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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

Friday, September 11, 2009

Who is telling the truth? The bonds or the market

DJIA 9605.41 -22.07 SPX 1042.73 -1.41 VIX 24.15 +.60 Gold 1007 +10.60 Silver 16.77 +.10 Oil 69.12 -2.82 RBOB (Whsl Gasoline)1.75 -.05 Dollar Index 76.89 -.1950 EURO 1.4608 +.0025 (Long Term Gov Bonds) TLT 96.60 +.43 IEF (7-10 Yr Gov Bonds)92.09 +.34 XLK (Tech Index)20.65 -.01 XLE (Oil Index)53.51 +.12 XLF (Financials index)14.51 -.11XHB (Homebuilders Index)15.62 UNCH EEM (Emerging Markets)37.88 +.04 FXI (China Index)42.35 -.23 GDX (Gold Miners Index) 46.23 +.69

Both the bonds and the market are going up together. That means that the long rates are falling and the economy is getting stronger. You can't have it both ways. The same happen in reverse between January of this year and March of this year. The bond market was falling and the market was falling. In other words, the long term interest rates were rising and the economy was "said" to be falling.

To figure out the answer to this question I always ask what makes the most sense. Between January and March it made sense that the market was falling but it made no sense that the Long interest rates were rising. That lead the public to sell their stocks and buy bonds because it made the most sense. Whoops that did not work.

Now what makes the most sense. The rates falling or the economy bottoming? The market is telling us that the economy is bottoming and that makes sense, The bonds rallying and interest rates dropping make no sense. The Dollar is falling and inflation is coming...that is what they say. So the public is selling their bonds and buying stocks and Gold. That makes sense, right?


The answer to the question who is right the bonds or the stock market? The Bonds are right because it make no sense that they are going up. The market and Gold make sense and that is what the public is doing.

If you remember that back in July on this blog I said the bonds were the place to be and they still are. The TLT is now at 96.76 off of a low of 87.56. That is a gain of about 11%. Why are the bonds going up when it makes no sense...They say there is going to be inflation and growth in the economy. Stay tuned it will make sense and not too far off in the future.

Where are the bonds going. I have no problem with the long rates making new lows and a 4% 30 year mortgage rate. I think the news will make the public want to be in bonds again. Guess who will be selling them ...Your friends Uncle Ben and his friends the banks.


The beat goes on.....Mikey
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