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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, January 24, 2011

Market hangs on as commodities and Foreign markets weaken

DJIA 11980.52 +108.58 SPX  1290.81 +7.49 NASDAQ 2717.55 +28.01
DJT 5076.52 +30.90 DJU 415.59 +2.25 VIX 17.65  
US Gov rates: 6 mo .162%  2 yr .625% 10 yr 3.40 30 yr  4.55 -.03
Gold 1344.50 +2.60 Silver 27.31 -.19 Copper 4.34 +.03 Platinum 1819.60 -11.10
Oil 87.87 -.23 RBOB 2.43 -.05 Nat Gas 4.58 -.14
Aussie 1.0014 +.0090 EURO 1.3592 +.0029 Pound 1.5908 -.0006
USD Index 78.18 +.06 DBC 27.72 -.24
Days to option expiration: 23
Long Term Opinions:

US Bonds: Major long term top forming. .... Current trend down
Muni Markets: Rough times ahead: 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 down 1-24
Commodities: Bear market rally ending..... Current trend up weakening
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 down
Emerging Markets Debt: A disaster.... Current trend down
World economy: Current trend slowing
World political environment: Tension, aggravated
Where's Waldo: Waldo is buying Gold, Foreign Bonds and Emerging Markets.

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
Mikey current trend opinion: 1-21 (DJI 11871) The caution light is on for this uptrend :
IBD : 1-20 Market under pressure


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

Short Term Trading Indicators


Mikey OB/OS index (80 OB 20 OS) .89 (market very OB )
Put/Call Ratio(.6 OB 1.2 OS).
10 day average .
Ratio Put Premiums/Call Premium  (extremes .60/ 1.54) .
Put Premium 10 day average .
Sentiment Total Score: Put/call + premium ratio = 
10 day Sentiment Total Score: Put/call + premium ratio =
Daily-Weekly=
Williams %R 12 day -.52, weekly -.34
Bulls 56 Bears 20.9 Bull/Bear ratio 2.67
Mikey Thrust indicator: Daily 10 Weekly 10 (1 low, 10 max) 20
DJIA MACD 126.77 up/Positive cross 1-18
NYSE New Highs 134 New Lows 17
NASDAQ New Highs 79 New Lows 18
NYSE Advance-Decline +1232  NASDAQ Advance-Decline +782
Mikey A/D line.(from 9/17/10). NYSE 16411 NASDAQ +6480
NYSE % above 200 day ave  %

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
1-20 Google blows away earnings estimate
1-20 IBD goes to market under pressure
1-20 AAPL selling off on big volume
1-21 Mikey Caution light is on for this uptrend
1-21 Google stocks reverse lower on big volume

 Options expire

Moving Averages

5 day 11867 Rising/Price above
20 day 11712 Rising/ Price above 
50 day 11465 Rising/Price above
200 day 10784 Rising/Price above
20 week 11239 Rising/Price above
50 week 10765 Rising/Price above
90 week 10218 Rising/Price above
200 week 10908 Flat/Price above

World Markets (Power Numbers) Ave score 50
DJIA 68 Emer Mkts 31 China 46, Brazil 34 Europe 63  Russia 50  Japan 55 Korea 49, India 37, Australia 47  Germany 55, Spain 74  UK 38

Commodities (Power Numbers)
Oil 31, Nat Gas 52, Gasoline 52,
Gold 30, Copper 38,  Silver 22, Platinum 47
Grains 47 DBC 60


Currencies (Power Numbers)
USD 39, Aussie 32 Euro 58 , Brit Pd 72, Yuan 44, Yen 59

US Industry Groups (relative strength) Ave Score 54
11 up, 20 Neutral, Downtrend 2 Score +9
Homebuilders (XHB) 57,  Real Estate (IYR) 59, Finance (XLF) 59, Insurance (IAK) 56 , Broker/Dealers ( IAI) 59, Retail (XRT) 44, Consumer Disc (XLY) 60, Telecom (IYZ) 46, Consumer Staple (XLP) 64, Health (XLV) 60, Pharma (IHE) 49, Biotech (PBE ) 47, Transports (IYT) 46 Aerospace (ITA) 71, Shipping (SEA) 36, Airlines ($XAL) 43, ,Utilities (XLU) 68 , Metals and Mining( XME) 46, Copper (COPX) 49, Nat Gas Production (FCG ) 63,Oil Expl and Prod (IEO) 62 Oil Service (OIH) 56,  Coal (KOL) 42,  Energy (XLE) 66, Gold Miners (GDX) 29, Steel  (SLX) 53, Basic Mat (XLB) 49, AgriBusiness (MOO) 54, Tech (XLK) 64, Semiconductors (SMH) 67, Software (SWH) 72 Networking (PXQ) 41, Internet (FDN) 44



Bonds (Relative Strength)
 (1 up, 1 down, 7 neutral) Score 0

MUB (Natl Muni) 50 NCA(Ca Muni) 46 
BND (Total Bond Index) 46 BWX (International Treas Bonds) 61, PCY (Emerg Mkt Debt) 38 TLT (20+ US Treasuries) 44, IEF ( 10 yr Treasuries) 46, PFF (US preferred) 54, HYG (High Yield) 64

Weakness in the Gold miners is spreading to other mining groups. Shipping and air transportation are weakening with international markets particularly the Far East. Gold, Silver, and now Copper are in sell mode. Oil is just started to join.  In relative terms the US economy is stronger than most of the world which means that things in the world economy are definitely slowing. Bonds are shwing some signs of life but I think it is premature as I think the Muni scam is coming.

The market rally today was the first day out of expirations and they took the air out of the puts from last week. The rally was on low volume and new highs and the A/D line is still off of its highs. This rally looks tired but still no trend break.

Mikey
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