentiment because investors often buy call and put options to express their actual market view of a particular stock. Market maker and firm trades, which are excluded, are not considered representative of true market sentiment due to their specialized nature. As such, the ISEE calculation method allows for a more accurate measure of true investor sentiment than traditional put/call ratios.  Worthwhile lows form in the market when ISEE ratio reaches .70 or lower and the bottom in the market usually shows up about one week later.   Bearish ISEE are near 1.60 and higher and the top in the market shows up about three trading days later (see chart above).   Yesterday’s close came in at 2.20 and is in the bearish camp.  Therefore for very short term there could be a bounce (three days) and current market has resistance near 74 on SPY, then another decline that could lead to the final bottom.   We are not sure how the bottom will form, its extreme pisstimizim or just complacent but the ISEE ratio should help identify the next low.   

 
It still appears a Head and Shoulder pattern developed from the October 2008 low.  From the October 2008 low an Elliott wave five count was completed into mid February high near 38 on GDX.  An Elliott wave five count going in the impulse direction (true trend) and corrects in a three count.  It appears that a ABC correction is in progress now (three count) and that GDX is on the “C” (last wave down) now.   Corrective waves normally end near the previous Fourth wave area which is near current levels.  However today’s decline has broke the previous low of 3/3 (near 30) on increased volume and so far the RSI is not producing a bullish divergence.  Therefore we can not say that GDX is making a bottom here.   Price wise GDX is near a Low (“C” leg is an ending leg) and market is near Wave 4 low.  The next leg up should not be less then the previous Elliott wave five up that started in October 2008 and ended mid February 2008 that traveled 20 GDX points.  We will be patient and wait for the next bullish setup which may not be far from current levels.  We still are bullish intermediate and long term, but the short term trend has not bottomed yet.