The Ord Oracle - 6-17-2008

The rally on the SPY from the recent low was accompanied on lighter volume and shows upside energy was decreasing and short term bearish sign. On June 11 the SPY tested the gap level that was created on 4/16 on higher volume. Higher volume tests of gaps suggests the gap will be tested again at some point. Price Momentum Oscillator (PMO) is a momentum indicator and this indicator is moving down and suggests the momentum of the market is down for now. Option expiration week normally has a bullish bias and this week is option expiration week.  We don’t see a safe trade for the moment. Either SPY tests the previous low of 6/12 on lighter volume and see +800 or more downtick closing to create a bullish signal or market rallies to 6/6 high and gap level near 140 and test gap on lighter volume and see uptick closing near +900 range. Since market is between these levels, we are staying flat for now.

Below is the NYSE index with its McClellan Oscillator and Summation index.  Over the last year, market lows in the NYSE where found when McClellan Oscillator traded below -230 the second time within three weeks. We have labeled three instances in the past year on the chart above. Recently the McClellan Oscillator reached below -245 last Wednesday that coincided with a low in the market. Since then the market reversed and stagger higher and possibly hitting a high today. On the next potential pull back in the market, if the McClellan Oscillator reaches near -230 or lower it will indicate a more important low since the McClellan Oscillator will have made a double low below -230. Staying flat for now.  We will see how the McClellan Oscillator performs on the next pull back. 

Below, you will see the HUI index with McClellan Oscillator, courtesy of www.sentimentrader.com. Intermediate term lows form on HUI when stock above 50 day moving average fall below 15% (see above chart). This condition happened in August and December 2007 and again in May 2008. Since the May 2008 low the market has been waffling in a minor consolidation. However, there appears to be little downside as 50 day moving average is hovering in oversold level near the 20%.   Also the McClellan Oscillator is hovering near the neutral reading and implies the market is in a mild consolidation. Seasonality turns bullish at end of June to the beginning of July and the market may wait until then to begin the next rally phase.  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, has support near 2.80 range. We are also holding CDE (long at 4.08, support near 3.90). 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.

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/