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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, October 1, 2009

What I can do, What I can't do and when I do it

DJIA 9570 -146 SPX 1038 -18.63 VIX 27.41 +1.80 Gold 1003 -6.40 Silver 16.53 -.128Oil 69.69 -.92 RBOB (Whsl Gasoline)1.73 -.02 Dollar Index 77.351 +.475 EURO 1.4541 -.0104 (Long Term Gov Bonds)99.39 +.73 IEF (7-10 Yr Gov Bonds)92.64 +.27 XLK (Tech)20.40 -.47 XLE(Oil Index)52.88 -1.04 XLF Financials Index)14.62 -.32 XHB (Homebuilders Index)14.46 -.57 EEM (Emerging Markets)38.03 -.88 FXI (China Index)10.26 +.46 GDX (Gold Miners Index)43.76 -1.56


I have three choices I can make. I can be long the market, I can be in cash or out of the market, or I can be short the market.

When I am Long the message to the public is that stocks are bad and the prices are reflecting that story. What I know is that the prices I pay will be winners. What I don't know is how far the system will go to get that message to the public and where they will act. In other words, I can not predict the extent of any move. I also don't care. The lower the prices go the greater the opportunity and the bigger the position I get. I know that the prices will go to a level that blows my mind so I am careful to buy small positions when I start.

When I am out I feel that the prices are in line with reality and the system is telling the public to get in. I have a hard time being on the same side of the fence with the Cramers of the world because they are just cheap whores hired by the system to pimp the stock market. During that phase stocks are easy trades and the public is drawn in. I will stage out and ALWAYS LEAVE MONEY ON THE TABLE.

I will be short when I think the story is ridiculous relative to the reality of the economy and the prices I am seeing. I also see the public playing and making easy money and react to the prices with amazement. In other words, it is just stupid. Again, when I start I will take small positions and add on when I think prices reach higher levels of absurdity.

I never can predict how stupid it will get be or how long it will take but I know that in each cycle it will get to that level.It is not my intention to predict the magnitude of any price move but to make one of those 3 choices. What I am saying I am never going to know where the top or bottom is but once I take a position I don't quit.

I am now shorting. I believe that the Fed either wants a depression or that they are in complete denial. The consumer is toast and without him the economy and the market are toast. That is at a time that the public is being told that we are going to be OK. I think the real level of prices for market should be 6000 and not 9500. That will happen sooner or later. Is this the top? Is 10000 the top is 12000 the top I do not know but I know these are good prices to short at. Will the employment number be good tomorrow and the market be up 200 points I don't know that one either but I like shorting at these prices because in the long run they are winners.


If I had to guess about tomarrow I would say the numbers would be better than expected and the market will be up big. That is of no concern to me at this point but that is my guess for what it is worth.

Shorted EWZ today @ 66.55

I hope that clarifies my approach.


The beat goes on...Mikey
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