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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, May 12, 2010

Investment Banking is a dirty business

In my last post the article mentioned that in the first quarter of 2010 JPMorgan achieved a loss-free quarter in its trading unit — making an average of $118 million a day, nearly $5 million an hour and the Goldman Sac trading desk recorded a profit of at least $25 million (£16.8 million) on each of the quarter’s 63 working days, making more than $100 million a day on 35 occasions.The 14 largest global investment banks reported $78.8 billion first-quarter revenues, their best numbers in three years and just 1 percent shy of the record.

The record was in the first quarter of 2007. Do you remember what was happening in the first quarter of 2007? The sub prime loans were blowing up. They were blowing up because the real estate values were going in the tank. The big banks at the time denied that they had a problem. The Fed Chairman said that the problem was contained.

The sellers came out of the woodwork in Feb of 2007 when this started to break. However, in that quarter the investment banks were making big money. They were doing the business that investment banks do. Trade the markets. I should say manipulate the markets. It was 1 year later that Bear Sterns collapsed. Who bought them out??? How about our old buddy JP Morgan.

Bear Stearns pioneered the securitization and asset-backed securities markets, and as investor losses mounted in those markets in 2006 and 2007, the company actually increased its exposure, especially the mortgage-backed assets that were central to the subprime mortgage crisis. In March 2008, the Federal Reserve Bank of New York provided an emergency loan to try to avert a sudden collapse of the company. The company could not be saved, however, and was sold to JPMorgan Chase for as low as ten dollars per share, a price far below the 52-week high of $133.20 per share, traded before the crisis, although not as low as the two dollars per share originally agreed upon by Bear Stearns and JP Morgan Chase.

That made Chase an investment bank. The job of an investment bank is to ramrod stocks down the public throat. The IB's did a good job doing that in the first quarter of 2007. The government covered the problem up from early 2007 and the IB's made sure that the public did not see what was going on by propping up the market. Fast forward to today the same guys are doing the same thing.

The trading accounts of JPMorgan and Goldman Sacs sounds alot like the trading accounts that Madoff managed, don't you think?

Mikey
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