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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, December 18, 2009

The truth about Capitalism...A tax on its citizens

I want to show you how the system imposes a cruel tax on it's citizens by looking at the 3 different bond markets.

The first is the TLT or long term government market. Notice the spike in late 2008 and early 2009. That is when the world was coming to an end. Fear was running wild and you can see how government bonds reacted.



The next market is the Muni market. As fear came in the money left the Muni market. The Muni bond holders ran to cover.




The third market is the high Yield



Notice how, at the end of last year money was chased into Government Bonds and out of the Muni and High yield markets. Suddenly, safety of principle was more important than yield. The same time the Fed had put rates at zero. That mean't that the government could borrow money at historically low rates. How convenient at a time that they needed to raise money for the bailout.

The sellers, Mom and Pop, who had worked hard and played by the rules sold their minis and corporate bonds and went to the banks that were paying almost nothing in interest. They were happy to get nothing because they thought they could lose everything they had worked for.

We fast foreword to today. The charts show that Mom and Pop are tired of getting
.0025 interest and are going back into the same things they sold at the end of last year. They are being told that the economy is bottoming and inflation is coming and the dollar is going to go down.

Sound familiar? Yes that is what they were told in 2007 and 2008. The Fed's was a big buyer of governments at that time and sold them big time in early 2009 during the panic. Today, they are playing the same old song they were playing in early 2008 and you know what the Fed is buying bonds big time again.

Mom and Pop are about to get clocked again except this time they also own Gold.
Income funds are going to get murdered again.
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Look at this article from CNBC

After Big Year, Junk Bonds May Have Smaller Gains in 2010

Talk about a dash to trash.

Investors have poured over $30 billion dollars into junk bond funds this year, according to AMG Data Services, after a flight to quality in 2008 crushed prices of low-grade corporate debt.


Junk bonds have returned a monstrous 56% thus far this year, according to Morningstar—10 percentage points better than the previous record gain set in 1991. Over the same period, the total return on US Treasurys is down 2.4 percent..

“For performance-chasing investors, junk was the only game in town,” says John Lonski, chief economist at Moody’s Capital Markets Group.

But is the game in what’s now a near trillion-dollar market over?

With the current spread between high-yield bonds and Treasurys about 1.3 percentage points above the long-term average, experts say there is still room to run. Just adjust your expectations, they say. The current spread is down from an eye-popping 20 percentage points last fall.

“This suggests that most of the profits have already been squeezed out of this sector, and the easy money’s been made,” says Lonski.

That’s not to say returns won’t be healthy going forward, says Martin Fridson of Fridson Investment Advisors. In fact, he expects junk to outperform other credit instruments in 2010.

“Because high-yield bonds rise and fall with the trends in corporate earnings, they stand to benefit more than other sectors of the fixed-income market from further improvement in the economy.”

And, if interest rates rise next year, as many economists expect, Fridson says high-yield bonds will be in a “favorable position” because they’re less rate-sensitive than higher quality issues.

Fridson is expecting a 10 percent return over the next 12 months—assuming the economic recovery continues and that there’s no double dip recession. His projection also assumes a stabilizing default rate of 5 percent—down from 12.7% over the past 12 months, according to Moody’s, and just one percentage point above the historical average of 4 percent.
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Junk bonds, Corporate bonds, and Muni's are a DISASTER NEXT YEAR.


This heads up brought to you by Mikey
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