The Ord Oracle - 08-19-2008

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August 20, 2008 by tim_ord

SPY SPDRs

The bearish “Rising Wedge” pattern that we mentioned in previous report appears to have completed and the down leg to targets below is starting.   Bearish “Rising Wedges” have downside targets to where there began and in this case this “Wedge” pattern began near 124 range on the SPY which equates to 1240 on the SPX. We don’t have the final figures today, but most like the NYSE McClellan Oscillator broke below the “0” and in turn has turned down the McClellan Summation index which implies now that the market is in a downtrend. Also notice that the Price Momentum Oscillator (PMO) is starting to roll over and a short term bearish sign.   We are not bearish on the bigger timeframes and it appears this pull back is in the context of an intermediate term uptrend. A bullish signal may get triggered near the 1240 range on the SPX and if that area does not hold then a signal could be generated near the July low at the 1200 level. We sold our SPX position on 8/7 close at 1266.07 for a 1/2% gain and are now flat.

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.

Energy XLE McClellan Oscillator

A sector that is showing bullish intermediate term signs (along with the gold issue market) is the energy sector (XLE).   The energy sector got hit hard over the last month and the Summation index is now trading below -1200 an extreme oversold level. We have marked on the chart with red arrows when the McClellan summation index turned up from below -750. This condition has lead to intermediate term rallies that last several months and rallied near 20% or more. Current the Summation index is below minus 1250. The Oscillator has been rising over the last month with the XLE declining and this condition shows that fewer stocks where participating on the decline as the decline matured and showed the decline was very weak. A bullish signal will be triggered when the Summation index turns up.

GDX McClellan Oscillator and Summation Index

Above is the Gold Miners (GDX) dating back for a year (courtesy of www.ETFinvestmentoutlook.com). Once the McClellan Summation index turns up (and especially if the Summation index is oversold below -1000 like it is now) a buy signal will be triggered by this method and the market should show a good rally. As of last nights close the Summation index has not turned up.   Remember Price Relative to gold hit into extreme oversold level and matched by the 2000 low near .1550. The pendulum has swung to where gold stock are extremely cheap compared to gold and the pendulum should start to swing the other way where gold stock and gold indexes will outperform gold.   We are watching AUY for a buy signal setup.  We remain bullish on the XAU on the bigger time frames and 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. We are holding NXG, purchased at 3.26, has support near 2.80 range. We are also holding CDE (long at 4.08, support near 3.90). We are holding a long term position in KGC at 6.07 and NXG at 2.26. We are long the XAU at 162.05 on 12/18/07.

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 you will receive a copy signed by Tim.  Visit his website at:  http://www.ord-oracle.com/