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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

Saturday, August 7, 2010

TW3 The stock Market yawns on bad news.

DJIA 10653.56 -21.42 VIX 21.74 -.36 10year 2.8183 -.0846 30year 3.994 -.0591 Gold 1205.30 Oil 80.70 -1.31 USD 80.37 -.44
Days to option expiration 10

Economic Conditions: Negative -10.3
Mikey OB/OS index High 97 Low 0 (80=OB 20=OS)---73

Mikey Confidence Index (Traders: confident = 100) 70

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

Stocks 50 Oil 67 Gold 34 Bonds 49 Emerging Mkts 65
USD 45 Aussie 74 Euro 56 Brit Pd 59

Short ETF SCORE 563
DXD 53 DZZ 57 ZSL 40 DUG 33 EDZ 32 SMN 35 SKF 40 SRS 42 SZK 46
QID 43 SCO 29 RXD 74 TBT 55 SDP 38 to to

Long ETF SCORE 809
DDM 46 UGL 37 AGQ 55 DIG 60 EDC 73 UYM 70 UYG 63 URE 62 UGE 70 QLD 57 UCO 74 RXL 48 UBT 35 UPW 46


The best way to sum up this week was that the economy went into the tank. The word deflation was heard many times and everyone looked to see what the Fed was going to do about it. Through it all the stock market refused to sell off.

The Treasury is auctioning billion in bonds next week which may account for the deflation talk or it may be the start of a new story. The Fed will probably downgrade the economy in their policy statement on Tuesday.

Technically The bulls have the trend and the Bears have the economy. The score ended 809 for Long ETF vs 563 for the short ETF. Mikey OB /OS reading is at 73 so we are very close to being overbought.

The ECRI leading indicator bounced off of its 14 month low of -10.7 to -10.3. The jobs numbers continued to show weakness. There were 131000 jobs lot in July. The jobless rate remained at 9.5% but only because people left the workforce.

They are now saying that the rate of job growth is too small to sustain an economic recovery. I guess the word jobless recovery is being set aside for now. In all the economy peaked in April right with the market.

This rally is now 5 weeks old. It started on July 1 at 9732 and has risen over 900 points. We have rallied back to near the May break of the 50 day at 10865. That would have been where the shorts came in. They have now seen bad economic news for the past 3 months and have nothing to show for it. The market has a way of doing that.

The focus has been on earnings which are backward looking. The forward looking indicators are negative and falling. If you are confused join the club. I am economically oriented so I will stay the course on that approach. Technically, I am waiting for this thing to get overbought and have some "technical breakout" that will send the shorts for cover before I short some more.


Here are the individual stocks I am going to use RSI for these. Over 60 is a buy under 50 is a sell and under 40 is a short. A reversal back above or below 50 cloes the position


AAPL 54 IBM 60 HPQ 35 INTC 46 AMAT 41 TXN 58
ORCL57 MSFT 50 SYMC 33 INTU 46 ADBE 54
COST 55 TGT 60 WMT 63 BBY 50 AMZN 66 JWN 53 JCP 38
LVS 71 WYNN 67 CCL 57 DIS 61 MCD 66 YUM 60
DAL 53 CAL 55 UAUA 55 AMR 54
CAT 67 DE 76 CMI 65 FCX 65 POT 73 NEM 47 ABX 56
DD 72 DOW 49 MOS 65 MON 63 APD 70 AGU 72
UNP 66 CSX 55 NSC 58 FDX 67 UPS 68
APA 59 CNQ 55 DVN 56 PTR 57 BTU 69 XOM 61 VLO 57
SLB 60 BHI 36 RIG 62
JPM 49 BAC 41 WFC 55 GS 68 MS 61 AXP 53 V 51 COF 67
SPG 64 KBH 54 LEN 50 HD 49 LOW 43
ABT 72 JNJ 59 CL 31 CLX 60 PG 45 K 48 KFT 62 KO 79
NUE 51 X 61 F 63 TM 52 HMC 70
BA 59 HON 59 GD 61 LMT 50 HON 59 NOC 61
MRK 52 LLY 69 GSK 61 PFE 68 UNH 73 AET 62 WLP 62 AFL 61
QCOM 68 CSCO 65 BRCM 53 VZ 79 T 70 BIDU 71 GOOG 60


Mikey
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