The Ord Oracle - 12-09-2008
On last Thursday report we said, “Tuesday we talked about the ARMS index closing at 9.84 and that a closing ARMS index of higher then 9.00 is a rare and bullish event. Since 1965, the ARMS index closed above 9.00 four times (counting current reading) and the three previous times the ARMS index closed above 9.00 the market staged an intermediate term rally. Because of the bullish extreme ARMS index close above 9.00 Monday, it implies most of the price damage is done and that an intermediate term rally is about to begin.” We still believe that to be the case. For near term however there is evidence that a pull back could start now. Uptick closing higher then +600 appears near short term highs and Friday a +666 was recorded and yesterday a +910 was recorded. These highs uptick readings suggest short term exhaustion of the up move and a consolidation is likely near term. There could be a pull back to support near 81 on SPY which is where the ARMS index reached a bullish 9.84 closing reading and should act as support. If the RSI reaches near 35 on lower as 81 is being tested then that would be good time to add to positions. Our intermediate term target to upside is gap level at the 110 range on SPY. Long SPX on 12/2/08 at 848.81. On 4/2, we Bought ASTM at 1.92, Biotech group. Long POWR at 13.70 on 12/14/07.
Below is the NYSE McClellan Oscillator. We have identified on the chart above other times in the past year when the Oscillator was above +200 and each time a pull back occurred. We are not looking for anything major as the McClellan Summation index is deeply oversold and is moving higher and a bullish sign intermediate term. However a pull back to 81 on SPY could be seen again. There may be a pull back here but the 81 area on SPY should hold. There is a Cycle turn date coming on December 14 (Sunday before Option Expiration week) which may start the rally phase. An RSI near 35 or lower on SPY will provide a good area to add to positions.
To review, the Commitment of Traders report (COT) remains very bullish for the intermediate term and GDX McClellan Summation index is moving higher and is also bullish. Therefore, it there is a pull back here it should be relative mild. There is a gap open near 20 on GDX and we believe this gap could get filled in the next several days or so. Watch for the gap at 20 to be filled on lighter volume for it to have a bullish outcome. If RSI pulls back to 35 or so near the time the Gap at 20 is hit, then that may be a good time to add gold stocks positions. Therefore for very short term there could be some backing and filling with support near 20 on GDX. We believe GDX turned the corner intermediate term wise to the upside at the late October low.
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.
