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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, January 14, 2011

Market closes on highs 28 weeks off lows

DJIA 11787 +53.48 SPX  1293.24 +9.48  NASDAQ 2755.30 +20.01
DJT 5228.30 -1.17 DJU 410.87 +1.53 VIX 15.46
US Gov rates: 6 mo .167%  2 yr .5808 % 10 yr 3.32 +.02 30yr 4.52 +.03
Gold 1361.40 -14.10 Silver 28.48 -.48 Copper 4.43 +.07 Platinum 1817 +8.50
Oil 91.67 -.19 RBOB 2.49 +.03 Nat Gas 4.48 -.05 
Aussie .9913 -.0066 EURO 11.3320 +.0024 Pound 1.5783 +.0046
USD Index 79.27 -.27 DBC 28.02 +.13
Days to option expiration 6 Day 20 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 up
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) .98 (market very OB )
Put/Call Ratio(.6 OB 1.2 OS).60
10 day average .65
Ratio Put Premiums/Call Premium  (extremes .60/ 1.54) .52
Put Premium 10 day average .55
Sentiment Total Score: Put/call + premium ratio = 1.12
10 day Sentiment Total Score: Put/call + premium ratio =1.20
Daily-Weekly=-.8
Williams %R 12 day -2.55, Weekly -5.90
% Advisory Service Bulls 57.3 Bears 19.1 Bull/Bear ratio 3.00
Mikey Thrust indicator: Daily 10 Weekly 9 (1 low, 10 max) 19, +1
DJIA MACD 102.79 Flat/Negative Cross 1-10
NYSE New Highs 233 New Lows 152(Expanded)
NASDAQ New Highs 230 New Lows 10
NYSE Advance-Decline +457 NASDAQ Advance-Decline +748
Mikey A/D line.(from 9/17/10). NYSE +17140 NASDAQ +9200
NYSE % above 200 day ave: 79  %

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
Moving Averages

5 day 11716 Rising/Price above
20 day 11627 Rising/ Price above 
50 day 11418 Rising/Price above
200 day 10779 Rising/Price above
20 week 11165 Rising/Price above
50 week 10726 Rising/Price above
90 week 10177 Rising/Price above
200 week 10911 Flat/Price above

World Markets (Power Numbers) Ave score 51
DJIA 57 Emer Mkts 43 China 53, Brazil 47 Europe 67  Russia 58  Japan 68, Korea 58, India 44, Australia 43  Germany 44, Spain52  UK 35

Commodities (Power Numbers)
Oil 46, Nat Gas 54, Gasoline 39,
Gold 41, Copper 48,  Silver 32, Platinum 64
Grains 69 DBC 60


Currencies (Power Numbers)
USD 37, Aussie 29, Euro 49 , Brit Pd 77, Yuan 80, Yen 77

US Industry Groups (relative strength) Ave Score 64
22 up, 9 Neutral, Downtrend 1 Score +21

Homebuilders (XHB) 71,  Real Estate (IYR) 61, Finance (XLF) 72, Insurance (IAK) 57 , Broker/Dealers ( IAI) 70, Retail (XRT) 46, Consumer Disc (XLY) 55, Telecom (IYZ) 54, Consumer Staple (XLP) 57, Health (XLV) 64, Pharma (IHE) 60, Biotech (PBE ) 57, Transports (IYT) 66 Aerospace (ITA) 74, Shipping (SEA) 60, Airlines ($XAL) 60, ,Utilities (XLU) 57 , Metals and Mining( XME) 63, Copper (COPX) 63, Nat Gas Production (FCG ) 74,Oil Expl and Prod (IEO) 73, Oil Service (OIH) 63,  Coal (KOL) 69,  Energy (XLE) 74, Gold Miners (GDX) 30, Steel  (SLX) 60, Basic Mat (XLB) 65, AgriBusiness (MOO) 80, Tech (XLK) 75, Semiconductors (SMH) 78, Software (SWH) 68, Networking (PXQ) 73, Internet (FDN) 67


Bonds (Relative Strength)
 (1 up, 0 down, 8 neutral) Score +1

MUB (Natl Muni) 30 NCA(Ca Muni) 31 
BND (Total Bond Index) 49 BWX (International Treas Bonds) 52, PCY (Emerg Mkt Debt) 46 TLT (20+ US Treasuries) 43, IEF ( 10 yr Treasuries) 50, PFF (US preferred) 59, HYG (High Yield) 65

This advance began on the week of 6-28 or 28 weeks ago. The current intermediate term advance is 18 weeks long that began on the week of 9-13. That is long in the tooth for any advance in any time period. My sentiment indicators are as about as stretched as they can get. The economic numbers indicates a growing economy and all systems are go.

The banks are getting a free ride on earnings by ignoring past mistakes that are buried deep in there financial statements. The retails are coming off of the glow of Xmas and the commodity producers are reaping the rewards of high prices. The consumer used his credit last quarter and is now faced with high prices and credit card bills. The Fed says we grow 3-4% this year and the way they move the numbers around maybe they can do it.

The problem is that this whole move was financed by deficit spending and there is a limit to this kind of thing as witnessed by the PIGS. Of course. what they are doing to to solve the problem is to issue more debt and apply austerity measures. This is what we are heading for in this country. The extend and pretend game has a limit.

Obama has hired Daily, of Clinton era, as chief economic advisor making Wall Street happy. This whole thing is nothing different than the past administration. There is a shell game they are playing with currencies and debt that is keeping the whole thing going. How much longer? I don't know but I do know it is not healthy.  They are letting the investment bankers run amok again to prop up the economy. The investment bankers and the banks are making big bucks by doing this but at some point they will jump ship just like they did the last time and the rest of us will be stuck again. In the meantime, the market makes new highs and the trends are up.

Mikey
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