The Ord Oracle - 10-08-2008

The Bullish Percentage Index (BPI) shows the percentage of point & figure chart buy signals for all the stocks in the NYSE. This chart tells us if the index is medium-term overbought or oversold based upon price. Over the last couple of day BPI reached a 12 year low of 8.80. Previous intermediate term low formed when BPI reached the 20 range. According to this chart the downside on SPX should be limited.

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

On-Balance Volume (OBV) Indicator Set: The Climactic Volume Indicator (CVI) measures extreme OBV movement within the context of a short-term OBV envelope for each stock in the index. The Short-Term Volume Oscillator (STVO) is a 5-day moving average of the CVI. The Volume Trend Oscillator (VTO) summarizes rising and falling OBV trends. These charts tell us if the index is overbought or oversold based upon volume in three different time frames. We have showed this chart in the past and in the past several weeks, VTO was not near an area where a bottom could have been expected. Over the last several days, VTO has worked lower and is now approaching the bullish level near -45. Yesterday’s close came in at -39 and still short of the reading of -45 to have a bullish outcome. Today’s decline may have pushed this indicator to the bullish level  e will take a closer look at this indicator tomorrow.

The Rydex Cash flow Ratio measures the ratio in bullish and bearish funds in the family of the Rydex funds.  Important lows form when this ratio reaches 1.10 for low. So far this ratio has not reached into the bullish level since August 2007 and at that time correctly foretold a bottom in the SPX. As of yesterday’s close this ratio closed at .98 and not near the bullish level of 1.10. Matter of fact, Rydex traders purchased bullish funds yesterday in the anticipation of a bottom in the SPX and not a good sign for short term. We would expect this ratio to reach 1.10 level or higher before the next bottom is in. In conclusion, a market bottom is not far off (BPI suggest it’s very near and VTO may reach the bullish level shortly) but sentiment, which is what the Rydex Cash Flow ratio measures, may need more time to get the Rydex Trader more in the bearish camp and raise the Rydex Cash Flow ratio to 1.10 or higher. We are staying flat for now.

Above is the Commitment of Traders (COT) updated to last Tuesday.  Next update will come after the close of Friday that will show this report updated to this Tuesday. What this report shows is where Commercials (Smart money) positions are and where Small Speculator (Dumb money) positions are. We have circled in blue when Commercials are at the most bullish level (second window down from top) and when Small Speculators (bottoms window) are at the most bearish level and which then the Commercials are opposed to the Small speculators. The decline into the 9/11 on Gold produced the least long position in the Small Speculator positions in the past five years and shows the Small Speculator are out of the gold market totally. In the past this has been a good buying opportunity for gold. Also at the 9/11 low the Commercials are at the most bullish level since July and August of 2007 at the 670 level on gold right before the mark up phase began that took gold to 1000. Because of these reason we are expecting a strong rally to begin soon on gold. 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.