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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

Tuesday, February 1, 2011

Risk traders back with a vengence

DJIA 12040.16 +148.23 SPX 1307.59 +21.47 NASDAQ 2751.19 +51.11
DJT5126.09 +100.98 DJU  413.57 +4.22 VIX 17.63
US Gov rates: 6 mo .162%  2 yr .6052% 10 yr 3.43 +.07 30 yr  4.60 +.03
Gold 1340.30 +9.50 Silver 28.51 +.34 Copper 4.55 +.09 Platinum 1833 +32.10  
Oil 90.77 -1.42 RBOB 2.65 +.16 Nat Gas 4.34 -.08
Aussie .1.0115 .0116 EURO 1.3778 +.0140 Pound 1.6050 +.0122
USD Index 77.19 -.67 DBC 28.74 +21
Days to option expiration: 18

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 up
Commodities: Bear market rally ending..... Current trend up weakening
Real Estate: Bottoming ..... Current trend down
US Dollar: 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 : Uptrend resumes 2-1



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) .83
Put/Call Ratio(.6 OB 1.2 OS).65
10 day average .82
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 -40.54 weekly -11.95
Bulls 56 Bears 20.9 Bull/Bear ratio 2.67
Mikey Thrust indicator: Daily 6 Weekly 9 (1 low, 10 max) 15, -3
DJIA MACD 119.50 falling /Positive cross 1-18
NYSE New Highs 139 (Lagging)New Lows 21
NASDAQ New Highs 81 (Lagging) New Lows 38(new high this move)
NYSE Advance-Decline +1139 NASDAQ Advance-Decline +448
Mikey A/D line.(from 9/17/10). NYSE 17268  NASDAQ +6412
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:
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
1-25 Consumer confidence strong, State of the Union message..overhall taxes
1-26 IBD Uptrend resumes, S&P, NASDAQ 2 year highs..Fed meets no changes Assets rally
1-28 Big distribution day second in 2 weeks
1-28 IBD uptrend under pressure
2-1 IBD uptrend resumes (3 rd change in past month)
Moving Averages

5 day 11946  Rising/Price above
20 day 11802 Rising/ Price above 
50 day 11561  Rising/Price above
200 day 10829 Rising/Price above
20 week 11371 Rising/Price above
50 week 10829 Rising/Price above
90 week 10295 Rising/Price above
200 week 10902 Flat/Price above

World Markets (Power Numbers) Ave score 62
DJIA 73 Emer Mkts 43 China 49, Brazil 47 Europe 66  Russia 64  Japan 53  Korea 52, India 42, Australia 64 Germany 87, Spain 90  UK 77

Commodities (Power Numbers)
Oil 56, Nat Gas 53, Gasoline 65
Gold 40, Copper 68,  Silver 45, Platinum 53
Grains 51 DBC 76


Currencies (Power Numbers)
USD 15, Aussie 54 Euro 91 , Brit Pd 67, Yuan 42, Yen 68

US Industry Groups (relative strength) Ave Score 61
16 up, 18 Neutral, Downtrend 1 Score +15

Homebuilders (XHB) 55,  Real Estate (IYR) 66, Finance (XLF) 63, Regional Banks (IAT) 59, Insurance (IAK) 60 , Broker/Dealers ( IAI) 61, Retail (XRT) 50, Consumer Disc (XLY) 50, Telecom (IYZ) 47, Consumer Staple (XLP) 45, Health (XLV) 58, Pharma (IHE) 50, Biotech (PBE ) 51, Transports (IYT) 44 Aerospace (ITA) 67, Shipping (SEA) 37, Airlines ($XAL) 41, ,Utilities (XLU) 58 , Metals and Mining( XME) 60, Copper (COPX) 57, Nat Gas Production (FCG ) 71, Oil Expl and Prod (IEO) 69 Oil Service (OIH) 73,  Coal (KOL) 56,  Energy (XLE) 76, Gold Miners (GDX) 46, Steel  (SLX) 57, Basic Mat (XLB) 63, Timber (Wood) 67 AgriBusiness (MOO) 60, Tech (XLK) 63, Semiconductors (SMH) 67, Software (SWH) 66 Networking (PXQ) 52, Internet (FDN) 53




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

MUB (Natl Muni) 52 NCA(Ca Muni) 49 
BND (Total Bond Index) 43 BWX (International Treas Bonds) 67, PCY (Emerg Mkt Debt) 33 TLT (20+ US Treasuries) 41, IEF ( 10 yr Treasuries) 44, PFF (US preferred) 49, HYG (High Yield) 56

The risk traders (Central Banks) bashed the dollar running assets back to their pre-Egypt highs. The dollar is nearing its November 4th lows. Bonds are nearing their April 2010 lows as the FED continues to SUPPORT the bonds. Economic news continues to be "good" as reported by business news services.  We are, in my opinion back to the same set of conditions that were in place in April of 2010. The market is overbought and things are slowing down in the economy.

The traders pulled the plug in May and the Fed caught the market and came up with the risk trade in August to prop things up. The dollar is in worse shape now than it was in May of last year. I don't think they want to move the commodities market any higher because it is hurting business. Maybe they can come up with something else new, we will see. The trend is up but I think we are at the ceiling and they are running out of tricks.

We have had a long period of grinding gains that have put the traders long and forced the shorts out.
The market volatility is picking up and acting erratically which happens at tops and bottoms. IBD has flipped 3 times in thne past month on its uptrend call.  I think weakness from here in the form of a lower close than 11800 can be sold that will be my sell signal.

Mikey
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