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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 6, 2010

What is the difference between the US and the Euro zone?

DJIA 11362.19 -19.90 SPX 1223.12 -1.59  NASDAQ 2594.92 +3.46 DJT 5050.92 -17.99 DJU 397.35 -1.68 IBD 100 294.44 +1.82 VIX 18.02
US Gov rates: 6 mo .1827%  2 yr .4286% 10 yr 2.93 -.07 30yr 4.29 -.02
Gold 1417.10 +1.10 Silver 29.73 +.31 Copper 4.00 -.01 Platinum 1713.60
Oil 89.38 -.06 RBOB 2.34 -.01 Nat Gas 4.49 +.17  DBC 26.33 -.03 
USD Index 79.60 +..50 Aussie ..9907 -.002 EURO 1.3239 -.0149 Pound 1.5636 -.0049
Days to option expiration 10 Day 10 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 up
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 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
11-30 Chicago PMI 62.5
Consumer confidence 54.1
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 trimed 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 vew 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

Noteable:
China PMI at a 7 month high
Iran and N. Korea defiant on Nukes
China to be aggressive on monitary 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

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 : 12-3 Market in confirmed uptrend 11381

Short Term Trading Indicators

Mikey OB/OS index (80 OB 20 OS) .88
Put/Call Ratio(.6 OB 1.2 OS)..68
10 day average .73
Ratio Put Premiums/Call Premium . (OB .53/ OS 1.54) .52
Put Premium 10 day average .66
Sentiment Total Score: Put/call + premium ratio = 1.20
Williams %R 12 day -6.31 ( uptrend OB:-1.00, downtrend OS -99): Weekly -10.5
% Advisory Service Bulls 55.4 Bears 21.8  Bull/Bear ratio 2.54 Advisors bullish
Mikey Thrust indicator: Daily 10 Weekly 9 (1 low, 10 max) +1
DJIA MACD 52.76 Rising/ Positive  cross 12-3
NYSE New Highs 267 New Lows 8
NASDAQ New Highs 239 New Lows 30
NYSE Advance-Decline -38 NASDAQ Advance-Decline +400
Mikey A/D line.(from 9/17/10). NYSE +11394  NASDAQ +4917
NYSE % above 200 day ave:  72%

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
12-6 Power numbers turn positive
Conclusions: Upside Price trend resumes on weak power numbers

Moving Averages

DJIA 5 day 11273 Rising/Price above
DJIA 20 day 11206 Rising Price above
DJIA 50 day 11115 Rising/Price above
DJIA 200 day 10649 Rising/Price above

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

World Markets, Commodities, Currencies

DJIA 53 Emer Mkts 52 China 34, Brazil 58, Europe 41, Russia 51 Japan 61, Korea 53, India 64, Australia 43, Germany 31, Spain 50, UK 66
Oil 47, Nat Gas 80, Gasoline 49, Gold 61, Copper 55,  Silver 71, Platinum 65, DBC 47,
USD 59, Aussie 44, Euro 52, Brit Pd 17, Yuan 35, Yen 57

US Industry Groups (relative strength)
(Uptrend , Downtrend , Neutral ) 8 up, 7 Neutral Score +8

Homebuilders(XHB) 68, Basic Mat (XLB) 67, Energy (XLE) 71 Finance (XLF) 59, Tech (XLK) 59, Retail (XRT) 74, Health (XLV) 50, Airlines ($XAL) 56, Utilities (XLU) 49 ,Gold Miners (GDX) 69,
Real Estate (IYR) 56. Consumer Disc(XLY) 68, Consumer Staple (XLP) 53, Metals and Mining(XME) 72 

Bonds

MUB (Natl Muni) 37,  NCA(Ca Muni) 34
BND (Total Bond Index) 42, BWX (International Treas Bonds) 41,
TLT (20+ US Treasuries) 42, IEF ( 10 yr Treasuries) 41,
PFF (US preferred) 36, HYG (High Yield) 48

2X ETF  Short Score 851 (3 up, 11 Neutral, 4 down)

DXD 48, SDS 64, DZZ 42, ZSL 35, DUG 44  EEV 59, FXP 67, SMN 39, CMD 38, SKF 53, SRS 50 SZK 50, QID 55, SCO 55, RXD 36, TBT 44, SDP 23, REW 47
Green=up, Red= down, Black = neutral
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 913 (5 up 11 neutral 2  down)

DDM 44 SSO 40, UGL 64 AGQ 67, DIG 64,EET 33 XPP 30, UYM 70, UCD 48, UYG 54, URE 45 UGE 56 QLD 44, UCO 47  RXL 44, UBT 64, UPW 53, ROM 46
Green=up, Red= down, Black = neutralLegend:


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) +62 uptrend

Do you remember that in 2006 the subprime loan problems hit the science. The Fed and the big banks swore that the problem was with the sub-prime loan lenders. Those lenders created the bad loans and it had nothing to do with the rest of the economy or even was going to create a problem in rea\l estate. They kept that party line up until 2008 and the truth came out.

Fast foreword to today. The Euro zone is having problems because the governments have borrowed too much and their credit is being downgraded. It is costing them more to borrow and they are tightening their spending. The reason is that the markets are making them do it. The US is on the same course as the Euro zone. The US is in denial now but the lawmakers are not coming to terms with the deficit. They are still cutting taxes and not coming to terms with the problem.

The results are predictable.  The Fed can buy as many bonds as they want but at some point the markets will price US debt where it belongs. Look for rates to rise and the economy to tank.

Mikey
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