Yesterday’s rally jumped above the previous highs of last Friday and Monday (near 90 range) with a Sign of Strength and that condition implies that the 90 range should act as support on any pull back. Today’s rally came on much reduced volume and tested the high of 10/22 and is a short term negative and implies SPY could pull back to support near the 90 range. RSI has made a positive divergence between the 10/10 low and Monday’s low and is a bullish development for the intermediate term. Today’s Advance/Decline line was good and most likely has turned up the McClellan Summation index and a bullish sign also for the intermediate term. Since volume was lacking today and suggest upside energy is weakening, a pull back to support near 90 is possible. If the 90 range does not hold and the Advance/decline reaches below -1000 then that will create a bearish sign. We will see how that potential pull back develops. We are staying flat for now.
This Monday the NYSE tested the low of 10/10 and the McClellan Oscillator made a higher low and a bullish divergence and suggested the NYSE may be near a low. Today’s good Advance/Decline line turned up the NYSE McClellan Summation index and is a bullish intermediate term sign. Since the NYSE McClellan Summation index is at such a low level and has turned up then that implies the next rally phase could last several months.
Below is the Volatility Index (VIX). The Vix trends to trend with the market inversely. Over the last couple of months the VIX has been rally and the NYSE had been declining and did a good job keeping with that trend. The signal for a turn comes when the PMO (or MACD) has bullish or bearish crossovers. Right now the PMO is approaching a bearish crossover but has not trigger a sell signal for the Vix (and a bullish signal for the market) but it’s becoming closer. The MACD is right on the cusp and any short term strength in the NYSE will most likely trigger a bearish signal on the VIX and a bullish signal for the NYSE. VIX is very close to generating a bullish signal for the NYSE.
This commentary is from Monday’s report and is worth another look. “Below is the Commitment of Traders (COT) for gold updated to last Tuesday’s close which is the most current report. The Small Spec and Commercials are back in the area where the last bottom in gold formed which was mid September. Therefore there could be a double bottom forming on physical gold. A similar pattern formed back in mid 2007 (see chart) and gold rallied strongly for six months into the March 2008 high. Inflation will hit the markets (huge bailouts funded by you and me) and the best commodity to benefit is gold. The COT report suggests the physical gold rally may be starting soon.”
Since August the McClellan Oscillator has made higher lows as GDX made lower lows and is a positive divergence. However, the GDX McClellan Summation index is still moving down but today’s strong advance may have started to bend up the Summation index which will be a bullish sign. The chart above is courtesy of wwww.etfinvestmentoutlook.com and is the chart from yesterday’s close. The physical Gold COT on previous page shows a positive development and should help pull up the gold stocks. Price Relative to Gold closed today at .1087, previous bottoms formed in the XAU when this ratio hit below .20. Once GDX Summation index turns up, which could be soon, it will be a good sign that the gold stock rally has started. Our government will inflate (through money at it) to gets us out of this situation, and that is eventually bullish for gold.
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. Holding CDE (average long at 2.77 (doubled our position on 9/12/08 at 1.46). 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 an average price at 6.07.
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/
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