The Ord Oracle - 06-01-2009

We were looking for a test of the 5/20 high (92.80) or 5/8 high (93.22) as these high occurred on high volume and high volume high are usually re-tested.  These highs were tested today and volume came in 28% lighter and suggested today’s surge and break out was a false breakout.  For a confirmed breakout above a previous high, volume should be at least equal to the previous high volume.  A close below the 5/8 high will imply the top has been seen and may be a good time to add to short positions.  Also resistance lies at the 200 EMA of which the SPX ran into today.  There was also an RSI negative divergence. We are short the SPX at 883.92.

Below is the weekly SPX.  Weekly RSI normally stays above 50 in bull runs and stay below 50 in bear runs.   The direction of the 200 day moving average defines bull and bearish markets and currently the 200 day moving average is moving down and therefore the weekly RSI should find resistance near 50 and right now the weekly RSI is at 50 range.  The 43 week moving average of the SPX normally find support in bull runs and resistance near in bear runs.  Right now the weekly SPX is testing the 43 week MA at the same time the Weekly RSI is testing 50.  The weekly Slow Stochastics is starting to roll over but has not turned down yet.   We where looking for the SPX to re-test the recent highs and that has been accomplished today.  The next thing that is needed to complete the top is for the momentum indicators to turn back down.   We don’t thing the market is started on an extended move to the upside but rather forming an “Upthrust”.    If the SPY fails to hold the 5/8 high at 93.22, it would imply the top may have been seen.

Below is the daily GDX chart.  The RSI is over 70 with volume declining and is a bearish combination.  GDX did jump through the channel line which we were not expecting but it’s unlikely GDX will move much higher with an RSI over 70.  A close below the channel line ( near 44) will imply the top was seen.   Over the last couple of days “On Balance Volume” (OBV) surged and previously when OBV surged the market was near a high.  We are looking for a pull back in GDX over the next several weeks that could retrace back to the 29 area.