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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, May 6, 2010

Back to the Breakout

DJIA 10789 -77.92 SPX 1155.32 -10.43 Nasdaq 2377 -23.76 VIX 26.18 +1.27 Gold 1196.6 +21.60 Silver 17.60 +.06 Oil 78.87 -.82 Nat Gas 3.88 -.10 DBC (Commodities) 23.19 -.17
Dollar 84.79 +.595 EURO 1.2691 -.96 Brit Pound 1.4861 -.017 Aussie .8957 -.0098
IEV(Europe Index 34.02 -.62 EEM (Emerging Market Index) 39.05 -.58 EWZ (Brazil)65.73 -1.46 FXI (China Index)38.67 -.39

TLT (LT US Bonds) 94.79 +.91 IEF (7-10 yr US Bonds)91.56 +.39

GDX(Gold Miners) 50.32 +1.08 IYR (Real estate) 51.44 -1.11 (XLF Financials) 15.69 -.24 XLE (Oil) 57.54 -.49 XLB (Materials) 32.48 -.07 XRT (Retail)41.67 -.84 XLK (Tech) 22.85 -.08 XLV (Health care) 30.86 -.09

The DJIA is below the 50 day and back to its 10730 breakout of 3/18. This is were most traders expect a bounce and who knows maybe we get a bounce here. I am not so sure that they get a tradeable bounce here. I don't think the shorts are shorting here either. If that is true then we will go right through this area and then the selling begins. Most charts I see hang in there for a few days and then sell off to their 200 day average. The 200 day on the DJIA is just below 10200.

The move in Gold today is a hook rally. The public is being told to hold their stocks and buy Gold as a hedge. Cramer (Captain Obvious) just posted that on his website this week and ringy dingy presto Gold takes off. I believe that they should be selling their stocks and Gold. I still am not shorting Gold now but again my sell signal is at 1133. At some point, I may raise that signal. Notice the strength in the bond market and the dollar here. There is notable weakness in all of the foreign markets and commodities.

The public is in commodities and foreign stocks remember. The public will not sell them because they know that the FED is printing all that money. They must be printing because golly gee look at Gold go up. In the meantime they are getting their butts kicked. The rally here in Gold preserves their inflation story, which as I have mentioned many times on this blog, is the wrong story. The problem will be deflation not inflation. The public is now adding to their Gold positions to protect there stock portfolios. NOT A GOOD IDEA!!!!

Note: I am raising my sell signal on Gold to a close below yesterdays low of 1156.20
If Gold closes below 1156.20 I will buy the DZZ

Mikey
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