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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 26, 2010

Down into the Hole

DJIA 9985.81 -74.25 VIX 27.37 +.67 10 year 2.48 -.05 30 year 3.51 -.06
Gold 1237.70 -3.60 Oil 73.36 +.84 USD 82.92 -.08
Days to option expiration 16

Economic Conditions: Negative -10
Fundamentals very negative

Mikey OB/OS index 50, Neutral
Mikey Confidence Index (MCI) 49, Traders: negative
Mikey OB/OS is dead center not extreme enough for a low.

Put/Call Ratio .91 ten day average .916
Ratio Put Premiums/Call Premium 1.18 Elevated
Put Premium 10 day average 1.007
Summary: Ten day average of P/C ratio should be over 1 to look for a low not extreme enough yet for a good low

DJIA MACD -80.74 Cross Negative 8/12 11 days old
Summary: Indicates a downtrend in progress

% Advisory Service Bulls 33.3 Bears 31.2 Moderately Bullish
US Mutual Funds cash position 3.5% Low cash (high 6.2% Low 3.3%)
Summary: Experts too bullish for a good low now

NYSE New Highs 41 New Lows 143
Nasdaq New Highs 14 New Lows 161
Summary: New lows expanding indicating further downside

IBD : Confirmed downtrend as of 8/24
Would not go against their signals

Mikey Power Index (MPI)Uptrend Above 60, Sell below 50, Downtrend below 40

Stocks 25 Bonds 87 Emerging Mkts 18 China 24 Brazil 21
Oil 26 Nat Gas 12 Copper 55 Gold 59 Silver 67
USD 60 Aussie 29 Euro 28 Brit Pd 43

Short ETF SCORE 883
DXD 75 DZZ 41 ZSL 30 DUG 79 EDZ 78 SMN 61 SKF 70 SRS 67 SZK 79
QID 78 SCO 82 RXD 59 TBT 14 SDP 70

Long ETF SCORE 576
DDM 29 UGL 53 AGQ 68 DIG 18 EDC 26 UYM 43 UYG 34 URE 35 UGE 61 QLD 24 UCO 21 RXL 40 UBT 85 UPW 40
Total Score -307(Positive number indicates uptrend)

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 complete, downtrend resuming
Economy: Double dip coming
Bonds: Strong uptrend telling us the story is about to turn ugly

The Dow lost its grip on 10,000, ending near session lows Thursday as trading was light and investors braced for two events Friday: the latest reading on second-quarter GDP and a speech by Fed Chairman Ben Bernanke.Central bankers gathered in Jackson Hole, Wyoming, today for the Fed's annual symposium on the economy. Fed Chairman Ben Bernanke is expected to speak Friday, though he isn't expected offer much in the way of clues on the Fed's next move.

I think you can see that my blog is getting more technically oriented. I will be keeping my views and rants to a bare bones minimum. The numbers above represent what is happening in the market. I am showing you my indicators and and interpretation them for you. You may use them any way you wish. Feel free to disagree with me.

The ETF section represents double short and double long ETF on a diverse set of industry sectors. I keep a cumulative score for both and take the difference. A positive number is an uptrend and a negative number is a downtrend. An MPI over 60 is a buy, crossing below 50 is a sell. An MPI of 40 or lower is a short crossing above 50 is a cover.

I am going to include the new highs and new lows for both the NYSE and the NASDAQ. You can watch these to get a truer picture of the overall market than just looking at the averages.

The put call ratios and put premium to call premium are measurements of fear in the market. Generally, the greater the fear the closer to a low we are on a short term basis.

I conclude that the market currently has a negative economic environment and there is some fear in the markets but I do not believe anyone has acted on it. For these reasons I say we are going lower in the near term.

I believe that the Fed wants the markets to go lower now to allow them to sell their treasuries and put that money to work in the economy. If that is the case the media will start to portray the FED as toothless and unable to stop the decline in the economy. I believe tomorrow will be the kickoff to that story.

I hope this helps, as I say I use these to help be trade. I am not giving these numbers as a recommendations but only as information. I am not a financial advisor just a guy trading the market. If you have any suggestions email me at mikey22222,@gmail.com.

All the best, Mikey
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