September 1, 2010

For 30 to 90 days horizons: Short SPX on 5/13/09 at 883.92.
Monitoring purposes GOLD: Gold ETF – Stop hit at 118 on 7/1/10 for 8% gain. Long GLD at 110.24 on 12-14-09
Long Term Trend monitor purposes: Flat
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On Monday’s report, we said, “For very short term the daily ARMS index closed at 3.80 today and reading above 3.00 can produce a bounce in the market in the next day or two. We don’t think this potential bounce will go far, perhaps 108 range or less on SPY. The weekly Bollinger Bands continue to find the trend when it rolled over in May and continues in a downtrend.” The expected bounce has materialized. The mid line of the daily Bollinger band comes in near 108 on SPY and is a resistance area. These bear market rally are usually fast and furious but usually burn out quickly. An exposition of ticks closed today at +1270 with an ARMS index close of .25 suggests this rally is a Short covering rally. These types of rallies normally last from one to three days. According to Seasonality charts the Friday before Labor Day weekend has the probability of being an up day is over 70%. Also the Friday before a long holiday weekend is usually a light volume day. Therefore if Friday’s test today’s high on lighter volume, it could lead to the next high and the market may start its next mark down next week. Seasonality remains bearish into September October timeframe and may be where the next intermediate term low will be found. The weekly Charts remain bearish.

We are taking another look at the Pattern Recognition comparing 1998 SPY chart to current XLF chart. We concluded previous that the August high was the final leg up and completed the sideways consolidation that started in May and the market was about to start and impulse wave down. That count may be still correct but there is another possibility that one more rally to previous high near 15 is possible after which a strong impulse wave down starts. Our target to 10.00 is still the forecast in both instances. We are short XLF at 14.30.

The longer term picture in gold and gold stocks remain very bullish. However, there may be a retracement in Gold stocks with a retracement in the general stock market that we have been expecting. There are cycles for a low in the general market due in September October time frame which is not far away. The second window down from the top is the Chaikin Oscillator and previous times that this indicator has been this high the market was near a short term high and is one of the reasons we are not buying new positions in gold stocks here. There is a good possibility that GDX could pull back to the blue uptrend line drawn on the chart which come in near 48 and rising. If GDX can hold this trend line on pull backs it would be a very bullish sign. This condition would imply on the next rally in GDX, it would have enough strength to break through the Neckline (near 54) which in turn would give an upside target to 92. In general we expect the gold stocks to pull back with the general market and GDX may find support near 48 which could develop into the next buy area. Gold may find support near 1150 range. For a valid breakout in GDX, it will need to jump the Neckline (near 54) With a “Sign of Strength” (SOS) (Big volume with large price move) of this Head and Shoulder bottom pattern which will give an upside target to 92 which is near a 100% move up from current levels. Our longer term studies show that GOLD could reach near 2200 in 2011 and could create a big push up for most gold stocks in this timeframe. Sold NSU at 3.87 on 6/21/10 for 20% gain. Long NSU at 3.23 on 5/13/10. Long CGR at 1.24 on 5/11/09. Long IROG at .52 on 5/10/10. Long AVARF at 2.52 on 4/26/10. Long VGZ at 2.11 on 4/22/10. Long PMU at .20 on 4/6/10. We will hold as our core position in NXG, CDE and KGC because in the longer term view these issues will head much higher. Long GLD on 12/14/09 at 110.24. Holding CDE (average long at 27.7. Long KRY at 1.82 on 2/5/08. 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. New Book release "The Secret Science of Price and Volume" by Timothy Ord, buy on www.Amazon.com