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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

Tuesday, October 19, 2010

Dollar Rallies assets sell off. The question is.... Is QE 2 real or a smokescreen?

DJIA 10978.62-165.07 S&P 500 1168.90 -18.89 NASDAQ 2436.95 -43.71
DJT 4647.28 - 65.72 DJU 407.89 -2.48 IBD100 262.25 -6.52 VIX 20.63 +1.54
US Gov rates: 6 mo .167%  2 yr .358 % 10 yr 2.48 +.-.08 30 yr 3.91 -.07
Gold 1336 -36.00 Silver 23.78 -.63 Oil 79.49 -3.59 USD 78.12 +.88
Days to option expiration 24 Day 2 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
30 Year Mtg rates 4.34%
Inventory of unsold homes 4 mil 11.6 months inventory
Existing home sales up in July down 19% from a year ago
Median Home prices 204,700  fell in Aug
Mortgage application index Low 784
Mtg Purchase Apps 181.8 Refi Apps 4288.3
New Home Sales flat  288000
Durable Goods  orders declined 1.3%    
Q2 GDP 3rd estimate  1.7%
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
10/6 IMF, Goldman Gloomy on economy expects sluggish or renewed recession over next 6-9 months
10/6 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% ammual rate 610000, Building permits fell to annual rate of 579000
Commercial property prices fell 3.3% in August, lowest level in 8 years

Short Term Trading Indicators

Mikey OB/OS index(80 OB 20 OS) 83
Put/Call Ratio(.6 OB 1.2 OS)  .88 10 day average .80
Ratio Put Premiums/Call Premium .65 (OB .53/ OS 1.54) Put Premium 10 day average .65
Williams %R 12 day -39.3 ( uptrend OB:-1.00, downtrend OS -99): Weekly -1.3
% Advisory Service Bulls 47.2  Bears 27.4 Bear/Bull ratio .58   Bullish
Mikey Thrust indicator: Daily 6 Weekly 9 (1 low, 10 max) Max thrust 9/3
DJIA MACD +1.4923 Falling/ Negative cross 10/19
NYSE New Highs 134 New Lows 26
NASDAQ New Highs 55  New Lows 15
NYSE Advance-Decline -1964 NASDAQ Advance-Decline -1789
Mikey A/D line.(from 9/17/10). NYSE +5726 NASDAQ +3640
Support: 1130 S&P, 10720 DJIA Breakout 9/20
Resistance: 1220 S&P; 11200 DJIA
IBD 100 index Breakout  9/2 242.87

Moving Averages
DJIA 5 day 11075 Falling/Price below
DJIA 20 day 10920 Rising/Price above
DJIA 50 day 10582 Rising/Price above
DJIA 200 day 10507 Rising/Price above

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

Stocks 43 0, Bonds 22- Emerging Mkts 52 0, China 77+, Brazil 54 0, Oil 64 +, Nat Gas 23 -, Copper 55 0, Gold 54 0, Silver 61+, USD 45 0, Aussie 60 +, Euro 71+, Brit Pd 56+

Trends
Mikey Short term trend: Up as of 9/2 @ 10320....31 days
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 771 (2 up, 7 down, 9 neutral)

DXD 49 0, SDS 27-, DZZ 48 0, ZSL 40 0, DUG 28 - , EEV 46 0, FXP 17 -, SMN58 0, CMD 62 +, SKF 41 0, SRS 34 -, SZK 27-, QID 46 0 SCO 37- , RXD 56 0, TBT 75+, SDP 33- REW 47 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 1058 (9 up, 2 down, 7neutral)

DDM 38-, SSO 70+, UGL 56 0, AGQ 61+,DIG 73+, EET 68+,XPP 73+, UYM 45 0 UCD 59 0, UYG 60 +, URE 67 +, UGE 52 0, QLD 56 0, UCO 69+, RXL 71 +, UBT 21 - , UPW 62 0, ROM 57 0

ETF Total Score +287 (Positive total indicates uptrend)

The dollar rallied strongly off of it lows. Gold, oil and stocks got hit. The pros are saying that this will not continue because QE 2 will trump the dollar rally. I believe that QE 2 will not happen now regardless of what the Fed says. It is my opinion that QE 2 is a cover story for the dollar rally that is coming. One day is not enough to judge this as a trend change. Lets see if there is a follow through.

Mikey
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