The Ord Oracle - 09-24-2008

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September 24, 2008 by tim_ord

SPY May Test the Spike Lows at Some Point
 

Yesterday we showed the ISEE put/call ratio with a reading of .66 and which suggested a bottom is not far off. A “Selling Climax” occurred on 9/18 on huge volume. Most (not all) “Selling climax” are tested. If the test of the “Selling Climax” low comes on lighter volume and then closes above the low, a bullish signal will be triggered. We think this condition could happen around the “9 month Cycle low” which is due 10/22/08.

NYSE McClellan Oscillator

As of yesterday’s close the NYSE McClellan Summation index was moving lower and implies the NYSE is in a downtrend. Normally after big volatility (like last week) the market will become dull. If this dullness produces fear then a bottom will form. The ISEE put call ratio we showed yesterday (which is showing fear) will help to identify the next intermediate term low.    We are staying flat for now.
 
We Bought ASTM at 1.92, Biotech group.  Long POWR at 13.70 on 12/14/07.

XAU Started Larger Wave 3 Up

The following chart above and the commentary were from last Thursday’s report and are worth repeating. “The above chart is the XAU what we believe is the correct count in Elliott Wave terms. The five wave up from the 2000 low ended at the March 2008 high. Wave 2 for larger degree started at March 2008 high and ended at the 9/11/08 low. Wave 3 for larger degree has started at the 9/11/08 low and in progress now and will hit new highs. Wave 3 of larger degree is never shorter then Wave 1 and can be Fibonacci ratio of 1.5; 1.68; 2 or 3 of Wave one. Wave 1 was 170 XAU points. Add 170 points to bottom of Wave 2 and the upside becomes 285 on the XAU at a minimum. We will take a look at the shorter time frame on next page.” I might add that Price Relative to Gold ratio hit a 24 year low in mid September and implies gold stocks are at the cheapest level in the last 24 years and at the best buying level in 24 years.

GDX Pushing Against Previous Highs on Volume

Above is the daily chart of GDX.   (Commodity Channel index) CCI is becoming overbought (+100) with GDX near the previous highs of August and suggest a short term consolidation is possible here.   GDX is up against the August highs and volume is way over double compared to the August highs.  Testing a previous high on higher volume shows energy here is higher then the August highs and that at some point the market will push through the current highs.   There is a possibility for short term that GDX may consolidate its recent run and that consolidation may form the Right Shoulder of a “Head and Shoulders Bottom”.   Normally Head and Shoulders patterns have symmetry and if the Left shoulder took 2 ½ weeks to form then the Right Shoulder will take as long.  Since the Left Shoulder did take about 2 ½ weeks to form, therefore the market could stay in this trading range for the next couple of weeks forming the Right shoulder. If this pattern turns out be a “Head and shoulders bottom” then it has an upside target to 51 which equates to 198 on the XAU.  I might add that GDX McClellan Summation index has turned up and is on an intermediate term buy signal by that method. We are long the XAU at 162.05.

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/