The Ord Oracle - 07/14/2009

The current Head and Shoulders pattern should have symmetry, if it has two left Shoulders then there should be two Right Shoulders.  The first Right shoulder came in early July and current rally may be forming a second Right Shoulder.  There is a gap between 7/1 and 7/2 near 91 and a rally to that area on lighter volume would be an ideal situation to form the second Right Shoulder and complete the H&D pattern.   For the gap to show resistance the gap should be tested on 10% lighter volume.  The gap had volume 212 million shares and therefore a test of 10% lighter volume would come in near 191 million shares or less.  So far SPY has not made it to the 91 level and it may not reach that level or over shot that level a little.  What will be important is that the volume drops at least 10 % to show that energy is running out on the upside.  The bullish Percent index remains on a sell signal and the RSI is back to the 50 level which should be resistance.  A 50% retracement from the March low would come in near 81 on SPX and this potential Head and Shoulder Top has a downside target to 82.  These downside targets are not set in Stone but are reasonable targets for the next low.  There is a chance the SPX could follow lower to the 74 range.  As the decline takes hold we will monitor our indicators for the next low.

We are short the SPX at 883.92.  We Bought ASTM at 1.92, Biotech group.   Long POWR at 13.70 on 12/14/07.
 
Below are a few momentum indicators which are on sell signals. The market could bounce a little for short term but the top appears to be in at the 6/11 high at 939.04 on SPX.

We are very bullish on the gold stocks for longer term and are expecting all gold stock sectors (GDX, XAU, HUI, XGD.TO) to hit new highs at some point.  Above is the Bullish Percent index of the Gold Miners index (GDM). A sell signal is triggered when the Bullish Percent index crosses it’s 10 day moving average.  We have circled in Blue on the chart above when these sell signal where triggered.  In early June a sell signal was triggered and remains on a sell signal and therefore the trend remains down. 

A possible area where support and a bottom may form is near the 30 range on GDX.   We will see what happens if and when GDX gets there.  We are expecting GDX to follow the SPX to the downside and both indexes to bottom together.   A possible low may form in GDX around August. Long GLD at 89 on 4/24/09. 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, Sold 5/13/09 at 1.55=6% gain). 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.  Long NXG average of 2.26.   For examples in how "Ord-Volume" works, visit www.ord-oracle.com.