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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

Wednesday, August 18, 2010

Moody's warns on US Euro debt citing weak economy

DJIA 10415.54 +9.69 VIX 24.30 -.03 10 year 2.62 30 year 3.73
Gold 1231.40 Oil 75.42 -.01 USD 82.47 +.12
Days to option expiration 2

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 38 Bonds 73 Emerging Mkts 42 China 47 Brazil 57
Oil 48 Nat Gas 26 Copper 53 Gold 67 Silver 59
USD 59 Aussie 58 Euro 40 Brit Pd 48

Short ETF SCORE 755
DXD 68 DZZ 25 ZSL 35 DUG 51 EDZ 57 SMN 32 SKF 67 SRS 71 SZK 81
QID 74 SCO 50 RXD 57 TBT 26 SDP 61

Long ETF SCORE 669
DDM 34 UGL 62 AGQ 57 DIG 44 EDC 41 UYM 70 UYG 36 URE 32 UGE 70
QLD 29 UCO 50 RXL 56 UBT 70 UPW 21

Total Score -86(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


Americans borrowing was 11.7 trillion at the end of Q2 down 1.5% from Q1 and down 6.5% from the top in Q3 2008. When did the market and economy break down? Q3 2008 right with the top in borrowing. That borrowing is still declining. Consumer debt delinquencies fell to 11.4% from 11.9% from Q1. The first drop since 2006.

PPI rose for the first time in 4 months. The weakness in the dollar was the primary culprit that drove the market and commodities higher this last month. The only way these guys can show market strength is to nail the dollar. They did that all through 2007 and the middle of 2008 to prop the market and commodities up. They are doing the same thing again. We all know what happened to that one. Reality caught up with their game and the market and commodities crashed. Throughout the process the Fed and the government maintained that everything was alright.

Housing starts rose 1.7% but building permits were hitting a 14 month low.

Moody is warning about a possible downgrade of US, UK, German and French bonds. Maybe that explains the hype about deflation now. We seem to be coming to a crossroads on debt in this country. How much more can the US add on? The stimulus has only put a band aide on the problem.

The up moves in the market are directly related to currency movements. I do not know the mechanism but it is easy to make that correlation. Keep you eye on the dollar power index and the Aussie. If the dollar index starts trading above 60 and the Aussie trades below 40 the market should be selling off.

Mikey
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