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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, October 31, 2008

Not a V or even a U its a bathtub

7:42 DJIA 9181 UNCH VIX 63.52 Gold 738.90 -.40 Oil 65.41 -.55

U.S. stocks turned mixed Friday after one report showed the worst drop in consumer sentiment on record and another showed personal spending fell for the first time in two years.
Traders noted that pension funds were buying stocks to rebalance their portfolios as today is the last day of the October.
Major U.S. Indexes.DJIA9187.386.69+0.07%193,059,000.NCOMP1695.39-3.13-0.18%202,280,300.SPX953.29-0.80-0.08%915,844,500
Indeed, there will many a sigh of relief today as we bid adieu to October, which is typically a one of the worst months of the year for the market, but this year, turned out to be the worst October since 1987, when the stock market crashed.
Still, it won't be all smooth sailing from here.
First, we have to get through the election on Tuesday. Then, the economy.
"There’s a lot of things not in this market," Art Cashin, director of floor operations at UBS, told CNBC. "This market is still working its way out of crisis mode. It hasn’t come to grips with the recession that’s coming up, which is not going to look like a V or a U, it’s going to look like a bathtub and that will carry us longer and further than we would care to be."
By the way Art was looking for a rretest of 7700 last week he is still not convinced.

The Reuters/University of Michigan gauge of consumer sentiment dropped to 57.6 in October from 70.3 in September, its steepest drop on record. However, a mid-October reading had indicated as much, so the report came as little surprise to the market.

Personal spending fell 0.3 percent, marking the first time in two years that consumers have cut their spending, even as income ticked up 0.1 percent. Spending came in as expected but economists expected a slightly higher bump in income.

The VIX is falling and the markets are calming down. This is the first step in getting the traders back into the long side. The DJIA is hanging just above the 2o day average and just below the last rally high. Place your bets
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