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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, August 24, 2010

Approaching the low end of the trading range.

DJIA 10040 133.96 VIX 27.46 +1.80 10 year 2.48 -.13 30 year 3.57 .04
Gold 1233 +10.00 Oil 71.63 -1.18 USD 83.27 -.07
Days to option expiration
Economic Conditions: Negative -10.0

Mikey OB/OS index Neutral ---50 (80=OB 20=OS)
Mikey Confidence Index (Traders: Low) 34
Ratio Put Premiums/Call Premium Elevated 1.11
% Advisory Service Bulls 36.7 Bears 31.1 Moderately Bullish
US Mutual Funds cash position 3.5% Low cash (high 6.2% Low 3.3%)
Numbers are from the prior day close

Mikey Power Index (MPI)
BUY 60> SELL 50< Short 40

Stocks 26 Bonds 83 Emerging Mkts 20 China 27 Brazil 31
Oil 11 Nat Gas 14 Copper 43 Gold 50 Silver 47
USD 64 Aussie 32 Euro 18 Brit Pd 41

Short ETF SCORE 906
DXD 68 DZZ 46 ZSL 46 DUG 68 EDZ 72 SMN 55 SKF 71 SRS 75 SZK 86
QID 82 SCO 87 RXD 66 TBT 17 SDP 67

Long ETF SCORE 546
DDM 35 UGL 44 AGQ 43 DIG 22 EDC 24 UYM 51 UYG 32 URE 25 UGE 71
QLD 20 UCO 8 RXL 55 UBT 79 UPW 41
Total Score -360(Positive number indicates uptrend)

Summary: Stocks, Emerging Markets, Oil, Euro, Aussie, Tech, Utilities, Real estate, Banks have weak MPI power numbers below 40.

Gold, US dollar, and Bonds have strong MPI power numbers above 60.

Long Term Opinions:

Bonds: Major long term top forming
Stocks: Secondary Bear market rally over, downtrend in progress
Gold: Primary Top Forming
Oil Secondary: Bear market rally complete, downtrend in progress
Commodities: Bear Market Rally ending
Real Estate: Bottoming no uptrend
US Dollar: Major long term Bottom complete, uptrend in progress
Emerging Markets: Bear Market Rally ending
Economy: Double dip coming


The DJI is approaching the low end of the trading range. I am not yet oversold on my indicators but the sentiment is getting negative traders are at 34 and the put premiums are over 1 at 1.06. A put reading of 1.2 would be high. The only long in an uptrend is the bond market.

The commodities are starting to break as the dollar strengthens. In times like these the old flight to safety rings a bell with me. The rats are starting to jump ship. I am seeing alot of the names that just had "great" earnings giving me sell signals. Gold is still hanging on but some morning we will wake up and see it down 50 bucks and never look back.

Mikey
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