Ord Oracle 10-21-2008

Over the last couple of weeks, it looks as though the SPY have been forming a “Triangle Pattern”. A “Triangle Pattern” is where boundary line form and converge around a trading range that meat out into an apex.  As the market works out into an apex the volume gradually decreases and this pattern appears to be forming on the SPY now. Triangle patterns normally break in the direction prior to when the Triangle pattern formed and in this case the direction was down. This pattern enforces the idea that at least the “Selling Climax Low” of 10/10 will be tested and could be broken. Also notice that over the last four days that volume decreased as the market worked higher and showed the market was becoming weaker as it rallied.

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

Today’s weak Advance/Decline line of -1300 most likely has put the McClellan Oscillator below the “0” line which in turn has turned down the Summation index. A downtrend Summation index implies the NYSE is back into downtrend. There is a very gold possibility that the SPY will test the 10/10 low (85 range) and there is a chance that low may not hold and head down to the next support which is the 2002 low near 77 Above is weekly Market Vectors Gold Miners (GDX) dating back to 1993. The bottom window show the weekly Price Relative to Gold ratio (PRTG). Right now PRTG ratio is at the level of the 2000. 

Here are the main sectors in the market (Consum Diser XLY, Conumer Stapl XLP, Energy XLE, Financials XLF, Health Care XLV, Industrials XLI, Materials, XLB Technology XLK with the ETF for Gold (GLD). The top performing groups over the last 90 days (in this case gone down the least) have been Consumer Staples XLP, ETF GOLD, and Health Care XLV with XLP and Gold holding up the best both down 10%. Energy got hit the hardest which is down 43%. Normally the most bullish and strongest groups hold up the best in a downturn in the market and most likely lead the way higher once the market turns back up and in this case GLD and XLP are the two strongest groups. We don’t think a bottom has been made in the market just yet as there may be some re-test of recent lows of either the 10/10 low or possible the 2002 low. But what ever group holds up the best should lead the rally up once the market does make a bottom.

Above is the Commitment of Traders (COT) updated to last Tuesday. The COT showed at the 9/11 low that Commercials were bullish (Smart Money) and Small Speculators (Dumb money) where bearish and correctly forecasted a low in gold. Gold rallied strongly into late September and since has pulled back where volume has dried up significantly. When volume decreases on a decline then down side is usually limited and therefore GLD should be near a low. Also the COT remains bullish for Gold. Gold stocks have gotten ran over in the last couple of months and may not start to rally until Gold and GLD are well in there rally phase. Therefore we will hold off buying any gold stocks until this group starts to show strength. Today we bought GLD at 75.90. We are long the XAU from 12/18/07 at 162.05. Long GLD at 75.90 on 10/21/08 stop on close below 72.51. 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.