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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

Friday, October 22, 2010

G20 meeting today expect a dollar sell off after the meeting

DJIA 11132.-14.01 S&P 500 1180.44 +2.82 NASDAQ 2470.87 +11.20 
DJT 4754.97 +19.40 DJU 406.83 -2.93 IBD100 270.34 +4.62 VIX 19.16 -.11
US Gov rates: 6 mo .167%  2 yr ..3547% 10 yr 2.55 +.02 30 yr 3.93 -.02
Gold 1327.90 +2.30 Silver 23.29 +.14 Oil 81.91 +1.31 USD 77.25 -.26
Days to option expiration 21 Day 5 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%

Short Term Trading Indicators

Mikey OB/OS index(80 OB 20 OS) 83
Put/Call Ratio(.6 OB 1.2 OS)  .93 10 day average .80
Ratio Put Premiums/Call Premium .72 (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 +1.4994 Rising/ Negative cross 10/19
NYSE New Highs 127 New Lows 4
NASDAQ New Highs100 New Lows 31NYSE Advance-Decline +586 NASDAQ Advance-Decline +718
Mikey A/D line.(from 9/17/10). NYSE +7822 NASDAQ +4876
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 11091 Flat/Price above
DJIA 20 day 10976 Rising/Price above
DJIA 50 day 10622 Rising/Price above
DJIA 200 day 10515 Rising/Price above

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

Stocks 52 0, Bonds 29- Emerging Mkts 51 0, China 67+, Brazil 37 0, Oil 53+, Nat Gas 29-, Copper 52 0, Gold 48 0, Silver 52+, USD 43 0, Aussie 59 0, Euro 67+, Brit Pd 53 0

Trends
Mikey Short term trend: Up as of 9/2 @ 10320....33days
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 760  ( 1 up, 9 down, 8 neutral)

DXD 44 0, SDS 28-, DZZ 53 0, ZSL 49 0, DUG 31 - , EEV 50 0, FXP 27 -, SMN 52 0, CMD 45 0, SKF 40 0, SRS 30 -, SZK 19-, QID 31 -SCO 44- , RXD 31-, TBT68+, SDP 78- REW 40 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 1077   (11 up, 1 down, 6 neutral)

DDM 47 0, SSO 69+, UGL 51 0, AGQ 52 0,DIG 71+, EET 71+,XPP 58+, UYM 49 0, UCD 61 +, UYG 63+, URE 70 +, UGE 65 +, QLD 70 + UCO 55 0, RXL 64 +, UBT 30 - , UPW 68 +, ROM 63+
ETF Total Score +317 (Positive total indicates uptrend)

The dollar has reached a level that is causing the emerging countries of the world to cry uncle. They have pegged their currencies to the dollar and have cheated the US out of its jobs and wealth. The US politicians mandated easy money and allow this process to go on for the last 20 years. The game is still going on but by allowing their currencies to be pegged to the dollar they are importing inflation. The US is experiencing deflation whole the developing countries are seeing their costs inflate.

 The emerging markets are losing their competitive edge now and the US consumer is getting squeezed. The business pie is shrinking.  This game is coming to an end, It can end with those countries imploding with inflation or it can end with them being more responsible with their currencies.

The G-20 will issue a statement that will say that they will end the currency war. It doesn't matter if they do or not the process will end it for them. The current environment will make emerging markets a bad investment going foreword. The analogy would be US real estate in 2005. It was hotter than hot and you see the result now. That is what I see for the emerging markets in the next 5 years. Their markets are slowing and their costs are rising. Not a good formula and they are crying about it now. By pegging their currency to a falling dollar they are able to increase market share at the expense of rising costs. That game is about to end. The net result is a  rising dollar as their economies roll over. The process is in motion now and the results are predictable.

Mikey

FYI
Daily dose of aspirin could cut cancer. .
Low dose aspirin may cut the risk of developing colon cancer, a European study found. People who took a baby dose aspirin daily for 6 years reduced their colon cancer risk by 24% the study found.
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