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Mikey's Short Term Trading Rules

1) Make up a list of stocks, commodities or ETF's to trade. This list should be names that have good earnings and high relative strength.
2) Monitor this list and throw out the weaker names
3) Buy only stocks or ETF's that are intermediate and daily up (green) and the market is Daily and intermediate term up (green)
4) Buy pullbacks on these stocks to the 20 and 50 day averages
Usually you get 4 to 6 20 day pullback buys and 2 or 3 50 day pullback buys in an intermediate term trend
5) More agressive traders can buy the 7 day average in the first 3 to 8 weeks of the uptrend.
6) Buy pullbacks not runups. A buy should not be easy or exciting but difficult and somewhat scary. DO NOT CHASE
7) Place stop at 5% below the buy price. Do not remove
8) Sell 3 to 5 days after the stock price takes out its most recent 2 week high with at least 15% gains
9) Uptrends that are 12 weeks or more may be ripe for a correction. The first 2 pullbacks to the 50 day are usually safe.
Intermediate term uptrends and downtrends generally last from 8 to 16 weeks with 12 weeks being the norm.
10) Shorting is a viable strategy in downtrends for experienced traders only. In general, reverse the above rules
11) Tweet Mikey @themarketshadow with questions or ideas

Tuesday, February 16, 2010

Market rises on Capital One Default rise, options expiration and lower dollar

DJIA 10193 +94.70 SPX 1086.31 10.80 Russ2000 614.55 +3.83 NASDAQ 2201.54 +18.04 VIX 22.59 -.14

Dollar Index 80.01 -.42 Aussie Dollar(FXA).90.12 +.0138 EURO(FXE)1.3714 +.0131

TLT(20yrGov Bonds) 89.89 -.30 IEF (7-10Gov Bonds)90.01 -.10

XLK (Tech)21.54 +.08 XLE (Oil Index)56.47 +.88 XLF (Finan Index)14.01 +.06
XHB Homebuilders Index)16.01 +.13 GDX (Gold Miners Index)45.00 +1.06
XLB (BasicMatIndex) 31.49 +.52

EEM(Emerging Markets) 39.13 +.68 FXI(China Index) 39.30 +.44 IEV(Europe350)35.99 +.39(Brazil) 68.32 +1.69

Gold 1116.5 +26.5 Silver 16.03 +.583 Copper 3.213 +.111 Oil 77.06 +.293 RBOB (Whsl Gas)2.0067 +.0772 Nat Gas 5.475 +.007


Capital One Financial's U.S. credit-card defaults rose in January, in a sign that consumers continue to remain under stress, it said in a regulatory filing.

Capital One [JPM 39.00 0.05 (+0.13%) ] said the annualized net charge-off rate—debts the company believes it will never collect—for U.S. credit cards rose to 10.41 percent in January from 10.14 percent in December.

Accounts at least 30 days delinquent—an indicator of future loan losses—were up marginally to 5.80 percent from 5.78 percent.

Capital One is the third-largest U.S. issuer of Visa [V 85.75 0.97 (+1.14%) ] branded credit cards, and the fifth-largest issuer of MasterCard [MA 226.55 1.07 (+0.47%) ] branded credit cards.

For U.S. auto loans, Capital One's charge-off rate was 4.27 percent in January, down from 5.68 percent in December, and the delinquency rate fell to 9.61 percent from 10.03 percent.

In credit card international operations, including Canada and Britain, the charge-off rate fell to 9.03 percent from 9.58 percent, while the delinquency rate rose to 6.66 percent from 6.55 percent.
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As I mentioned in this blog the market would rally into options expiration and all the Feb puts would go up in smoke. Options expire this Friday. The market was also helped by the lower dollar which boosted commodities. Bank stocks also rallied on the Capital One news. It makes sense if you factor in options expiration.

There is no question in my mind that the the Fed goosed this rally by adding liquidity to the system. This is after all last week when they were talking about exit strategy. Feb was also the month that they were going to withdraw the special liquidity they were providing to the system. Notice how Gold, Oil rallied and the Dollar Index fell. I guess they chickened out on that one at least for now expiration week anyway.

The market is still just one giant currency trade where prices rise and fall on dollar strength and weakness. Economic factors are secondary to currency manipulations. The dollar drops and they make up stories why it went up today is a prime example of that. Defaults rise at Capital One and the market rallies as the dollar get hit.

Mikey
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