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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, March 5, 2010

Jobs "better than expected" Market enters shorting zone

DJIA 10536 +87.52 SPX 1135 +12.16 Russ2000 663.40 +10.93 NASDAQ 2321.41 +29.13 VIX 17.59 -1.13 Oil VIX 32.99 -.59

Dollar Index 80.53 -.005 (FXA) 90.77 +.59 Euro 1.3612 +.0032 Yen 90.40 +1.27 Brit Pound 1.5133 +.0032

TLT(20yrGov Bonds)90.76 -1.20 IEF (7-10Gov Bonds)90.13 -.54

XLK (Tech)22.27 +.23 XLE (Oil Index)59.95 +.875 XLF (Finan Index)15.13 +.20 XHB Homebuilders Index)16.46 +.20 GDX (Gold Miners Index)46.25 +.67 XLB (BasicMatIndex) 33.03 +.28 XRT (Retail Index)39.39 +.60

EEM(Emerging Markets) 40.65 +.74 FXI(China Index) 40.97 +.81 IEV(Europe350)37.67 +.60(Brazil)71.22 +1.66

Gold 1135 +1.90 Silver 17.35 +.174 Copper 3.42 +.0485 Oil81.66 +1.45 RBOB (Whsl Gas)2.27 +.0363 Nat Gas 4.57 -.005


I have be talking about a rally back up that would reverse the first sell off. We have now rallied to 10500 in the DJIA and above 1125 in the S&P and have done so amid a collapsing Europe and a pitiful jobs report. That is how good these guys are. That should convince anyone that the market is going to go up regardless of the economic numbers. Talk about putting lipstick on a pig, read this report:

Stocks rallied Friday amid relief that the job loss in February wasn't as bad as expected. The Dow Jones Industrial Average was up about 80 points, or 0.8 percent, at mid morning, led by Boeing [BA 67.14 1.59 (+2.43%) ] as commodity and industrial stocks got a boost from the jobs report, which showed 1,000 manufacturing jobs were added last month. American Express and Disney rounded out the top three.

Employers slashed 36,000 jobs from non farm payrolls last month, far fewer than expected. The consensus estimate had projected a loss of 50,000 jobs but the whisper number went as high as 200,000, given the impact of brutal winter weather in the Northeast. Job losses for December and January were revised to show 35,000 fewer jobs lost than previously reported. And the unemployment rate held steady at 9.7 percent.

Manufacturing showed signs of a modest recovery, adding 1,000 jobs, but construction shed 64,000 jobs — a worrisome sign for the sector at this point in the recovery. Census hiring was just 15,000, less than expected. (The hiring of Cenus workers was less than expected..I can't stop laughing)

Temporary work rose for a fifth straight month, which is usually viewed as an encouraging sign but Todd Schoenberger, managing director at LandColt Trading, said it's the source of some concern.

"After dissecting the report, traders are recognizing that what is keeping the jobs number from falling off a cliff is the amount of temporary hiring," Schoenberger explained. "Unless there is supporting evidence that temps are becoming permanent on company payrolls, the long-range view remains cloudy. This could dampen any bullish sentiment that appeared following the release," he said.

If the economy starts to wobble, the Fed may have to renew some of its stimulus set to expire at the end of March, Bill Gross, of bond giant Pimco, said on CNBC this morning.

"These things have all been very critical but let's face it — they're expiring at the end of March," Gross said. "The critical question...is do we really need Uncle Sam and the check writing to continue?"

Do we need the check writing to continue? That is a critical question? Let me decode that for you. This is what he is saying. Is the Fed going to continue to prop this Albatross up by directly intervening in the markets and directing it's pimps to spin the numbers as "better than expected" after March?

My guess, and of course it is only a guess, is that the Fed is dumping assets into the markets on this feel good move. The securities are being handed over to the Investment bankers for distribution to the public AS WE SPEAK. The million dollar question is how long this process will take. We will know this when the trend reverses.
T
The numbers are all artificial. They call them stimulus. The "stimulus" is not going into the economy but it is going into a select few target corporations. This is the same thing that Madoff did. He was borrowing from Peter to pay Paul. It is the nature of every Ponzi scheme. That is was we are doing here. In the mean time, the market parties on the "better than expected" numbers and the whistle blowers have no creditability because hey "look at the market". What the market is doing has no connection with reality it means nothing. Madoff had the numbers too and just like Madoff it can go on and on but in the end Ponzi schemes blow up.

The earnings numbers are easier to control than the Macro economic numbers. The Macro numbers are spinned to always being better than expected. It is amazing that every number is better than expected isn't it? Well not really because when you have a pig it is still a pig but you can say you like pigs and that would be the truth.

We have reached the target shorting zone and the "breakout" of 1125. I will wait for the weakness before I short. The VIX is now near it's lows which means the players are not afraid of the market. The shorts are being forced out and the bears are losing their argument now. I would say that any short here would be successful but I will wait for a reversal which to me now is a close below 10314.

Mikey
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