The Ord Oracle - 08/04/2009

The Spy appears to be drawing a bearish “Broadening Top” that may be close to completing.   The QQQQ is also drawing a bearish pattern and this pattern appears to be drawing a “Three Drives to Top” pattern.  This pattern has a deep retracement off of second top that retraces at least 61.8% of the rally into second top (this one retraced 61.8%).  The third rally up normally shows resistance at the line connecting the first and second top.  As the market works higher volume gradually decreases which show energy to the upside is decreasing.  There is also symmetry in this pattern.   Notice the minor hump after first and second top, there should also be a minor hump after the high of top three that may take a couple of weeks to complete.  Three Drives to Top have a down side target to where the pattern began and in this case near 33 but could decline more then that. The RSI is over 70 and overbought and any weakness in the SPY will turn down the MACD.   Short SPX at 883.92.



Above chart is courtesy of sentimentrader.com.  Trading bands surround public opinion sentiment.  When sentiment reaches the upper band then market (in this case the US dollar) may be near a high and when sentiment reaches the lower band then market is near a low.  Notice that the sentiment has reached the lower band and the dollar could be near a low.  Also notice that and Elliott wave five count down is in progress and the dollar is working on the 5th and final leg down with the sentiment at the lower band.  This chart was put out last Friday and the dollar has dropped more since then and may have pushed sentiment at a more extreme level.  Don’t know where dollar will bottom but may not be far from current levels.  If the Dollar turns up then the stock market should turn down.


 
There could be a Head and Shoulder pattern developing on GDX,  To confirm this Head and Shoulders bottom, GDX should show a “Sign of Strength” through the Neckline (at current levels) and so far not Sign of Strength is being produced.  If the Sign of Strength (SOS) is going to show up it should do it at current prices. If the SOS does not show up in the next day or so then the Head and Shoulder pattern will be in question.  The bottom window in the chart above is the Bullish Percent index for GDM gold index.  In mid July it did have a bullish crossover and has market modestly higher and is a bullish sign for the short term.  The third window up from the bottom is the GDX/Gold ratio.  When this ratio is rising then gdx is outperforming gold and is a bullish sign for gold stocks. This ratio broke down through the uptrend line from the November lows and has since been trending sideways and not showing strength in GDX.  For now we are not chasing gold stocks and volume is not showing up and the GDX/Gold Ratio is not showing strength.  However, we still like GLD. 



We are 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.