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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

Monday, October 25, 2010

Stock prices and reality widen

;DJIA11164.05 +31.49 S&P 500 1185.62 +2.54 NASDAQ 2490.85 +11.46
DJT 4774.86 +19.86 DJU 405.20 -1.63 IBD100 276.34 +3.00 VIX 19.85 +1.07
US Gov rates: 6 mo .167%  2 yr ..3628% 10 yr 2.56 +.01 30 yr 3.91
Gold 1339.85 Silver 23.46 +.17 Oil 81.91 +82.34 +.43 USD 77.14 -.11
Days to option expiration 20 Day 6 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 10/15 ECRI Index  -6.8% 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%
10-25 Sept exisiting home sales rose 10% annual rate 4.53 mil an annual decline of 19.1%
Dollar falls after G-20
French strikes on 62 retirement age costing economy, Invenory of unsold homes 4.04 mil,
Mortgage apps index 803.4
Chicago Fed activity index fell .9 in Sept to -.58 (reading below zero indicate negative growth)
Credit card write offs rose to 10.3% from 9.45% in July

Short Term Trading Indicators

Mikey OB/OS index(80 OB 20 OS) 81
Put/Call Ratio(.6 OB 1.2 OS)  .89 10 day average .81
Ratio Put Premiums/Call Premium ..62 (OB .53/ OS 1.54) Put Premium 10 day average .66
Williams %R 12 day -24.51( uptrend OB:-1.00, downtrend OS -99): Weekly -6.24
% 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 +1.4591 Falling/ Negative cross 10/19
NYSE New Highs 311 New Lows 7
NASDAQ New Highs 191 New Lows 27
NYSE Advance-Decline +612 NASDAQ Advance-Decline +556
Mikey A/D line.(from 9/17/10). NYSE +8434 NASDAQ +5432
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 New Highs 442 on 10/13
Mikey OB/OS remains high
NYSE new high on AD line in gear.

Moving Averages
DJIA 5 day 11138 Rising/Price above
DJIA 20 day 10994 Rising/Price above
DJIA 50 day 10640 Rising/Price above
DJIA 200 day 10518 Rising/Price above

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

Stocks 58 0, Bonds 30- Emerging Mkts 57 0, China 65+, Brazil 36 -, Oil 52+, Nat Gas 30-, Copper 56 0, Gold 51 0, Silver 56+, USD 39 -, Aussie 64 +, Euro 70 +, Brit Pd 55 0

Trends
Mikey Short term trend: Up as of 9/2 @ 10320....38 trading days.. 7.6 weeks
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 684  ( 2 up, 10 down, 6 neutral)

DXD 38 - SDS 28-, DZZ 51 0, ZSL 45 0, DUG 25 - , EEV 50 0, FXP 28 -, SMN 46 0, CMD 31 0, SKF 35 -, SRS 31 -, SZK 13-, QID 24 -SCO 44 0 , RXD 23-, TBT 67+, SDP 70 + REW 35 -

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 1097   (11 up, 1 down, 6 neutral)

DDM 55 0, SSO 76+, UGL 55 0, AGQ 59 0, DIG 72+, EET 67+,XPP 72+, UYM 45 0, UCD 59 0, UYG 60+, URE 66 +, UGE 51 0 QLD 56 + UCO 69 0, RXL 64 +, UBT 33 - , UPW 73 +, ROM 65+
ETF Total Score +413 (Positive total indicates uptrend)

  • Dollar falls after G-20
  • French strikes on 62 retirement age costing economy
  • Exisitng home sales rise 10%  in Sept to depressed level of 4.53 mil ann rate
  • Invenory of unsold homes 4.04 mil
  • Mortgage apps index 803.4
  • Chicago Fed activity index fell .9 in Sept to -.58 (reading below zero indicate negative growth)
  • Credit card write offs rose to 10.3% from 9.45% in July 

The economy remains weak in spite of the Feds efforts to save the economy and stock prices rise. The spread between stock prices and reality are widening but stocks are still in an uptrend.  

Mikey
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