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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

Monday, July 26, 2010

Traders turning bullish

DJIA 10525.43 +100.81 VIX 22.73 -.74 10 year 2.9942 -.002 30 year4.0156 -.0043 Gold 1181 -2.10 Oil 78.98 unch USD 82.037 -.427
Mikey OB/OS index (80=OB 20=OS) 69

Trends:

Economy Fundamentals Negative -10 Falling

Stocks----------ST:UP-------IT: DOWN---LT:DOWN---Money Flow: 69
Gold------------ ST:Down-----IT: UP:----LT:UP------Money Flow: 29
Oil --------------ST:-UP------IT: DOWN---LT:DOWN:---Money Flow: 69
LT Bond --------ST:Neutral--IT: UP----LT:UP------Money Flow: 50
Emerging Mkts--ST UP-------IT: UP-----LT:Neutral----Money Flow: 73

Money Flow under 40 is negative over 60 is positive. Generally when MF goes above 60 it is an uptrend and when it goes below 40 it is a downtrend. These indicators are daily indicators and, therefore, are considered short term indicators.

Conclusions: Economic fundamentals are bad and weakening. Stocks are challenging the IT downtrend on recent strong earnings reports. All markets are in up trends. Gold is the weakest with money appearing to go back into equities. Gold is near its breking point of 1180 and a 20 month uptrendline. It would be just like this guys to clock Gold now to prove that everything is OK. Considering that over the last 9 months they have been selling it to the public it seems logical to me.

The Mikey OB/OS index is nearing overbought a reading of 80 should put a ceiling on this rally. The news on Europe is turning giddy and is telling us the worst is over. This shows up in the strength of the emerging markets. The Euro is at a 7 week high at 129.86 and stocks in Europe are at a 5 week high.

Here is trader talk from CNBC

Some encouraging signs for bulls this afternoon at the close as the markets ended the day at session highs:

1) The Dow Industrials and S&P 500 are up 4 percent during their current 3-day winning streak. In fact, the Dow has now posted its 3rd straight triple-digit gain — something it hasn’t done since Dec. 30, Dec. 31, 2008 and Jan. 2, 2009.

2) The Dow Industrials index is now back in the black year-to-date (up almost 1 percent in 2010). The S&P is just a fraction of a point shy of turning positive this year (1,115.10 is its 12/31/09 close)

3) Dow Theory holds: both the Dow Industrials & Dow Transports have closed at 2-month highs today

4) As mentioned earlier, both the Dow Industrials and S&P 500 are hitting higher highs, reversing a recent trend of lower highs

5) New highs abound: 131 NYSE-listed companies are hitting new highs at the NYSE, the greatest number in 3 months. Additionally, 111 stocks are hitting new 52-week highs at the Nasdaq, the most in 2.5-months.

Like I said just like 2008 stocks rallying on bad fundamentals and good earnings.

Mikey
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