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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, November 19, 2010

Correction continues Intermediate trend still up

DJIA 11203.65 +22.32 S & P 500 1199.73 +3.04 NASDAQ 2518.12 +3.72
DJT 4873.44 +33.48 DJU 398.00 -1.37 IBD100 280.88 +2.68 VIX 18.04 -.71
US Gov rates: 6 mo .1877%  2 yr .5130 % 10 yr 2.88  30 yr 4.25
Gold 1353 unch  Silver 26.83   Copper 3.83
Oil 82.42 +.57 RBOB 2.12 -.11 Nat Gas 4.17 +.17
USD Index 78.47 +.24  Aussie .98.84 +.0007 EURO 1.3548 Pound 1.5908
Days  to option expiration 1 Day 25 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 correcting
Gold: Primary top forming crash expected.....  Current trend up correcting
Oil : Secondary bear market rally ending..... Current trend up
Commodities: Bear market rally ending..... Current trend up correcting
Real Estate: Bottoming no uptrend..... Current trend neutral, weakening
US Dollar: Major long term bottom forming .....Current trend down correcting
US Economy: Double dip coming .....Current trend neutral, weakening
Emerging Markets: Bear market rally ending..... Current trend up correcting
World economy: Current trend up..slowing
World politcal environment: Tensions increasing

Economic Conditions: Poor
11-15 Retail sales strong ( I don't make these things up)
Empire manufactuing index -11.4 , This is  disaster they expected +17
11-17 Walmart sees strong holidays
Industrial production flat
PPI +.4% Core PPI -.6% Cap utilization 74.8%
Oct consumer price index +.02% ex food and energy flat lowest on record
Housing starts hit 18 month low annual rate 519,000 record low 477,000 April 09
11-18 Jobless claims rose 2,000 to 439,000 last week

Noteable:

SEC investigating Chase on its adequate disclosure of hedge fund in the selection of asset for 1.1 billion package of subprime loans.
Ambac looking to go bankrupt.
Aussies hike cash rates to 4.75%
Eurozone PMI 54.1
ADP reports private employment rose 43000 for Oct.
Republicans retake control of House
Fed to buy 600 billion in treasuries by mid 2011
11-4 GM set for IPO 365 Million dollars 26-29 US to reduce stake from 61 to 43%
Freddie lost 4.1 bil in Q3
G-20 meets this week...accord not seen.
Bond insurer  Ambac files for bankruptcy
11-8 OECD: US,Germany, Japan, Russia seem to be gathering steam while China, Britain, France and India appear to be slowing down. It added that leading indicators in China and Brazil "continue to point strongly downward."
Geithner: Economy picking up.
Problems surface again at Greek and Irish banks
11-9 Margin on silver raised
11-10 CSCO outlook soft CSCO warns of soft public sector
Presidential panel: cut 1.5 tril outlay cut, 1 tril tax hike.. proposes raising retirement age for SS to 69, trim cost of living increases for current retirees
11-12 G-20 ends with no agreement
China raises rates to slow inflation
11-15 US  30 year hit 4.44% Rates hit a 6 month high
11-17 China...Food price controls

Ireland bank woes creates survival crisis in Euro zone
GM raises IPO price and shares on IPO due to demand Prices stock at 33 US state will be cut to 33% from 61%
Fed to stress test banks again in early 2011
11-18 Ireland bank to get help from EU/IMF
GM up 4% to 34.19 on IPO
Long term benefits for 2 million expire end of year

Inflation spiking in China Raises bank reserves for 5th time this year, orders banks to cut lending
Central aank's voters more hostile on QE2 GOP eyes curbing Fed

Stock Market Trends

Mikey Short term trend: ...11-16. market correction 11023
Mikey Intermediate Trend: Up 09/03/10 10477
Mikey Long term trend: UP 10/13/10 11052
IBD : Market under pressure@ 11192 on 11-13 Market in Correction 11-17 11201
Short term reversal  DJIA 11143 Gold 1315 GLD ( 133.07)Dollar index 78.42 UUP (23.28)

Short Term Trading Indicators

Mikey OB/OS index(80 OB 20 OS) .85
Put/Call Ratio(.6 OB 1.2 OS) .71
10 day average .73
Ratio Put Premiums/Call Premium . (OB .53/ OS 1.54) .72
Put Premium 10 day average .60
Score: Put/call + premium ratio = 1.43
Williams %R 12 day -52.64 .( uptrend OB:-1.00, downtrend OS -99): Weekly -16.48
% Advisory Service Bulls 56.2 Bears 20.2  Bear/Bull ratio .35   Bullish
Mikey Thrust indicator: Daily 5 Weekly 8 (1 low, 10 max) -4
DJIA MACD 53.0  Falling/ Negative  cross 11-12 (second cross)
NYSE New Highs 86 New Lows 21
NASDAQ New Highs 91 New Lows 42
NYSE Advance-Decline +528 NASDAQ Advance-Decline +282
Mikey A/D line.(from 9/17/10). NYSE +9740  NASDAQ +3690
NYSE % above 200 day ave: %

Support: 1130 S & P, 10720 DJIA Breakout 9/20
Resistance: 1220 S & P; 11200 DJIA
IBD 100 index Breakout  9/2 242.87

Comments:
Mikey power index on DJIA peaked on 9/22 at 88
MACD  First negative cross 10/19 MACD peaked on 10/14 @160.92
11-2 .52 Put/call reading
11-4 DJIA breaks out above 11258 April 26 high DJIA at 11200 resistance level
11-5 Indicators overbought all trends up
P/C and premium total a very low 1.09
MCD positive cross  market at new high MACD below 10-14 high possible divergence
Mikey OB/OS @ 87
Put Premiums .48
11-8 Extremely low put activity and premiums
11-11 Market is selling off Put premiums and P/C ratios NOT expanding meaning there is no concern about this sell off.
11-12 Market reverses 11258 breakout of 11-4
11-15 GLD reverses closes below 133.07
11-16 DJIA reverses closes below 11143
Muni market hits 52 week low interday down 4.6% in last 4 sessions ..That was quick
11-17 Bounce off of sell signal

Moving Averages

DJIA 5 day 11123 Rising/Price sbove
DJIA 20 day 11215 Rising/Price below
DJIA 50 day 11009  Rising/Price above
DJIA 200 day 10599 Rising/Price above

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

Currencies, Commodities, World markets

DJIA  51, Emer Mkts 48, China 44, Brazil 42, Europe 34
Oil 50, Nat Gas 46, Gasoline 59
Gold 35, Copper 46, , Silver 61, Platinum 50,
USD 43,  Aussie 35  Euro 51  Brit Pd 41

US Industry Groups (relative strength)  (Uptrend , Downtrend , Neutral )

Homebuilders(XHB) 43, Basic Mat (XLB) 54, Energy (XLE) 68 Finance (XLF) 50, Tech (XLK) 52, Retail (XRT) 67, Health (XLV) 50, Airlines ($XAL) 63, Utilities (XLU) 40 ,Gold Miners (GDX) 53, Real Estate (IYR) 43. Consumer Disc(XLY) 62, Consumer Staple(XLP) 55, Metals and Mining(XME) 53  

Bonds

MUB (Natl Muni) 16,  PFF (US preferred) 49, BND (Total Bond Index) 40, HYG (High Yield) 51
BWX (International Treas Bonds) 37, TLT (20+ US Treasuries) 29, IEF ( 10 yr Treasuries) 32, NCA(Ca Muni) 29

Double ETF's

2X Short ETF Score  959  (6 up  10 neutral  2 down) Green=up, Red= down, Black = neutral

DXD 51, SDS 54, DZZ 65, ZSL 42, DUG 21, EEV 55, FXP 54, SMN 50, CMD 55, SKF 44, SRS 66 SZK 48, QID 62, SCO 53, RXD 61, TBT67, SDP 49, REW 62

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=UltraShortSZK=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 Long ETF SCORE 830 (2 up 11 neutral 5 down) Green=up, Red= down, Black = neutral

DDM 41 SSO 41, UGL 45 AGQ 59, DIG 81, EET 37 XPP 40, UYM 52, UCD 57, UYG45, URE 32 UGE 69 QLD 38, UCO 45  RXL 37, UBT 25, UPW 42 ROM 44

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


Total Score (uptrend is positive) -129 Correction

The market is correcting its 10 week uptrend. There is no change in the intermediate trend. Options expired today with both sides losing as usual. Groups showing strength are Energy, Airlines, Consumer discretionary and retail. Groups showing weakness are Bonds and Utilities and Real estate.

Sentiment numbers show that the correction is not a concern to the traders. Mikey OB is a hefty 88 and the P/C 10 day is a low 72 with the 10 day put/call premium ratio a very small 58.  My double short ETF shows 6 groups up and 2 down with 10 neutral. The long double ETF shows 2 up 5 down and 11 neutral. The scales are tipped toward double short but nothing definite yet.

Mikey
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