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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, August 6, 2009

Unemployment Numbers tomorrow

DJIA 9251 -21.02 SPX 997.53 -5.19 VIX 25.74 +.84 Gold 963 -1.10 Silver 14.68 -.08 Oil 71.40 -.57 RBOB (Whsl Gasoline)2.04 -.01 Dollar Index 78.17 +.57 EURO 1.4344 -.0086 (Long Term Gov Bonds 91.26 +.32 IEF (7-10 Yr Gov Bonds 789.20 +.03 XLK (Tech Index)19.63 -.10 XLE (Oil Index) 50.71 -.60 XLF (Financials index)14.03 -.05 XHB (Homebuilders Index) 15.02 +.05 EEM (Emerging Markets) 36.06 -.31 FXI (China Index)41.71 -.08

Unemployment numbers released tomorrow and I would expect them to continue the "much better than expected" trend that has been going on for the past 3 weeks. Remember on my post of 7/28

They said that earnings season was coming to an end and they would now look at the macro economic numbers to see if the rally was for real.

They would look at the GDP..which was reported better than expected last Friday.

They would look at the energy prices to see if the prices were strong and that would mean that the economy was growing. Well guess what, they have been strong rising $10 in the past week.

Now to tomorrow they will look at the unemployment numbers and they need this to show "improvement" to tell them the rally is for real.

I would expect them to have "better than expected numbers" tomorrow. The shorts are hanging on by a thread and I think a nice spike would push them over the cliff.

I am still waiting. The Euro broke out of a trading range high of 143.52 it set on 6/2 and hit a high of 144.45 on Monday. Last night and this morning it pulled back to 143.52 which is right on it break out.

The Euro and the US stock market are trading tick for tick and the charts are identical. The idea is that the value of the dollar, as it declines makes stocks and commodities more expensive. This is the same idea we had going into the top last year. That stocks and commodities become more expensive as they devalue the dollar. Emerging markets would benefit as they produced the goods and commodities we need for the next expansion. That is the trade now and earnings and the economy they say will take care of themselves later as the economy improves in the future. It is all on the come. They believe this because that has been the way it has worked in the past.

They believe that we can inflate are way out of this thing now and we will return to what we had last year. Of course, you know I believe that is not the case as I have stated many times on this blog. The debt genie is out of the bottle and Humpty Dumpty is broken. All the King's horse and all the King's men can't put Humpty back together again. the bubble has burst and that game is over. The shorts believe that, the longs do not that is where we are now.

I think over the next few weeks the inflation story will dominate and that will been the top in this move. That is my position now. Stay tuned to see if Mikey survives or they kick his butt.

The story becomes more believable as stock prices rise. I will continue to wait until they play themselves out and then put back the short positions I removed 3 weeks ago.

Nothing new today waiting for the "good news" tomorrow. Added the XHB (Homebuilders Index) to my index list today. I think this is a good lead indicator. It always tips off the next move.

All trends on equities and commdoities are Short term up and Intermediate term up and Long term down except for Gold which is long term Flat. The bond market long and short term is in a down trend. 75 billion is bonds are being auctioned this week. Rest assured that the boys will buy this auction because no one else will.

The beat goes on...Mikey
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