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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

Wednesday, October 14, 2009

Here is something to think about as DJIA nears 10000

DJIA 10016 +148 SPX 1091 +18.80 VIX 22.70 -.29 Gold 1061 -3.20 Silver 17.86 +.02 Oil 75.27 +1.27 RBOB (Whsl Gasoline)1.86 +.028 Dollar Index 75.66 -.50 EURO 1.4903 +.0083 Term Gov Bonds) 95.06 -1.49 IEF (7-10 Yr Gov Bonds)91.68 -.62 +.16 XLK (Tech)21.36 +.25 XLE(Oil Index)57.97 +.98 XLF Financials Index)15.71 +.50 XHB (Homebuilders Index)15.71 +.34 EEM (Emerging Markets)41.54 +1.29 FXI (China Index)44.24 +1.52 GDX (Gold Miners Index)49.13 -.06

Comments by Enzio von Pfeil, chief executive officer of EconomicClock.com

"There's going to be quite a bit of strong downward earnings revisions going forward, especially the outlook for 2010. And that's simply because the economic clock, of which we tell the economic time, suggests that the excess supply of goods (rising unemployment) is here to stay and you can't keep on making profits if unemployment keeps rising

The worst of the earnings results will come out of labor-intensive and consumer-led industries, according to von Pfeil.

"The key earnings surprises will be in those industries which cannot keep on cutting workers," he said. "In other words, the basic materials and the very labor-intensive industries, like the car industry that very much have already gone through their cost-cutting exercises."

The U.S. will have the worst earnings results, closely followed by Europe as problems in the housing sector and consumer sector remain. But von Pfeil warned that Asia will also be affected by the earnings news from the West.

"The U.S. will come in for major surprises because you do see that the mortgage problems persist. That means that consumption is going to remain low. That means that U.S. consumer stocks cannot fair very well, particularly at the discretionary end of the stick," von Pfeil said. "(Another) region to do very poorly will be over-taxed Europe where the politicians managed to have taxed away any shred of work incentive."

"It is going to be very much in the West that you see these downward surprises," he said. "But again because of technology, it's the inter-connectedness of markets that is going to make those downward earnings revisions in the U.S. and in Europe, particularly in the consumer sectors ripple through and affect Asian market sentiment."

Von Pfeil predicted a "muted jobless recovery coming through."

China Won't Save Us

Another reason for von Pfeil's bearish prediction is that he has a "feeling that there may be some kind of a knee-jerk policy response in China. Given China's global role, could very well lead to some very severe downward market surprises."

"I do think that the Chinese growth story is a little bit of a tin drum that is understandably made to look very good," he said, adding that he doesn't believe so much in the positive growth numbers and outlook for China as he sees labor costs rising.

"I don't believe that China, with a per capita income that is a fraction of America's, is actually going to pull the world out of recession," he said.
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