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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

Thursday, May 21, 2009

Topping

DJIA 8267 -154 SPX 885.86 -17.58 VIX 30.97 Gold 937.20 -.20 Oil 60.32 -1.72 Dollar Index 81.34 +.26

I am turning bearish because I believe that they have accomplished what they needed to do from the crisis in Sept. The rally has allow the the opportunity to repair the badly broken balance sheets of the banks and also to restructure Chrysler and allowed Ford to sell common to tide them over for the lean months ahead. The last one GM I believe will work the same way as all of the others. Today it is up in the 1.60 range with very little fanfare.

If you have been reading this blog you know that my reason for going long was because I believed that they need to raise capital and the banks have just sold 40 billion in stock. I also told you that after they sold this stock the the "experts" and "analysts" would turn bullish. I see that starting to happen. There are a number of touts that now like the banks.

This does not mean that I think this market will go down now. Usually you get a number of downside probes before the sell off comes. Art Cashen has said that he thinks a correction to 820 will come if we break 870 on the SPX. I would think that if 870 is broken that we will take out the 200 day now at about 940 with alot of fanfare about this being a bull market. That is what I am waiting for to sell out my last 30% and to start going short. We still do not have the all clear signal that we normally get before the top is set. I still expect that to happen.

This being said I want to change gears because this is a bear market rally in the market and the economy. The consumer is still screwed all they have done is save the institutions. The Credit card bill is JOKE. I expect massive bankruptcies in the consumer area. This is obviously by design. If they wanted to help the consumer they would have mandated that the banks cut interest rates an principle amounts on the credit card debt held by middle class. They easily could have done this but did not.

Where are we now and what am I hearing? I am hearing that the economy is bottoming...Wrong. I am hearing that you have buy now for the longer term...wrong. I am hearing that China is going to be OK and their stimulus will keep them growing...wrong. I am hearing that oil and commodities are telling us that the economy is growing ....wrong. I am hearing that the dollar is going to go to hell in a hand basket....wrong. That is the big lie and has the Gold Bug all a twitter.
What are we going to have ? We are going to have a deflation depression scare later this year and into next year. They will replay this nightmare again.

My market call in the short term...I think it is not finished but topping. A break above 940 on the SPX and some excitement should happen before this is over. A short term break below below 870 should produce a rally to a new high. The old saying sell in May and go away I think is sound advise now....Mikey
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