The Ord Oracle - 06-03-2008
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Below is a long chart of the SPX with it’s Bullish Percent Index (BPI) dating back to 1996. BPI shows the percentage of Point & Figure buy signals for all stocks in the SPX index. Selling Climax bottoms have formed when BPI falls below 20%. Those instances have been labeled on the chart above. In January of this year, the BPI index reached below 20% and triggered a bullish signal and implied a multi month or longer rally was developing. That signal was proven correct. Back at the 1998 low a bullish signal was triggered by BPI below 20% and the 200 EMA turned down a short time (bearish) then turned back up a couple of months later (bullish). The direction of the 200 EMA defines bull and bear markets. Right now the SPX is in the area of where the 200 EMA lies and the 200 EMA is moving sideways and not give a bullish or bearish road sign. We will look at the shorter term timeframe on next page using the BPI.
Below is the Bullish Percent Index (BPI) over the last three years. A bearish divergence develops when SPX makes higher highs and BPI makes lower highs. This condition shows that there are fewer stocks carry the rally and therefore shows the rally is weakening and at some point will reverse. A bullish divergence develops when SPX makes lower lows and BPI makes higher lows. This conditions shows that fewer stocks are pushing the down the decline and therefore the market is nearing a reversal to the upside. This bullish divergence developed at the January and March lows for the SPX. Another bullish divergence occurs when SPX makes lower highs and BPI makes higher highs. This condition shows that there are more stocks carry the rally then the previous high even though the SPX is lower then the previous high and a bullish sign. On the chart above, notice that the recent high in May was much lower then the previous high of December 2007 but the BPI is much higher then the previous high of December 2007. This condition is a bullish sign and shows the market is getting stronger as time passes. Still staying flat for now.
On April 18 it appears the SPY “jumped” (broke resistance) the “Creek” (blue trend line) with a “Sign of Strength” (strong rally). Once resistance is exceeded then on the pull back that area should become support and that area comes in near the 136 level on the SPY. June is not usually the best time to invest and there are some things wrong with this market but the bigger timeframes are showing bullish signs such as the BPI mentioned in this report. Near term the SPX McClellan Summation index has turned down and today’s negative AD line keeps the Summation index heading lower which in turns implies the short term trend is down on the SPX. However, it appears the down side is very limited and the SPY my find support near 136 level which equates to 1360 level on SPX. It’s also worth noting that years ending in 5 and 8 are usually strong years. Also election years and especially leading into the election month is usually up. There may be some back and filling for the next couple of weeks but the market may be close to a low.
Sold 5/27/08 IVAN at 2.70=6% gain. Bought Ivan (Invanhoe Energy) 4/13/06 at 2.55,Energy stock. On 4/2, we Bought ASTM at 1.92, Biotech group. Long POWR at 13.70 on 12/14/07.
Below is the daily Market Vectors Gold Miners (GDX) courtesy of www.ETFinvestmentoutlook.com. From April a positive divergence has occurred where McClellan Oscillator has made higher highs and GDX has made lower highs. This condition shows that more stocks are rallying at the May high compared to the April high and a bullish sign. Seasonality is neutral to bearish form now into Early July and therefore we are looking for the market to back and fill probably through June. After June, we expect the market to pick up significantly. We remain bullish on the XAU on the bigger time frames and we are long the XAU from 12/18/07 at 162.05.
Tim Ord is president, editor and publisher of "The Ord Oracle" established in 1990. His newsletter is a Monday through Thursday email report that trades the S&P, Nasdaq and gold issues. He is frequently listed in the top 10 market timers in the country. If you purchase his book "The Secret Science of Price and Volume" through
