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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, December 27, 2010

2007 replayed

DJIA 11555.03 -18.46 SPX  1257.54 +1.67 NASDAQ 2667.27 +1.67
IBD 294.01 unch DJT 5095.69 +16.77  DJU 405.86 +.13 VIX 17.67  
US Gov rates: 6 mo .193%  2 yr .6392% 10 yr 3.34 30yr 4.41
Gold 1382.90 Silver 29.26 Copper 4.28 Platinum 1735.50
Oil 91.00 RBOB 2.40  Nat Gas 4.11
Aussie 1.0070 -.0008 EURO 1.3167 +1.00 Pound 1.5328 -.0026
USD Index 80.67 DBC 27.11 -.01
Days to option expiration 16 Day 6 of December Expiration 1-15
Long Term Opinions:

Bonds: Major long term top forming. .... Current trend down
Stocks: Secondary bear market rally ending......  Current trend up stalled
Gold: Primary top forming crash expected.....  Current trend up stalled
Oil : Secondary bear market rally ending..... Current trend up stalled
Commodities: Bear market rally ending..... Current trend up
Real Estate: Bottoming ..... 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 up
World economy: Current trend slowing
World political environment: Tension, aggravated
Where's Waldo: Waldo is buying Gold, Bonds and Emerging Markets.

Economy:
Case/Schiller home price index fell .8% in Sept Prices +.6% from 1 year ago
12-2 jobless claims rose 26000 to 436000 presented as a positive
November same store sales rose 5.3% vs a year ago presented as a positive for a nice Xmas for retailers
12-3 Non-farm payrolls rose 39000 in November a 10 month low. Jobless rate at 9.8%
Goods producers trimmed 15000 jobs Builders cut 5000 workers. Retailers cut 28000, government cut 14000. Service firms added 65000
Underemployment rate was 17%
ISM service sector rose .7% to 55
Analysts stuck to their view that the economy is recovering at a modest pace.
Proposed by Obama: 2 Yr extension of Bush tax cuts, Div and payroll tax remain at 15%, 13 month extension of unemployment benefits, 2% cut in payroll taxes for 1 year, 1 yr cut in SS taxes, estates taxes 35% with 5 million exemption. Estimated cost: 450 to 600 bil over 2 years
12-10 Trade deficit fell 13.2% in Oct to 38.7 bil
12-13 Retail Sales +.8% in Nov x Autos +1.2%
Autos fell .8% Building Materials fell .1%
Producer Prices +.8% core +.35 Gasoline +4.7%
Business inventories +.7% to 1.42 trillion highest since Feb 2009

Noteable:
China PMI at a 7 month high
Iran and N. Korea defiant on Nukes
China to be aggressive on monetary controls
Treasury to sell all of its shares (2.4 billion) in CITI at public offering
Goldman Sacs forecasts 25% gain for stocks next year.,1650 for Gold, advises shorting the dollar
China increased bank reserves for 3rd time in a month to 18.5%
China trade deficit with US fell 8.3%
China inflation expected to be 5.1%
Nasdaq rose for 8th day in a row to new highs
12- 17 Tax cuts extended. Tea party defeats appropriation spending bill.
12-20 State deficits and decling Federal money to hurt economy

Stock Market Trends

Mikey Short term up 12-6 11362
Mikey Intermediate Trend: Up 09/03/10 10477
Mikey Long term trend: UP 10/13/10 11052
IBD : 12-21 Market in confirmed uptrend 11478

Short Term Trading Indicators


Mikey OB/OS index (80 OB 20 OS) .89 (market very OB )
Put/Call Ratio(.6 OB 1.2 OS).67
10 day average .57
Ratio Put Premiums/Call Premium  (extremes .60/ 1.54) .56
Put Premium 10 day average .57
Sentiment Total Score: Put/call + premium ratio = 1.23
10 day Sentiment Total Score: Put/call + premium ratio =1.14
Williams %R 12 day -9.92, Weekly -3.71
% Advisory Service Bulls 56.8 Bears 20.5  Bull/Bear ratio 2.77
Mikey Thrust indicator: Daily 9 Weekly 10 (1 low, 10 max) 19,-1
DJIA MACD 104.84 Rising/ Positive  cross 12-3
NYSE New Highs 112 New Lows 11 
NASDAQ New Highs 144 New Lows 12
NYSE Advance-Decline +330 NASDAQ Advance-Decline +431
Mikey A/D line.(from 9/17/10). NYSE +13837  NASDAQ +7708
NYSE % above 200 day ave:  75%

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

Comments:
12-3 MACD Positive cross
IBD market in confirmed uptrend
12-6 Power numbers turn positive
Mikey short term up
12-7 Extermely low sentiment numbers...very overbought
Possible Metals reversal
Conclusions: Upside Price trend resumes 
12-14 AD line and NH/NL do not confirm DJI new high
New lows hit a 1 month high
30 year bonds return to April lows (amid Fed buying??????)
12-15 IBD Market under pressure
12-17 Gold MACD second negative cross RSI 46
New highs, AD line non confirm new high in DJIA
Options expire
12-20 Nasdaq rallies to new high for 3rd straight day.
12-21 IBD  market in confirmed uptrend
12-27 New highs in A/D lines for both N/H N/L lagging
Moving Averages

5 day 11555 Rising/Price at 
20 day 11540 Rising/ Price above 
50 day 11267 Rising/Price above
200 day 11720 Rising/Price above
20 week 10852 Rising/Price above
50 week 10663 Rising/Price above
90 week 10097 Rising/Price above
200 week 10916 Falling/Price above


World Markets, Commodities, Currencies

DJIA 85 Emer Mkts 53 China 32, Brazil 35 Europe 55 Russia 69 
Japan 47, Korea 69, India 51, Australia 56  Germany 29, Spain 32 UK 73
Oil 61, Nat Gas 28, Gasoline 55,
Gold 47, Copper 69,  Silver 49, Platinum 57
USD 67, Aussie 66, Euro 33 , Brit Pd 40, Yuan 44, Yen 50
Grains 61, DBC 65

US Industry Groups (relative strength)
(Uptrend , Downtrend , Neutral )
 23 up, 9 Neutral, Downtrend 0 Score +23

Homebuilders (XHB) 70,  Real Estate (IYR) 59, Finance (XLF) 70, Insirance 64 (IAK), Broker/Dealers ( IAI) 71, Retail (XRT) 63, Consumer Disc (XLY) 62, Consumer Staple (XLP) 58, Health (XLV) 59, Pharma (IHE) 63, Biotech (PBE )83, Transports (IYT) 61 Aerospace (ITA) 61, SEA (Shipping) 47, Airlines ($XAL) 41, ,Utilities (XLU) 55  , Metals and Mining( XME) 68 Copper (COPX) 64, Nat Gas Production (FCG ) 71,Oil Expl and Prod (IEO) 73, Oil Service (OIH) 62   Coal (KOL) 66 Energy (XLE) 70, Gold Miners (GDX) 48, Steel  (SLX) 61, Basic Mat (XLB) 73, Tech (XLK) 67, Semiconductors (SMH) 64, Software (SWH) 71, Networking (PXQ) 68



Bonds (Relative Strength)
 (0 up, 3 down, 2 neutral) Score -3
MUB (Natl Muni) 41 NCA(Ca Muni) 34 
BND (Total Bond Index) 35 BWX (International Treas Bonds) 43, PCY (Emerg Mkt Debt) 32
TLT (20+ US Treasuries) 45, IEF ( 10 yr Treasuries) 40, PFF (US preferred) 36, HYG (High Yield) 55,


I feel I am watching an old movie. The stock market complete with emerging market growth, commodities, rising oil prices gold, the falling dollar and falling housing prices are back. Correct me if I am wrong, but I saw this movie in 2007. I remember in the Spring of 2007 oil prices were going up on pipeline shutdowns in Nigeria. I also China was raisings rates to cool off their economy and that even that would not stop oil prices.

This was on CNBC today.

The hot commodities trade had cooled Monday morning on news of an interest rate hike out of China. China’s central bank raised the one-year Yuan lending rate by 0.25 percentage points on Saturday in another attempt to slow inflation, which hit a 28-month high of 5.1% in November. Investor bets that China’s latest effort to reign in prices would prove successful sent futures for agricultural products and crude lower Monday.

Commodities investor and Fast Money Contributor Dennis Gartman was betting that the sell-off was a knee-jerk reaction and wouldn’t last, particularly for crude [CLC1 91.13 -0.38 (-0.42%) ].   Gartman believes crude is set to skyrocket and that the case for higher oil is much stronger than China’s ability to pressure prices. “Oil is not going down very far,” said Gartman, author of the renowned Gartman Letter.

Gartman highlighted supply chain threats from the bombings in Nigeria as evidence that oil would rise. Three of Nigeria’s four state-owned refineries were shut down after a pipeline attack earlier this month. Deadly bombings on Christmas Eve had intensified violence in the country, leading to riots Monday morning.

The trend in stocks commodities, oil, and gold are up but this is what happened in the end game in 2007.
In my wildest imagination I did not think they could play this movie again so quickly. We know the outcome of this movie because we saw it in 2007.  They are using the same script  and it is a bad grade B movie. How long can it go on? Keep reading my blog I will have the signal when it happens

Mikey
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