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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

Wednesday, January 19, 2011

Big Distribution day

DJIA 11825.29 -12.64 SPX  1281.92 -13.10 NASDAQ 2725.36 -40.49
DJT 5129.33 -92..32  DJU 411.31 -.04 VIX 17.31
US Gov rates: 6 mo .183%  2 yr .5764 % 10 yr 3.33 -.04 30yr 4.53
Gold 1370.20 +2.00 Silver 28.79 -.13 Copper 4.37 -.06 Platinum 1838.10 +8.80
Oil 90.86 -.52 RBOB 2.48 uch  Nat Gas 4.58 +.16
Aussie 1.0009 +.0011 EURO 1.3417 +.0088 Pound 1.5896 +.004
USD Index 78.81 -.17 DBC 27.96 -.02
Days to option expiration 4 Day 21 of Jan Expiration 1-21

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 down
Oil : Secondary bear market rally ending..... Current trend up
Commodities: Bear market rally ending..... Current trend up
Real Estate: Bottoming ..... Current trend down
US Dollar: Major long term bottom forming .....Current Trend down 1-18
US Economy: Double dip coming .....Current trend up
Emerging Markets: Bear market rally ending..... Current Trend Neutral
World economy: Current trend slowing
World political environment: Tension, aggravated
Where's Waldo: Waldo is buying Gold, Foreign Bonds and Emerging Markets.

Economy:
Earnings season starts will good reports
Noteable:

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

Oil upside breakout 12-1-10 @87.42 USO 37.29
Gold upside breakout 9-22-10 @1283.50 GLD 123.11
Dollar Index breakdown 9-21-10 @81.17  UUP 23.52
(Prices trading below these breakouts are considered trend reversals)

Short Term Trading Indicators


Mikey OB/OS index (80 OB 20 OS) .91 (market very OB )
Put/Call Ratio(.6 OB 1.2 OS).90
10 day average .68
Ratio Put Premiums/Call Premium  (extremes .60/ 1.54) .47
Put Premium 10 day average .53
Sentiment Total Score: Put/call + premium ratio = 1.37
10 day Sentiment Total Score: Put/call + premium ratio =1.21
Daily-Weekly=-+.16
Williams %R 12 day -12.51 , weekly -3.73
Bulls 56 Bears 20.9 Bull/Bear ratio 2.67
Mikey Thrust indicator: Daily 9 Weekly 10 (1 low, 10 max) 19, -1
DJIA MACD 114.38 UP /Positive cross 1-18
NYSE New Highs 174 New Lows 22
NASDAQ New Highs 145 New Lows 11
NYSE Advance-Decline -1646 NASDAQ Advance-Decline -1758
Mikey A/D line.(from 9/17/10). NYSE 15746  NASDAQ +7351
NYSE % above 200 day ave 77 %

Support: 1220 SPX, 11258 DJIA Breakout 9/20
Resistance: 1305 SPX; 11867 DJIA
Downside reversal 1207 SPX, DJIA 11200, NASDAQ 2550

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
12-31 Negative MACD cross
1-3 New highs on averages and A/D line N/H N/L Still off Nov 4 highs
1-4 Gold drops $44 Oil 2.17 Commodities showing weakness
Market sells off on higher volume DJIA up
Dollar holds 50 day average turns up
1-7 Foreign markets showing weakness. India in a downtrend
Dollar nears intermediate reversal levels up
Bad news in Europe surfaces again
1-10 MACD Negative cross
World markets give sell signal
1-12 New highs in DJI and NASDAQ confirmd by AD Line.
1-13 New lows expand on NYSE to 111
1-14 New highs confirmed by AD line
1-18 AAPL blows away earnings
1-19 Big distribution day NYSE 1646 net declines Nasdaq 1758 net declines

Moving Averages

5 day 11787 Rising/Price above
20 day 11661 Rising/ Price above 
50 day 11433 Rising/Price above
200 day 10788Rising/Price above
20 week 11237 Rising/Price above
50 week 10764 Rising/Price above
90 week 10218 Rising/Price above
200 week 10906 Flat/Price above

World Markets (Power Numbers) Ave score 54
DJIA 63 Emer Mkts 41 China 62, Brazil 45 Europe 63  Russia 62  Japan 60, Korea 64, India 43, Australia 46  Germany 52, Spain 63  UK 37

Commodities (Power Numbers)
Oil 41, Nat Gas 53, Gasoline 58,
Gold 44, Copper 38,  Silver 33, Platinum 60
Grains 54 DBC 66


Currencies (Power Numbers)
USD 35, Aussie 39 Euro 56 , Brit Pd 87, Yuan 56, Yen 58

US Industry Groups (relative strength) Ave Score 55
11 up, 21 Neutral, Downtrend 1 Score +10
Homebuilders (XHB) 57,  Real Estate (IYR) 55, Finance (XLF) 55, Insurance (IAK) 51 , Broker/Dealers ( IAI) 53, Retail (XRT) 40, Consumer Disc (XLY) 53, Telecom (IYZ) 40, Consumer Staple (XLP) 55, Health (XLV) 59, Pharma (IHE)46, Biotech (PBE ) 48, Transports (IYT) 50 Aerospace (ITA) 72, Shipping (SEA) 52, Airlines ($XAL) 41, ,Utilities (XLU) 61 , Metals and Mining( XME) 48, Copper (COPX) 59, Nat Gas Production (FCG ) 66,Oil Expl and Prod (IEO) 66 Oil Service (OIH) 60,  Coal (KOL) 50,  Energy (XLE) 66, Gold Miners (GDX) 35, Steel  (SLX) 53, Basic Mat (XLB) 51, AgriBusiness (MOO) 60, Tech (XLK) 67, Semiconductors (SMH) 70, Software (SWH) 71 Networking (PXQ) 46, Internet (FDN) 58


Bonds (Relative Strength)
 (0 up, 2 down, 7 neutral) Score -2

MUB (Natl Muni) 40 NCA(Ca Muni) 31 
BND (Total Bond Index) 49 BWX (International Treas Bonds) 49, PCY (Emerg Mkt Debt) 36 TLT (20+ US Treasuries) 45, IEF ( 10 yr Treasuries) 48, PFF (US preferred) 52, HYG (High Yield) 55

Today was a very weak day even though the DJI was only down 12 points. The NYSE had 1646 net declines and the NASDAQ had 1758. The NYSE declines was the largest since Nov 23. The NASDAQ last had a day like this on Oct 19.

You will notice that my industry group sectors went from green to mostly black in 1 day. Options expire on Friday so this may just be an options dump for the calls or it may be the start of something bigger. The chart breakout for this expiration series was 11,451 a trip back to this number by Friday would not surprise me.
That would wipe out the call buyers for the last month.

Copper and silver are in sell mode and Gold is still hanging on by a thread. A constructive move form a base is being made by UNG ( Natural Gas). The 20 day is trading up through the 20 week. This stock was sold out at the end of last year and no one owns it any good news would set it off.

Mikey
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