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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, December 3, 2010

Rallying on "good news" MACD will diverge on this rally

DJIA 11362.41 +106.63 SPX 1221.53 +29.92 NASDAQ 2579.35 +29.92
DJT 5037.57 +66.00 DJU 397.67 +1.44 IBD 100 290.86 +1.93  VIX 19.39
US Gov rates: 6 mo .203%  2 yr .54% 10 yr 2.97 +.01 30yr 4.24 +.01
Gold 1389.30 +1.00 Silver 28.58 +.16 Copper 3.98 +.04
Oil 88.00 +1.53 RBOB 2.36 +.06 Nat Gas 4.35 +.08 DBC 26.04 +.23
USD Index 80.33 -.43 Aussie ...9767 +.0078 EURO 1.3168 +.0081 Pound 1.5515 -.0025
Yen 83.70 -.15
Days to option expiration 11 Day 9 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
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 jonless 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

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
China PMI at a 7 month high
Iran and N. Korea defiant on Nukes

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) .82
Put/Call Ratio(.6 OB 1.2 OS). 66
10 day average .74
Ratio Put Premiums/Call Premium . (OB .53/ OS 1.54) .56
Put Premium 10 day average .70
Sentiment Total Score: Put/call + premium ratio = 1.22
Williams %R 12 day -2.63 ( uptrend OB:-1.00, downtrend OS -99): Weekly -9.01% 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 28.68  Rising/ Negative  cross 11-12 (second cross)
NYSE New Highs 287 New Lows 13
NASDAQ New Highs 221 New Lows 31
NYSE Advance-Decline +1265 NASDAQ Advance-Decline +725
Mikey A/D line.(from 9/17/10). NYSE +10600  NASDAQ +3953
NYSE % above 200 day ave:  70%

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
11-30 Retesting 11-16 low just below 50 day average. MACD at zero line : Challenging intermediate term uptrend. Dollar at 200 day resistance
Conclusions: Challenging intermediate term uptrend.

Moving Averages

DJIA 5 day 11153 Rising/Price above
DJIA 20 day 11212 Rising Price above
DJIA 50 day 11090  Rising/Price above
DJIA 200 day 10639 Rising/Price above

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

World Markets, Commodities, Currencies

DJIA 38, Emer Mkts 35 China 39, Brazil 45, Europe 34, Russia 38 Japan 47, Korea 48, India 55, Australia 37, Germany 31, Spain 51, UK 47
Oil 40, Nat Gas 67, Gasoline 51 Gold 50, Copper 46,  Silver 58, Platinum 50, DBC 33,
USD 65, Aussie 35, Euro 51, Brit Pd 18, Yuan 36, Yen 47

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

Homebuilders(XHB) 65, Basic Mat (XLB) 64, Energy (XLE) 69 Finance (XLF) 58, Tech (XLK) 58, Retail (XRT) 74, Health (XLV) 53, Airlines ($XAL) 57, Utilities (XLU) 47 ,Gold Miners (GDX) 61,
Real Estate (IYR) 55. Consumer Disc(XLY) 67, Consumer Staple(XLP) 54, Metals and Mining(XME) 67 

Bonds

MUB (Natl Muni) 35,  NCA(Ca Muni) 33
BND (Total Bond Index) 51, BWX (International Treas Bonds) 35,
TLT (20+ US Treasuries) 54, IEF ( 10 yr Treasuries) 34,
PFF (US preferred) 35, HYG (High Yield) 34

2X ETF Short (9 up, 7 Neutral, 2 down) Score 1018
Green=up, Red= down, Black = neutral

DXD 59, SDS 69, DZZ 54, ZSL 44, DUG 50  EEV 66, FXP 66, SMN 46, CMD 43, SKF 71, SRS 62 SZK 71, QID 68, SCO 67, RXD 39, TBT 45, SDP 35, REW 63
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 741  (2 up 4 neutral 12  down)
Green=up, Red= down, Black = neutral

DDM 32 SSO 28, UGL 52 AGQ 57, DIG 56, EET 29 XPP 32, UYM 61, UCD 34, UYG 31, URE 34 UGE 34 QLD 32, UCO 42  RXL 42, UBT 64, UPW 49, ROM 32
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) -277 Correction

The "good news" rally back to the highs will cause the MACD to diverge which is the precursor to an intermediate decline. My power numbers are not strong enough to say the correction is over. On the other hand,  price has my industry groups with a positive score of +8. This is saying that price is strong but the power behind these moves is not. Price will give me a positive cross on the MACD above the zero line so that will end the correction phase . I will then have to classify this as an unconfirmed rally until the ETF score is a positive number. The put/call ratio fell to .66 witch is a low number but not extreme and the Put premiums moved to modest .56 which is near an extreme reading.  The total sentiment score is an almosrt overbought 1.22. The Mikey OB/OS indicator is back to an overbought 82. We will be overbought very soon if this rally goes another 2 or 3 days.


Mikey
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