The Ord Oracle - 09-09-2008

September 10, 2008 by tim_ord

McClellan Oscillator All Issues

Yesterday the NYSE McClellan Summation index turned up and a bullish sign and today the Summation index turned back down and a bearish sign. We are going to stay flat for now. We sold our SPX position on 8/7 close at 1266.07 for a 1/2% gain and are now flat.

The Biotechs (XBI) had a strong showing from the March low into early August. It appears a bullish “Head and Shoulders” pattern developed and a pull back to the Neck line is occurring now. Support comes in at the Neck line which would equate to 59 on XBI. We will watch this area for a potential bullish setup.

Chart courtesy of www.etfInvestmentoutlook.com. Above is the McClellan Oscillator and Summation index for the biotech Spdr (XBI). On the recent pull back the Oscillator showed weakness and up to yesterday the weakness is still present. Also the Summation index is heading lower and implies XBI is still in a downtrend. Support lies near the 59 range and we will wait to see what happen there.

On 4/2, we Bought ASTM at 1.92, Biotech group. Long POWR at 13.70 on 12/14/07.

Above is the ETF for Gold (GLD). Today GLD tested the “Selling Climax” low of 8/15 on lighter volume but did not close above the 8/15 which would have created a bullish buy signal using the “Richard Wyckoff” method. Therefore the low of 8/15 at 76.61 will be watched and a bullish sign would be to get a close above that level. Once the daily PMO turns back up (momentum indicator in bottom window) then most likely GLD will start to trend higher. On yesterday’s report, we showed a chart of the Commitment of Traders report (COT) for gold and this report showed that commercials were heavily long gold and a bullish sign.

XAU Chart Showing Support at 115

Above is what we believe is he correct Elliott wave count on the XAU since the 2000 bottom. Wave 5 ended at the March high and ended the Wave 1 of one degree higher. Wave 2 of larger degree that started at the March high is an ABC down and leg C is extended and finishing now. Wave 2 of larger degree usually finds support near wave 4 of smaller degree of which the XAU is in this range now. We have a trend line drawn up from the 2000 low and it comes in near 113 range and should hold as support because most indicators on XAU are very extended and would be hard to push much lower. When market creep down are the ones that keep going down. The ones that free fall (like now) are the ones that reverse back up (remember 1987?). PMO is at levels seen in late 1998, mid 2002 and mid 2004 and all reversed back up on the XAU. Also remember on yesterday’s report, that the COT Commercials are long gold and short the Dollar which helps support this larger degree wave 2 low.

It’s always been wise to buy cheap and sell expensively and the Price Relative to Gold ratio helps to identify these conditions on the XAU. Right now gold stocks are at the cheapest level compared to gold going back to 1984. If someone has a chart of Price Relative to Gold going back further, please send it to me I would like to see it. Price Relative to Gold ratio is at a 24 year low suggesting something big to the upside is about to begin and Wave 3 of a larger degree would fit that bill. It has surprised us that Price Relative to Gold has got this cheap but for a Wave 3 of a larger degree to materialize; this is exactly what needs to happen. A good time to add to positions would be when the weekly PMO (or MACD) turns up. It’s worth noting that Wave 3 is at least equal in length to wave 1 and a lot of the times wave 3 is extended (longer then wave 1). Wave 1 was 160 XAU points (from 40 to 200). Wave 3 should also be at least 160 XAU points which would take the XAU to 275 minimum. A 275 on the XAU would imply most stocks will hit new all time highs. We have found the more pain in the decline, the more reward on the next rally and the current decline has producing the most pain since the bull run began back at the 2000 bottom. 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. We are also holding CDE (long at 4.08. 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/

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