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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

Sunday, May 24, 2009

Henny Penny says the Dollar is falling, the Dollar is falling

Sell US Stocks, Bonds, Dollar NOW: Strategist
Sell All U.S. stocks, sell U.S. bonds, sell the dollar and protect your wealth by going abroad, said Peter Schiff, president of Euro Pacific Capital.
“When [the U.S.] decouples, the world will thrive,” Schiff told CNBC. “The world doesn’t need our consumption, we need their production. The global economy is fine without propping up the U.S. economy. We are in serious, serious trouble.”

Schiff said it’s not only a possibility, but “it’s inevitable” that Brazil and China are eventually going to dump the dollar as the international currency of choice. (Watch interview for more of Schiff's reasons why the U.S. dollar is in trouble.)

“As far as I’m concerned, the U.S. has already lost its AAA rated status,” said Schiff.

Gross: Sell-Off Driven By Fears US Could Lose AAAHe said emerging markets continue to be strong and had great gains since they bottomed in October 2008.

“Americans are going to lose their wealth if they go down with this ship,” he said. “I’m trying to help by getting their stocks abroad, out of the dollar and protecting them from Ben Bernanke, Obama and the congress.”

And this:

Art Cashin: AAA Loss Fear May Drive 'Critical Mass' Sell-OffPublished: Friday, 22 May 2009 | 12:22 PM ET Text Size By: CNBC.com
Amid anxiety that Great Britain's debt rating will be cut, fears grow that the U.S. could lose its AAA rating.

Art Cashin, director of floor operations at UBS, offered CNBC his stock market insights.

"It got very scary yesterday, with both the dollar and Treasury bonds selling off," Cashin said.
He referred to Mohamed El-Erian's CNBC interview, in which the Pimco CEO exhorted the U.S. government to address the danger of losing America's triple-A rating.

"The fear on the floor has to do with Mohamed's idea of a 'neighborhood.' This thing could start to feed on itself. You get to a certain critical mass of selling..."

For an example, Cashin held up the model of "Bear Stearns and Lehman days," when some analysts said the financials were "solid as a rock."

"But when the market starts to disbelieve something, the selling can turn violent."

About Thursday's positive intra-day moves, he explained:

"Late in the day, we held the lows from the previous Friday — 8221 on the Dow, 879 on the S&P. When they held, that prompted a little short covering."

Dow As to today, Cashin said, "The day before a 3-day weekend tends to be biased towards the upside."

But he cautions against mistaking that bias for an upside guarantee going forward: "Next week will be absolutely critical. We may start to test some lower levels."


Last week I turned bearish but I do not believe we will have any sell off of consequence until this fear of the dollar goes away. The good news is it will go away and we will probably breakout to the upside. The bad news is the economy has more problems to deal with. I am 25% long 70% Cash and 5% short Gold and silver. The "experts" are telling us to get out of the dollar and buy Gold. Now they are telling us to buy the emerging markets because their sell off was only tied to us and they will be OK.

I am looking to buy 20+ US treasuries, and short Gold. Silver, Oil, and the Euro. and short the emerging markets. If we get a hit next week because of the dollar weakness and they say that the market is now going to correct I may do some buying and raise my market exposure to 50%. I almost every case after a rally of this magnitude we don't just rollover this easy and telegraph the sell off as they are doing now, particularly when there is a good reason like the dollar today.

My perfect short scenario would be for the dollar to blast off, Gold to fall apart and the bonds to rally as the market breaks out above the 200 day and the "experts" to proclaim that we all clear. I know that sounds ridiculous now but things can change in a hurry.

You have heard me bash Gold for the last year now. The hype on Gold has been steady for that period and it is in the same price as it was 1 year ago. I have been particularly bearish for the last 6 months and it has rallied from about 800 to 958. Gold made its high on 3-21-2008 at 1003. It sold off to 704.90 on 11/14/2008. It double topped at 1001.80 on 2/20/2009 and is now at 958.50. I am convinced that Gold will have the same fate as the Stock market did last year.

There is universal agreement that everyone should own Gold. They have their hand and it is a pair of dueces. They are bluffing and I know it. It is the same hand they had on the Stock market in 2008. Does that mean it will not go above 1000..no but it does mean that it has a long way to fall. The big money will be made on the downside. Short term the Gold bugs have it but a close below 880 should complete a top.

The beat goes on...Mikey
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