The Ord Oracle - 6-24-2008

We showed this chart and commentary yesterday and it’s worth another look. “The ISE Sentiment Index is a unique put/call value that only uses opening long customer transactions to calculate bullish/bearish market direction. Opening long transactions are thought to best represent market sentiment because investors often buy call and put options to express their actual market view of a particular stock. Market maker and firm trades, which are excluded, are not considered representative of true market sentiment due to their specialized nature. The ISEE gives a good sentiment of what small put and call traders are doing. When this ratio hits a cluster of .75 and below, important lows have formed in the markets. We have circled in red when cluster of the ISEE ratio have fallen below .75. This indicator leads market lows usually by one to three weeks. The first reading in ISEE below .75 came on 6/10. Second reading below .75 came on 6/11 and third reading came on Friday. Therefore we are in the window for a bottom in the market from now until next Friday. A bullish trigger will occur next when the NYSE Summation index turns up.”  We are staying flat for now.

Above is the NYSE index with its McClellan Oscillator and Summation index. Over the last year, market lows in the NYSE formed 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. June 11 the McClellan Oscillator reached below -245 and the first Oscillator reading below -230. Today’s weak Advance/Decline line came in at -1152 and may have pushed the Oscillator below the -230 bullish reading. The second Oscillator reading below -230 have picked the day of the low of the market.  When the Oscillator passes back above the “0” line it turns up the Summation index which in turn is the confirmation of a bottom in the market. That extra confirmation in the market comes usually a couple or so days after the low in the market.   The McClellan Summation index is still moving lower and implies the NYSE is still in a downtrend.  It appears an intermediate term low may show up shortly. 

Sold 5/27/08 IVAN at 2.70=6% gain. Bought Ivan (Invanhoe Energy) 4/13/06 at 2.55,Energy stock.  On 4/2, we Bought ASTM at 1.92, Biotech group. Long POWR at 13.70 on 12/14/07.

On the surface it does not appear much is going on with the XAU. However, if you look closer, there is a lot going on. The Head and Shoulders pattern we have alluded to over the last couple of weeks appears to be progressing but for confirmation of this H&S, the XAU will need to break the Neck line with a “Sign of Strength” (see H&S pattern above). PMO is also about to turn up and any strength in XAU will turn it up and generate a bullish sign. Price Relative to Gold has jumped above the red downtrend and has triggered a buy signal by this method in early May. A smaller pattern by Price Relative to Gold also is about to jump above the blue downtrend line and signal another smaller buy signal. Seasonality turns bullish at end of June (which we are entering now) to the beginning of July and the market may wait until then to show strength.  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.