Abet Chichi2

[chichi2]

Tom Ord- Wedges (VIX and SPY) 08/05

http://www.decisionpoint.com/TAC/ORD.html

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For 30 to 90 days horizons: Short SPX on 5/13/09 at 883.92.
Monitoring purposes GOLD: Gold ETF= long GLD at 89 on 4/24/09
Long Term Trend monitor purposes: Flat
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Above is the weekly chart of the VIX going back to early 2007. VIX trades opposite of the SPY and therefore if bullish signs develop for the VIX then that is bearish for the SPY. Over the last couple of weeks the VIX ran into the support line dating back to 2007 and suggest there is strong support near current levels and last week the VIX has staged a rally which is a bearish sign for the SPX. If the VIX is going to turn back up it should do it at this support line. Over the last 40 weeks the VIX has been forming a down sloping wedge pattern that is a bullish formation for the VIX and bearish for the SPX. If this bullish Pattern for the VIX plays out it would be a very bearish for the SPX. The MACD histogram has been showing a bullish divergence and any rally in the VIX will produce a bullish crossover on the MACD. We are short the SPX at 883.92.



A potential bearish “Rising Wedge” pattern formed from the March 2009 low (see chart). This pattern has a downside target to where the pattern began (near 67 on SPY). In the top window is an indicator we call “Percent Volume” which measures in a percentage of up volume compared to total volume. When this indicator reaches near 60% and turns down then a bearish signal would be triggered. Right now this indicator is at 66% and any weakness in the SPY may trigger a signal on this indicator. The second window up from the bottom is a 20 day MA of the Declining stocks (blue) and 20 day MA of the down volume (Red). When 20 day MA down volume reaches below 1300 then market may be nearing a high. When 20 day MA down volume turns up from below 1300 then that condition will trigger a sell signal. Both the % Volume and 20 day MA down volume are very close to triggering sell signal and any weakness in the SPY most like will trigger these sell signal. If this pattern of the “Rising Wedge” works out then a serious decline is not far off. Also if you remember the Post Election Seasonal chart that was sent Monday (8-3-09) that predicts a High the first of August and a decline into November.



Above is the weekly chart for DGP which is the double beta ETF for Gold. The pattern forming on DGP may be a Head and Shoulders bottom. The Neck line of this H&S pattern comes in right here at 21.50 and to confirm this H&S pattern a “Sign of Strength” (SOS) would be needed through the Neckline. A Sign of Strength is a strong price move with above average volume through a resistance zone and in this case it would be through the 21.50 neckline area. Since February, DGP has been forming the Right Shoulder and also formed a Symmetric Triangle. Normally the Symmetric Triangles breakout in the same direction as the direction that went into the pattern and in this case it would predict another rally. The Slow Stochastics is still pointing up and the RSI is above 50 which suggest the short term picture is still up. To “Prove the Point” we should see an “SOS” shortly through 21.50. This potential Head and Shoulder bottom has an upside target near 36 on DGP which equates to 130 on GLD. Long GLD at 89 on 4/24/09. We are holding off on GDX in that most gold stocks may follow the lead of the S&P stocks which are studies show may start to pull back. However, we are keeping our core positions and may add to them later this year. Long KRY at 1.82 on 2/5/08. We are long PLM at 2.77 on 1/22/08. Holding CDE (average long at 2.77 (doubled our position on 9/12/08 at 1.46, Sold 5/13/09 at 1.55=6% gain). Bought NXG at 3.26 on 6/4/07. We doubled our positions in KGC on (7/30/04) at 5.26 and we now have average price at 6.07. Long NXG average of 2.26. For examples in how "Ord-Volume" works, visit www.ord-oracle.com.