Tim Ord 12-2-2008 Market Update

Yesterday the ARMS index closed at 9.84. A closing ARMS index of higher then 9.00 is a rare event. Since 1965, the ARMS index closed above 9.00 four times (counting current reading). The three previous times the ARMS index closed above 9.00 the market staged an intermediate term rally. Price wise in 1987 and March 2007 the price damage was done on the ARMS index close above 9.00 and the market back and filled before rally higher. For the high ARMS index close above 9.00 for November 1997, it marked a low and rallied immediately. Since the ARMS index closed above 9.00 yesterday then that condition implies the November 21 low was the bottom. Because of the bullish extreme ARMS index close above 9.00 yesterday, it implies most of the price damage is done. Long SPX on 12/2/08 at 848.81.

Yesterday’s decline did touch the gap level (barely) on much lighter volume and may have completed the test of the gap level. We also looked at the QQQQ and notice that its gap was tested yesterday on lighter volume and today closed above the gap level triggered a bullish signal. There may be back and filling near term but it looks like the 11/21 low was the bottom and in general the market should start to work higher.

The most update COT reading came out last night and is displayed above (courtesy www.sentimentrader.com). When the Small Spec is bearish and Commercials are bullish then a bottom in Gold is at hand. Therefore there appears be a double bottom has formed in physical gold. Previous times when the Commercials and Small Speculators where opposed to each to this extent, the gold rally last at least 5 months to as long as one year. According to this COT chart a new up-leg in gold has started. Also Gold is considered a Safe Haven and may attack money in this troubled financial system for the longer term. We think this sector will be the one to be in over the next several years and we expect most gold issues will hit new highs.

Chart of the McClellan Summation index is courtesy of www.etfinvestmentoutlook.com. Since late October GDX the McClellan Summation index has been moving higher and implies GDX is in an uptrend. The previous page showed that the COT is in a bullish position in physical Gold and it is also in an uptrend. We expect this gold and gold issue rally to continue. For very short term there could be some backing and filling with support near 20 on GDX. We believe GDX turned the corner to the upside at the late October low where it seen its bottom.

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.