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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

Thursday, August 19, 2010

Bond market telling a grim story

DJIA 10271.21 -144.33 VIX 26.44 +1.85 10 year 2.57 30 year 3.65
Gold 1235.40 +10.40 74.43 -.99 USD 82.45
Days to option expiration 1

Economic Conditions: Negative -10.3

Mikey OB/OS index Elevated ---63 (80=OB 20=OS)
Mikey Confidence Index (Traders: Elevated) 65
Ratio Put Premiums/Call Premium Elevated 1.08
% Advisory Service Bulls 41.7 Bears 27.5 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 42 Bonds 79 Emerging Mkts 35 China 46 Brazil 54
Oil 41 Nat Gas 18 Copper 50 Gold 65 Silver 56
USD 62 Aussie 54 Euro 35 Brit Pd 46

Short ETF SCORE 755
DXD 64 DZZ 28 ZSL 39 DUG 55 EDZ 62 SMN 35 SKF 65 SRS 68 SZK 80
QID 71 SCO 56 RXD 53 TBT 20 SDP 58

Long ETF SCORE 649
DDM 38 UGL 63 AGQ 57 DIG 39 EDC 37 UYM 68 UYG 36 URE 34 UGE 74
QLD 29 UCO 42 RXL 62 UBT 76 UPW 21

Total Score -76(Positive number indicates uptrend)

Long Term Opinions:

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


You will notice that the power index has the bonds at 79. The 10 year yield is at 2.57 and the 30 year is at 3.65. That is saying that all is not well in the economy. The early groups of Housing and Retail and Banks are showing severe weakness and the only thing holding this thing together are the late cyclicals. I don't think they will hold up much longer.
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