The Ord Oracle - 09-30-2008

On Last Thursday’s report we said, “The intermediate term picture is turning bullish. September 18 produced a “Selling Climax Day” and stopped the downtrend. Most but not all “Selling Climax Days” are tested at some point and if tested on lighter volume would create a bullish signal. The big gap up on 9/19 tested the previous high of 9/8 on higher volume. Also a test of a previous high on higher volume implies the downtrend has ended because bear market rallies don’t test previous highs on higher volume but rather test previous high on lighter volume. The test of the 9/8 high is bullish as well. The pull back into yesterday’s low came on reduced volume compared to the rally into the 9/19 high and shows energy is pushing more up then down and another bullish sign. Also PMO is starting to bend up and positive momentum sign. The SPX is in the process of hammer out an intermediate term bottom.

The possibility is left open that the SPY may test the Selling Climax low of 9/18 before the bottom process is complete.” Yesterday the 9/18 low was tested and tested on lighter volume and a bullish sign. Today’s rally closed above the “Selling Climax” low and created a bullish signal. The chart above is the “9 Month Cycle Low” dating back to 1995. The “9 Month Cycle Low” has done a fine job of identify intermediate term lows. The next “9 Month Cycle Low” is due 10/22/08. The bottom probably was seen yesterday but after the initial buying, a pull back usually forms and gives a better buying opportunity. We think this next buying opportunity may show up at the “9 Month Cycle Low” due on 10/22/08.

There was a positive divergence where NYSE made a lower low and McClellan Oscillator made a higher low yesterday. We have identified time in the past where this occurrence has happen and as you can see did lead to short term rallies in the past. After the initial bounce in the market after this divergence, a pull back did occur later, this gave a good buy level. Also on this next pull back to a good buy level, the Summation index should be trending up by then and giving more support for an uptrend. On 4/2, we Bought ASTM at 1.92, Biotech group. Long POWR at 13.70 on 12/14/07.

On last Thursday’s report we displayed HMY. We are still watching HMY and have updated the chart and think a good buy are would be near the 9.00 range. Last week we said, “Harmony Gold Mining is a gold company we have been watching for a while. Above is the weekly HMY dating back to late 2001 In our opinion this gold stock just finished it’s Right Shoulder of a “Head and Shoulders bottom” that dates back to 2002. It’s a Huge pattern. In the far right window is our trading plan buy signal setup. The weekly HMY “Jumped the Creek” at the 9.00 level with a “Sign of Strength” and now the 9.00 should hold as support on any pull back and would be a good buy area and then place a stop around 8.00. This potential huge Head and Shoulders bottom has an upside target to 30.”

Above is the GDX chart in the Ord-Volume format. The Ord-Volume format measures the average daily volume between swings so a trader can identify which way energy is pushing. The rally to 9/22 high tested the previous high on higher volume implies the downtrend is over. The last several day pull back showed that Ord-Volume is ½ the energy compared to the previous leg up and implies the current pull back is a consolidation leg and not an impulse leg which implies once this consolidation is completed, then another impulse leg up should start. The last several market reports, we talked about a possible Head and Shoulders pattern forming on GDX and the Right Shoulder is forming now. If that is the case (which we believe it is) then GDX may trade in narrow trading range with support near 34 into next week forming the Right Shoulder and be symmetric in time with the Left Shoulder. This potential Head and Shoulder bottom has an upside target to the 50 area. 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 (average long at 2.77 (doubled our position on 9/12/08 at 1.46). 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. For examples in how "Ord-Volume" works, visit www.ord-oracle.com.

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/