The Ord Oracle - 08-13-2008

Closing uptick readings exceeding +800 can stall the rally on the market for short term. We have listed the tick closing that exceeded +800 going back to May. All uptick closing exceeding +800 stalled the rally within two days.   The only time the uptick closing exceeding +800 fail to produce a short term decline was off of the July 15 low.   On the rally from the 7/15 low there have been numerous times uptick closing exceeded +800 and is why the rally has been so choppy thus far. We have explained why we are bullish intermediate term further into this report, but we are neutral for short term because of these high uptick closing and the lack volume on the rally days.   It still appears a bearish “Rising Wedge” pattern is forming here and a pull back to 124 range is possible.   Also the daily Commodity Channel Index (CCI) is overbought.    We are staying neutral for now.

The Rydex Cash flow Ratio measures the flow of cash into and out of the bullish and bearish funds. Over the last 12 months, short term tops have formed in the SPX when the Rydex Cash Flow ratio reached near .90. This ratio closed yesterday at .91 and is another sign for caution for the short term.

On last nights report, we presented a longer term view of the market using the Bullish Percent index (BPI). It’s worth a repeat in that this bullish BPI configuration should be remembered until a counter negative pattern forms. On last night report, we said, “The Bullish Percentage Index (BPI) shows the percentage of point & figure chart buy signals for all the stocks in a given index. This chart tells us if the index is medium-term overbought or oversold based upon price. When BPI hits below 20% then a potential bottoming process may be beginning. Addition information is obtained when market makes lower low and BPI makes higher low. This positive divergence shows that even though market broke to a new low there were more stocks on a buy signal. This condition is an intermediate term bullish sign. This bullish set up (stocks making lower lows and BPI makes higher low) occurred at the 1998 bottom and 2002 bottom. The current positive divergence is much larger then the previous bottoms and is showing an intermediate term bullish signs. Everyone is talking about the 200 day moving average trending down and implies a bear market. There is a rule of Alternation, if previous bear market had a deep decline (which it did) the next bear market may be more sideways. With the BPI index showing a positive divergence on a longer term timeframe, then a case can be made that the bottom may have been seen. What may develop here is a trading range where the 7/15 low at 1200 will hold as support and the 1400 to 1550 range may from the top range and market bounce between this range until the bearish market runs it’s cycle. The Presidential cycle runs until August 2010 and may be when next bull move begins. Therefore we are not big bears here on the longer term timeframe but near term a pull back could form. If the pull back happens to pull back to the 7/15 low (1200 range) and test that low on lighter volume and the BPI makes a much higher low then the July 15 low, then that would generate a very bullish signal for intermediate term.” We are staying neutral for now.

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.

The XAU is making a major low with the weekly Commodity Channel index (CCI) below -300 and weekly RSI near .30 and Price Relative to Gold hitting below .17.  We have circle in RED the past time that all three of the weekly, (not daily buy weekly) indicators line up this well on CCI, Price Relative to Gold and RSI.    Anniversary dates of major highs and lows can mark turning points in the market. Last years low in the XAU came in 8/16 and the market may wait until then before moving higher. Extreme pessimism runs high at major lows and the price Relative to Gold ratio measures that pessimism and the current reading is as low as the 2000 bottom. Next rally up may be explosive.   Friday’s big jump in Volume on GDX may have been the “Selling Climax” day. Most “Selling Climax” days are tested and if tested on lighter volume would be a bullish sign. We think at least 320 on the XAU is in the cards.   We are long the XAU from 12/18/07 at 162.05. 

Sold PMU on 2/29/08 at 1.20, bought at .81 for gain of 48%.   Long KRY at 1.82 on 2/5/08. We are long PLM at 2.77 on 1/22/08. Bought CDE at 4.08 on 7/10/07. 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.