The Ord Oracle - 05-12-2009

In our view the Elliott wave count for the NDX is relative clear.  Notice that the smaller Elliott Waves break down into five count patterns and suggests the larger waves should also.  It appears to us that NDX is forming the 4th wave now and once complete then Wave 5 down should start and most likely break new lows.  If however if NDX keeps rallying and goes above Wave 1 low then this count is incorrect because Wave 4 can not go above Wave 1 low.  Wave 1 low came in at 1668.57.  The Elliott Wave count for the S&P is not as clear but if we have the correct count for NDX and NDX starts leg 5 down then the S&P should follow.

Below is our trend model of the S&P.  When the majority of these trend following indicators turn down then a top in the market is expected.  The top window is the Cumulative of the Advance/Decline line.  When this indicator is rising then uptrend is in tact and right now this indicator is rising still.  The next window down is the Cumulative of Up/Down volume and the same rules apply here and so far this indicator is trending up.  Bottom window is the Tick index and this indicator rises and falls with the market.  Notice that Tick index is showing a negative divergence and a bearish sign.  Second Window from bottom is the Summation index and this indicator is starting to bend down.  Any weakness in the A/D line will turn this indicator down. Third window from bottom is the RSI and the RSI rises and falls with the market also.  It is starting to bend lower but has not had a bearish crossover.  Our %volume indicator is still rising and not bearish sign here yet.  It appears that an intermediate term top is not far off but so far not bearish signal has been triggered yet.  Any weakness in the A/D line, price or volume will turn down some of the indicator above and trigger a sell signal.  There is still a possibility the S&P may rally to January high (943.85) before sell signal get triggered.  We are still flat for now. 

Below is GDX.  We have been expecting a pull back in GDX to near 27.  The pattern forming in our view was “Three Drives to a Top”.   What appears now to be forming is a bearish “Rising Wedge”.   This pattern makes three higher highs and as the market works higher volume gradually decreases which is what is happening with the current pattern on GDX.  Rising Wedge pattern have downside target to where the pattern began and for GDX that would imply a pull back to 29.  Previous we had a target to 27.   There is also a negative divergence in the MACD where MACD is making lower highs and GDX is making higher highs.  We are noticing that the Small Gold stocks are showing strength compared to the large gold stocks and we expect this relationship to continue.  We pointed out this relationship on our 5/5/09 report.  We will look to buy some small gap gold stocks on the next pull back near 29 on GDX.   Also Gold stock should outperform silver stocks on the longer term and will not be looking to buy silver stocks.