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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, May 28, 2010

They still don't know what caused the decline...Its the economy stupid

DJIA 10136 SPX 10859.41 Nasdaq 2257.04 VIX 32.07 Gold 1219 Silver 18.56 Oil 74.15 RBOB(retail gas)2.02 Nat Gas 4.374 DBC (Commodities)21.98

Dollar Index 86.70 EURO 1.2276 Brit Pound 1.4533 Aussie.8414 IEV(Europe Index 32.64 EEM (Emerging Market Index)38.12 EWZ (Brazil)63.61 FXI (China Index)39.32

TLT (LT US Bonds)96.58 IEF (7-10 yr US Bonds)93.10

GDX(Gold Miners) 49.83 IYR (Real estate)50.03 (XLF Financials)14.89 XLE (Oil) 53.05 XLB (Materials)30.84 XRT (Retail)40.64 XLK (Tech) 21.71 XLV (Health care) 28.87

Here are the comments I saw from some of the experts regarding the action in May and what they think is coming. The one comment that I found interesting was that they still do not know what caused the flash crash in May. I will tell you before this decline is over they will know what caused it.


Investors can be forgiven for a little deja vu: In the month of the Flash Crash, wild swings in volatility and incessant talk about risks to the entire financial system, May seemed like a trip back to the bad old days.

The wild and crazy month saw the market rise or fall more than 1.5 percent on nearly half the trading sessions. Major indexes put together their worst May since 1940, and the view from the playing field looked even worse.

"The S&P 500's rollercoaster ride this month is reminiscent of the Cyclone on Coney Island," said Mike O'Rourke, chief strategist at BTIG in New York, in his morning note. "If you ever rode the Cyclone, you know that the truly scary part of the ride was not how high or fast the coaster went, but the fear that it would fall apart at any moment."

"If you want a correction you're going to get one," said Linda Duessel, equity market strategist at Federated Investors in Pittsburgh. "We were well overbought. Sentiment measures were getting too high. We were overdue for a correction. It was all in line."

Duessel is sticking to her projection of 1,350 on the S&P by year's end, though she acknowledged that investors have a right to be concerned about the Flash Crash and the mystery that continues to surround the stunning event.

"The event itself is worthy (of concern) but I don't hear many people talking about it," she said. "We should worry about that and why we haven't figured it out."

The market finds itself entering a normally pretty easy time for investors. June and August are usually about average, but July tops the rest of the calendar for stock performance.

Sam Stovall, S&P's chief market strategist, said a "summer sprint" could well be in the cards, and at the least believes worries that the market reverting to financial crisis mode is unlikely.
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They talk about the roller coaster ride like it is some kind of fun thing. Hey. it was wide and crazy. It is never any fun when you lose your money. I mentioned that I thought this decline was about over in the near term. I still believe this but in no way do I think that we have any sustainable rally from here. I took some money off of the table but still have half of my shorts. I am not looking to get long but the nature of the ETF's that I am trading is so volatile that I feel they need to be traded.

The Real Estate Market has been looking for a bottom for the last 3 years and still is bouncing around the lows. The banks have been holding foreclosures down and controlling the descent of the market. The derivative market that caused the whole mess was not dealt with but swept under the carpet. Corporate earnings are coming at the expense workers being cut back and wages being cut. Just check out the employment numbers and they still though don't know what caused the decline.

The commodities markets are in full retreat and the emerging markets have rolled over. This is not a pretty picture. What is causing this decline is a world wide economic decline cause by the bad debt that was created by the last consumer and asset bubble. That debt and asset bubble burst and the governments of the world took on the debt to stabilize their economies. That was not a good decision. This shift is that last one in this game of hot potato as no one is left to throw the potato to.

What happens now is the deflation of this debt and asset bubble. Yes, I said DEFLATION which is not what the story that the system is telling.
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