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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, September 24, 2009

Fed says there is growth coming and leaves rates unchanged....That tells you something .................. A Top I think so

DJIA 9700 -47 SPX 1051 -8.73 VIX 25.01 +1.47 Gold 999.30 -15.10 Silver 16.45 -.4550 RBOB (Whsl Gasoline)1.631 -.07 Dollar Index 76.92 +.625 EURO 1.4692 -.71 (Long Term Gov Bonds) TLT 96.74 +.27 IEF (7-10 Yr Gov Bonds)91.73 +.17 XLK (Tech) 20.77 -.14 XLE (Oil Index) 53.62 -.79 XLF (Financials Index)14.90 -.13 XHB (Homebuilders Index)15.45 -.08 EEM (Emerging Markets)38.18 -.51 FXI (China Index)41.16 -.16 GDX (Gold Miners Index) 43.84 -1.00


What if I everyone is worried about inflation and a growing economy and the Fed left rates unchanged. Well let's see 1+1=2 QED Presto that means that were are going to have even more growth and more inflation. That is unless behind them scene the Fed is tightening while their buddies the investment experts are telling us to worry about something that is the last thing we have to worry about. In this game when 1+1=2 and John Q is convinced then the equation is about to change. Y

Yesterday, after the Fed decision was announced the dollar got whacked and the market took off. That lasted about 1/2 hour and since that time the dollar has been strong and the market weak. The markets, Gold and commodities have not acted according to their story lately.

A top or bottom always comes when a story that is very compelling to the public because of price and media hype. The only problem with the story is that is it a bald faced lie. The price action will continue with this lie and the great unwashed public will follow it because the price is making them money.

At some point the story no longer makes them money but the story still makes senses. That is the completion of the top or bottom. That is to say when the story remains but is losing money then you have something different going on and that is the end of it.

It looks to me that we are beginning to see that now. I suspect that this is the top for that reason. Everyone now has reacted to the inflation and growth story. They have bought this story and believe it. They have made money and are confident that it is the truth. They will not sell as prices drop and will buy the dips just as Cramer and others have told them to do. They will do this because they have had some success and the story is very real because it has been accompanied by price action that validates it.


Well now the Fed is doing nothing to stop the inflation bug and that will keep the Gold bugs and growth puppies long as the prices decline. How will the decline happen? I think it will not be a crash but a slow turn so as to not scare anyone who has bought into this lie.

They have all figured out that a weak dollar means a strong market. I saw that mentioned by Art Cashin in his post on CNBC this week. After yesterday I do not think they will believe that the dollar can do anything but decline. Therefore I think they will not believe dollar strength and market weakness when it comes.

Bought BGZ (3X Large cap short) @20.72
Bought FXP (2X China short) @ 9.06
Bought ZSL (2X Silver Short)@ 5.37
Bought GLL (2X Gold short) @12.79
Bought SMN (2X Basic materials short) @ 10.96

Shorted F @ 7.50
Shorted AXP @ 33.37

Jeff Shannon I like your position in the FAZ now

The beat goes on...Mikey
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