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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, October 21, 2010

Bonds, Gold and Commodities taking hits as G-20 nears

DJIA 11146.57 +38.60  S&P 5001180.26 +2.09 NASDAQ 2949.67+2.28
DJT 4735.57 -13.81 DJU 409.26 -1.57 IBD100 265.72 +.69 VIX 19.27
US Gov rates: 6 mo .167%  2 yr .3506% 10 yr 2.53 +.05 30 yr 3.95 +.06
Gold 1325.60 -18.60 Silver 23.15 -.71 Oil 80.56 -1.98 USD 77.51 +.14
Days to option expiration 22 Day 4 of November Expiration 11/19
Long Term Opinions:

Bonds: Major long term top forming. .... Current trend down
Stocks: Secondary bear market rally ending......  Current trend up weakening
Gold: Primary top forming crash expected.....  Current trend up
Oil : Secondary bear market rally ending..... Current trend up
Commodities: Bear market rally ending..... Current trend up
Real Estate: Bottoming no uptrend..... Current trend neutral
US Dollar: Major long term bottom forming .....Current trend down
Emerging Markets: Bear market rally ending..... Current trend up
Economy: Double dip coming .....Current trend down

Economic Conditions: Poor

Week ended 10/8 ECRI Index  -6.9 % annualized
Consumer confidence 48.5 (Above 50 is good)
CEO economic index Sept 86 , June 94.6
ISM Index Aug  56.3 (above 50 is growth) new low for 2010
New orders index 51.1 Lowest since June 09
Backlog index 46.5 lowest since April 09
Inventories 55.6 Highest since July 1984 a 26 year high.
Auto and light trucks Aug 11.7 (16 million was average for past 15 years)
Jobless initial claims fell to 453,000
Chicago PMI 60.4
Sept Employment index 53.4
10/6 ADP employment report -39,000  jobs by private employers in Sept
 IMF, Goldman Gloomy on economy expects sluggish or renewed recession over next 6-9 months
 Foreclosures rose to 282,528 in August
10/7 Nonfarm payrolls declined 95000 in Sept
Jobless rate 9.6% , underemployed rate 17.1%
Sept Manufacturing jobs -6000
Long Term unemployment (% out of work  26 weeks) 41.7%
10/14 Mortgage Applications  rise 14.6% last week Purchase apps fell 8.5%
Core PPI +.1%
Trade Balance -46.3 Bil
10/15 U of Mich Consumer sentiment 67.9
Core PPI .8% (49 year low)
Sept Retail Sales 0.6% Ex Autos +0.4% 
Aug Business inventories +0.6%
Atlanta Fed chief Dennis Lockhart: "US Economic growth has slowed pretty dramatically and deflation is a concern."
South Korea: Warns of trade war wants compromise on exchange rates
Japans PM Naoto Kan: Yen's rise is extremely excessive
10-18 Sept industrial production fell .2%, Homebuilder confidence 16 (50 is average)
10-19 China raises rates to curb inflation: French riot over increase in retirement age
Intel will invest 6 billion in US chip plant
Housing starts rose .3% annual rate 610000, Building permits fell to annual rate of 579000
Commercial property prices fell 3.3% in August, lowest level in 8 years
Brazil raises taxes on bonds and asks for a stop to the currency wars.
G-20 will meet the end of this week. Guess what they will be talking about that's right the $ weakness.
10-20 Mortgage apps fell 10.5% last week Purchase demand fell 6.7% near a 13 year low  Refi's were down 11.2% 6th decline in 7 weeks
30 year mtg rates  averaged 4.34%
US wants G-20 finance ministers to address trade imbalances and wants developing countries to let their currencies rise in line with market forces
Yield on Chinese 5 year bonds jumped to 2.97% highest yield since 2009
10-21 China GDP slows to 9.6% Industrial Production 13.3% Consumer Prices +3.6% Retail Sales 18.8%
Short Term Trading Indicators

Mikey OB/OS index(80 OB 20 OS) 83
Put/Call Ratio(.6 OB 1.2 OS)  .99 10 day average .79
Ratio Put Premiums/Call Premium .74 (OB .53/ OS 1.54) Put Premium 10 day average .66
Williams %R 12 day -20.59( uptrend OB:-1.00, downtrend OS -99): Weekly -4.35
% Advisory Service Bulls 45.1  Bears 22  Bear/Bull ratio .48   Bullish
Mikey Thrust indicator: Daily 8 Weekly 9 (1 low, 10 max) Max thrust 9/3
DJIA MACD +1.4862 Falling/ Negative cross 10/19
NYSE New Highs 239 New Lows 8
NASDAQ New Highs 123  New Lows 8
NYSE Advance-Decline -57 NASDAQ Advance-Decline -591
Mikey A/D line.(from 9/17/10). NYSE +7236 NASDAQ +4156
Support: 1130 S&P, 10720 DJIA Breakout 9/20
Resistance: 1220 S&P; 11200 DJIA
IBD 100 index Breakout  9/2 242.87
Note: Bears are at same level they were at April top
Non confirmation on Mike A/D line Oct 13 AD high 8163
Non confirmation on New Highs 442 on 10/13

Moving Averages
DJIA 5 day 11094 Rising/Price above
DJIA 20 day 10963 Rising/Price above
DJIA 50 day 10606 Rising/Price above
DJIA 200 day 10512 Rising/Price above

Mikey Power Index (MPI) (Uptrend Above 60, Sell below 50, Downtrend below 40) (Uptrend = +, Downtrend = -, Neutral = 0)

Stocks 45 0, Bonds 28- Emerging Mkts 52 0, China 71+, Brazil 44 0, Oil 56+, Nat Gas 29 -, Copper 55 0, Gold 53 0, Silver 57+, USD 38-, Aussie 61 +, Euro 71+, Brit Pd 58 0

Trends
Mikey Short term trend: Up as of 9/2 @ 10320....32days
Mikey Intermediate Trend: Up 09/03/10 10477
Mikey Long term trend: UP 10/13/10 11052
IBD : Confirmed Uptrend as of 9/01 @ 10269

Legend: DXD =UltraShort DJIA,.SDS= Ultra short S&P 500, DZZ= UltraShort Gold, ZSL =UltraShort Silver, DUG =UltraShort Oil index,EEV=UltraShort Emerg Mkts,FXP= Ultrashort China25, SMN=UltraShort Basic Mat, CMD= Ultrashort Commodities, SKF=UltraShort Financials, SRS=UltraShort Real Estate, SZK=UltraShort Consumer Goods, QID =UltraShort NASDAQ 100, SCO=Ultrashort oil, RXD=UltraShort Health Index,TBT=UltraShort 20+ year Treasuries, SDP=UltraShort Utilities REW=UltraShort Technology

2x Short ETF Score 699  ( 1 up, 9 down, 8 neutral)

DXD 40 0, SDS 28-, DZZ 50 0, ZSL 45 0, DUG 30 - , EEV 47 0, FXP 23 -, SMN 47 0, CMD 43 0, SKF 36 0, SRS 27 -, SZK 22-, QID 37 -SCO 43- , RXD 39 -, TBT 69 +, SDP 29- REW 44 0

Legend: DDM =Ultra DJIA, SSO=Ultra S&P 500, UGL=Ultra Gold, AGQ=Ultra Silver, DIG=Ultra Oil index, EET=Ultra Emerging Mkts, XPP =Ultra China25, UYM Ultra Basic Mat, UCD=Ultra Commodities, UYG=Ultra Financials, URE=Ulta Real Estate, UGE=UltraConsumer Goods, QLD UltaNasdaq 100, UCO=Ultra Crude Oil, RXL=Ultra Healthcare, UBT Ultra 20+ Year Treas, UPW=Ultra Utilities, ROM=Ultra Technology

2x Long ETF SCORE 1113   (11 up, 1 down, 6 neutral)

DDM 44 0, SSO 70+, UGL 53 0, AGQ 57 0,DIG 72+, EET 73+,XPP 63+, UYM 54 0, UCD 58 0, UYG 67+, URE 74 +, UGE 62 +, QLD 65 + UCO 59 0, RXL 81 +, UBT 30 - , UPW 71 0, ROM 60+
ETF Total Score +414 (Positive total indicates uptrend

I am getting non-confirmations on my ad line  and new highs on the NYSE and NASDAQ. Today e were back to the highs of 10/13 but we had net declines on both indexes. The Gold market has been clipped from its high of 1388 on 10/14 to a low of 1322 today. Bonds for all of the talk of Fed buying have clearly entered a downtrend and sold off again today since August 26 the yields on the 30 year have risen from 3.46% to 3.96% today. The decline in the bonds is not consistent to the QE 2 story.

Mikey
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