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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, November 3, 2008

Today's economic news "Worse than expected" Geez

7:51 DJIA 9369 +77.87 VIX 56.27 falling Gold 727.90 +9.70 Oil 65.65 -2.17

U.S. factory activity contracted sharply in October, falling to its lowest in 26 years as the financial crisis ravaged the world's largest economy, an industry report showed.

Pretty grim," said Robert Macintosh, chief economist at Eaton Vance Corp in Boston. "It means we're in a recession, it's as simple as that...a pretty solid manufacturing recession...The question is how long or deep is it going to be? Where is this group of economists that is charged with declaring a recession? Why haven't they said anything?"

The Institute for Supply Management said its index of national factory activity fell to 38.9 in October from 43.5 in September. The level of 50 separates contraction from expansion, and a reading below 40 is exceptionally weak.

On Wall Street, stocks briefly turned lower after the weaker-than-expected data, while the dollar trimmed its gains versus the yen.

Economists had expected a reading of 41.5, according to the median of forecasts in a Reuters poll.

The report was uniformly weak, and employment in the sector was dismal. The ISM's gauge of employment fell to its lowest since March 1991 and suffered its biggest one-month drop in 20 years.

The data foreshadowed a grim outlook, with the index of new orders hitting its lowest since 1980.

Meanwhile, a separate report showed construction spending fell by a smaller-than-expected amount in September as a rebound in nonresidential activity helped offset further weakness in home building.

The Commerce Department says construction spending dropped by 0.3 percent in September, less than the 0.8 percent decline many economists had been expecting. Spending had been up by 0.3 percent in August after a huge 2.4 percent plunge in July.

The weakness in September was led by a 1.3 percent drop in housing construction, which has fallen every month but two over the past 30 months. Spending on government projects fell by 1.3 percent, the biggest setback since January.

Worse than expected what the hell were you expecting?
Against this kind of news background the DJIA has rallied for 5 straight days for 1360 points.
This is the background as the market works its way higher. It will do so until hope comes back Gold collapses and stocks look cheap. They are still not sure of the rally that is good. We are going higher. In the short term we are up against the rally high of Oct 29 we are stalling here to let the bottom pickers of that rally out now. When they sell out we go higher.
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