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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, February 3, 2010

Employment numbers revised down 900,000

The employment numbers first, 9 months of last year, were revised down 900,000. In other words there were almost 1 million more jobs lost last year than were reported. This matters because when they report the new number they can say that the numbers are improving faster than expected. Why? because the new numbers are being compared to a lower base. That,of course, means that everything they reported last year was wrong, but what the heck. Like Mark Twain said there are lies, damn lies, and statistics.

They do alot of revisions and then proceed with the new numbers. The game they used to play with the inflation number was they would report a number then revise it up before the next one and then use the new number against the revised number to show no inflation growth.

I heard a story today from an "investor" that said he missed the low in March but he would buy a 10% correction from this level. He said that if you would have bought 9/11 it would have been a great buy. They missed the low and now they remember 9/11 as a great buy.

First of all, no one bought 9/11 until the end of that year. The market was at around 10000. They felt the worst was over and it was a good time to get back in. That is similar to where I think we are now. They missed the low and now it is a good time to get back in.

What they don't remember or are not telling you is that the low on 9/11 was at 8100. The bounce off of that low was to 10600 and it topped in early March of 2002. In other words, the rally lasted 6 months. In October of 2002 it was making new lows at 7200. What I am saying is we are going to take out the lows made in March and then this guy will sell again.

The best short will come when this rally runs it's course. They need to be convinced and again I think the employment numbers will be good.


Mikey
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