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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 26, 2010

Korean distraction masks dollar rally, asset sell off

DJIA 11091.87 -95.41 SPX 1189.40 -8.95 NASDAQ 2534.56 -8.56
DJT 4879.25 -32.13 DJU 392.64 -2.61 IBD 100 286.89 -.38 VIX 22.22
US Gov rates: 6 mo .2081%  2 yr .516% 10 yr 2.87 -.04 yr 4.21 -.07
Gold 1363.50 -9.50 Silver 26.67 -.85 Copper 3.74
Oil 83.86 - RBOB 2.16 +.01   Nat Gas 4.41 +.02  DBC 25.03 -.11
USD Index 80.43 +.49 Aussie .9670 -0171 EURO 1.3170 -.0106
Pound 1.5526-.0166 Yen 84.09 +.73
Days to option expiration 16 Day 4 of December Expiration 12-17

Long Term Opinions:

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

Economy:
11-24 Durable goods fell 3.3%
Jobless claims fell 34000 last week to 407000
Personal spending +.4% in Oct
U of Mich Consumer sentiment 71.6% highest since June
ECRI Nov 19th -3.1%
New home sales fell 8.1%, ave price of a home fell 13.9% in August

Noteable:
Texas jury convicted ex- republican house leader Tom Delay of illegally funneling 190000 of corp donations to Texas GOP candidates in 2002. He was once the most powerful Republican in Congress.
North Korea attacks South Korea
US carrier ordered to Korea for war games with S Korea on Sunday.
Deere beats but outlook weak

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 Trading Indicators

Mikey OB/OS index (80 OB 20 OS) .71
Put/Call Ratio(.6 OB 1.2 OS) .47
10 day average .74
Ratio Put Premiums/Call Premium . (OB .53/ OS 1.54) .72
Put Premium 10 day average .68
Sentiment Total Score: Put/call + premium ratio = 1.19
Williams %R 12 day -70.83.( uptrend OB:-1.00, downtrend OS -99): Weekly -32.13
% Advisory Service Bulls 55.7 Bears 21.6  Bull/Bear ratio 2.57 Advisors bullish
Mikey Thrust indicator: Daily 3 Weekly 7 (1 low, 10 max) -4
DJIA MACD 23.08 Falling/ Negative  cross 11-12 (second cross)
NYSE New Highs 71 New Lows 16
NASDAQ New Highs 112 New Lows 36
NYSE Advance-Decline -1012 NASDAQ Advance-Decline -679
Mikey A/D line.(from 9/17/10). NYSE +8990  NASDAQ +3244
NYSE % above 200 day ave: %

Support: 1130 SPX, 10720 DJIA Breakout 9/20
Resistance: 1220 SPX; 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 hits 50 day average
Muni market hits 52 week low inter day down 4.6% in last 4 sessions ..That was quick
11-17 Bounce off of sell signal
11-23 Dollar in uptrend
11-24 Sharp pre-Thanksgiving rally on low volume
Conclusions: Still correcting an intermediate term uptrend.

Moving Averages

DJIA 5 day 11139 Falling/Price below
DJIA 20 day 11211 Flat/Price below
DJIA 50 day 11054  Rising/Price above
DJIA 200 day 10621 Rising/Price above

Mikey Power Index (MPI)
(Uptrend = +, Downtrend = -, Neutral = 0)

World Markets, Commodities, Currencies

DJIA 33, Emer Mkts 27 China 23, Brazil 24, Europe 24, Russia 34 Japan 24, Korea 39, India 42, Australia 24, Germany 37, Spain 29, UK 30
Oil 36, Nat Gas 72, Gasoline 45
Gold 34, Copper 37,  Silver 58, Platinum 53, DBC 43,
USD 78, Aussie 23, Euro 28, Brit Pd 16, Yuan 35, Yen 32

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

Homebuilders(XHB) 34, Basic Mat (XLB) 45, Energy (XLE) 60 Finance (XLF) 28, Tech (XLK) 35, Retail (XRT) 63, Health (XLV) 21, Airlines ($XAL) 61, Utilities (XLU) 22 ,Gold Miners (GDX) 41,
Real Estate (IYR) 34. Consumer Disc(XLY) 52, Consumer Staple(XLP) 19, Metals and Mining(XME) 54 

Bonds

MUB (Natl Muni) 39,  NCA(Ca Muni) 29
BND (Total Bond Index) 41, BWX (International Treas Bonds) 21,
TLT (20+ US Treasuries) 43, IEF ( 10 yr Treasuries) 26,
PFF (US preferred) 44, HYG (High Yield) 34

2X ETF Short (9 up, 9 Neutral, 0 down) Score 1152
Green=up, Red= down, Black = neutral

DXD 68, SDS75, DZZ 69, ZSL 48, DUG 40, EEV 72, FXP 75, SMN 53, CMD 54, SKF 59, SRS 69 SZK 59, QID 75, SCO 71, RXD 69, TBT 58, SDP 62, REW 68

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=UltraShortltraShortSZK=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 600 (1 up 4 neutral 13  down)
Green=up, Red= down, Black = neutral

DDM 27 SSO 21, UGL 36 AGQ 53, DIG 63, EET 26 XPP 23, UYM 47, UCD 42, UYG 26, URE 24 UGE 23 QLD 21, UCO 33  RXL 21, UBT 42, UPW 39 ROM 33

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 Ultra Nasdaq 100, UCO=Ultra Crude Oil, RXL=Ultra Healthcare, UBT Ultra 20+ Year Treas, UPW=Ultra Utilities, ROM=Ultra Technology


Total Score (uptrend is positive) -552 Correction

War in Korea? What a great way mask the dollar rally. I'll bet no one even knows the dollar is in rally mode now. The news back drop is about the Fed printing remember? Gold was down 10 bucks today. The Gold bulls will never sell this move not with the Fed printing and a possible war in Korea. The truth is that on a relative basis the emerging countries and China are falling faster than that of the US now. That is the reason that the dollar is going up. This is not a concept that anyone will buy now. That makes it a perfect time for a dollar rally. In the meantime, the world economy is going to be in a lot of trouble.

Trends: Correction The daily MACD had a second negative cross on 11-12. The second cross usually signals a correction. The MACD is still above the zero line at 23.08 but could cross zero next week. The intermediate trend will still be in place as long as the MACD is above zero. The Mikey total score for double ETF's is a very negative -552. The daily Williams indicator, the Mikey daily thrust indicator and the Mikey power numbers are all saying we are in a correction. This holds true for all world stock markets all world currencies except the dollar, which is in an uptrend.

You will note that I am tracking the Yuan now and it is in a corrective move now. It appears that trading is becoming more active in this currency now. In the commodities, the power numbers say that gold, copper, and oil are in a correction. The commodity index (DBC) is close to a sell signal and could do so next week. Natural gas is the only commodity in a rally phase. Natural gas seems to tag along with the dollar.

Sentiment: Bullish The advisers are 2.57 to 1 bullish, the Put call ratio is a mild 74 with a .47 registered on Friday. The 10 day Put/call premium is a lowish .68 and is holding around .72  for this sell off. The Mikey O/B index is an almost overbought 72.

Summary: Correction continues The world markets, world currencies, and commodities are in a corrective phase. The dollar and Natural gas are in a rally phase. This corrective behavior has not changed the intermediate trends on either. The sentiment of the advisers and the traders during this correction is bullish. There does not seem to be any concern about this correction.

Mikey



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