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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, July 27, 2010

Gold breaks 20 month trendline

DJIA 10537.69 +12.26 VIX 23.19 +.46 10 year 3.3002 -.0165 30 year 4.0813 -.0165 Gold 1158 -25.10 Oil 77.01 -.49 USD 82.222 +.037
Mikey OB/OS index (80=OB 20=OS) 67

Gold broke a 20 month trendline and traded close to its 200 day average closing down 25.10 at 1158. Here is what the gamekeeper had to say about Gold today.

Gold Settles Below $1,160 as Safe Haven Allure Fades

Gold dropped 2 percent on Tuesday to a near three-month low under $1,160 an ounce, as weak consumer confidence data and an option expiration triggered heavy technical selling.

After trading modestly weaker in early sessions, bullion prices accelerated losses to hit a low of $1,157.65 an ounce, the cheapest price since May 5 despite firm U.S. stock markets and a flat dollar. Gold also posted also its biggest one-day decline since July 1.

Silver and platinum group metals tracked gold and crude oil to fall sharply after data showed stagnant growth of U.S. home prices and as job worries drove July U.S. consumer confidence to its lowest since February.

Sean Lusk, market specialist at Chicago-based futures broker PFGBest, said that dealers sold heavily in an attempt to push gold futures prices lower as COMEX August gold options were expiring on Tuesday. Gold prices sometimes gravitate toward an option strike price as traders try to profit from their bets when options are about to expire. "In conjunction with the option expiration here, you have a lot of longs liquidating and rolling into another forward months," Lusk said.

Price volatility has spiked ahead of August's first-notice day on Friday, as gold investors rolled their August futures into December contracts, traders said.

They blame it on Options expiration and the fading of the safe haven allure. They do not mention any fundamental reasons for the sell off. In other words, they give no real reason to sell just a technical selloff. This kind of news will not draw any real selling.

The sell off in Gold implies that the problems of the early part of the year are not as great. That takes the edge off of the nervous market traders. It also gives a reason that no Gold bug would believe for the sell off.

They have told us that the stock market is in a trading range and that stocks are cheap. They have told us that the earnings are great and the outlook is great. Now the safe haven status means that the problems that took the market down are going away because Gold is selling off. They have taken the spotlight away from the economy and are making it look safe to get back in. I have said many times that the economy calls the final tune. Where the economy goes the market will follow.

Before they market can resume its decline they must convince the traders and investors that everthing is OK and they should buy the pullback. This is what they are doing now. Here are the trends:


Down <40 Up >60 Neutral 40>&<60

Stocks: ST 69 IT 46

Oil ST 61 IT 51

Gold ST 27 IT 72

Bonds ST 50 IT 61

Emerging Markets ST 68 IT 43



Mikey
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