Posting Times

Posts will be between 8:30 PM to 10:00 PM PST
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

Tuesday, November 24, 2009

Misdirection is the Wizards game

DJIA 10408.17 -42.63 SPX 1103.04 -3.20 VIX 20.92 -.24 Gold1167.40 +2.40 Silver 18.47 -.14 Oil 76.29 -1.27 RBOB (Whsl Gasoline1.9545 -.0249 Dollar Index 75.30 +.13 EURO 1.4943 -.0007 TLT (Long Term Gov Bonds)95.17 +.17 IEF (7-10 Yr Gov Bonds)91.91 +.20 XLK (Tech)21.98 -.08 XLE(Oil Index)57.22 -.11 (XLF Financials Index)14.69 -.11 XHB (Homebuilders Index)14.61 -.15 EEM (Emerging Markets)41.01 -.48 FXI (China Index)44.76 -.86 GDX (Gold Miners Index)51.11 -.67

Every market cycle ends with a disconnect. A disconnect from the reality of the economy and the prices of stocks. Why? The reason is that, in the end, the Wizard wants to distribute stocks but to the knowledgeable trader it is obvious that the economy is waning. That creates a situation where the sellers come in before Wizard is ready to sell. So Wizard wants to sell at the same time the sellers do.

What the Wizards must do is create a misdirection. He must create a story that makes the economy irrelevant. Something that drives prices that appears to be greater than what is going on in the economy. If the Wizard does that long enough it will crush the sellers and create a situation where, if you want to make money, you have to capitulate and buy.

In the end, IT IS ALL ABOUT PRICE. The trade becomes a momentum trade. Don't fight the tape. Regardless of the economy if you are a trader you have to be in. If you look at the charts even my kid could tell you that you don't want to be a short you have to be a buyer, "everyone knows that". The economy becomes irrelevant and like a pack of lemmings the crowd runs off the cliff.


The misdirection now is the weak dollar. The Wizard calls this the risk trade. Every time the dollar drops the market goes up. The focus is on the Fed "printing" so much money that inflation and a growth economy is coming. The Wizard has the traders watching the dollar and not the economy. Hey it must be true look at Gold. The risk trade is the misdirection that the Wizard needs to distribute his stocks now.

The truth is that in the end the economy which does not matter now will matter in the end. The misdirection has the effect of getting all of the traders and the public long and in the wrong stocks for the next business cycle as the Wizard moves on.

The Wizard is selling his commodity stocks and using the money to buy government bonds. Those bonds while being held are not increasing liquidity in the system. The system is starved for cash and the Wizard will only put in liquidity when the bonds are sold. The Wizard will only be able to sell these bonds in a very negative economic environment. Those assets that are being pushed now will be the ones that will tell the traders to buy bonds.

The Wizard works his magic when he lays down the bread crumbs for the Lemmings and the Lemmings get to eat. It is so easy that they willingly follow the bread willingly eating. The problem is that the trail goes off of the cliff.


REMEMBER THIS: THE TOP DOES NOT COME UNTIL THERE IS NO ARGUMENT BECAUSE PRICE IS EVERYTHING. THOSE WHO POINT TO THE FUNDAMENTALS ARE IDIOTS. WHEN PRICE IS SO DRAMATIC THAT FUNDAMENTALS MEAN NOTHING. THE PRICE MUST GO MUCH FURTHER THAN YOU THINK IT CAN POSSIBLY GO. WHEN YOU GET WEAKNESS OFF OF THAT MOVE THAT IS IT!!!!.

What the Wizard is selling: Gold, China, Emerging Markets, Oil, Techs, Commodity related, Banks.

What he Wizard is buying: The Dollar, US Bonds

Note: VIX is near low of its trading range. Fear is low
The XHB (housing) topped on 9/16 at 16.47 is now at 14.59
The $RUT(Russell 2000) is 591.30 the high was 623 on 10/15 a decline of 5%
The $XAL(airline index) topped ai 30.50 on 9/21 is now at 26.57
The DJIA is 10420 right on the high

Mikey
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)