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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, July 14, 2010

Redirection...The Magicians best tool

Over the past 2 months it has become apparent that the economy is winding down. Every economic stat says slowdown. The gamekeepers have now redirecting the attention away from the economy to earnings and outlook. They are saying ignore the stats and look at the earnings and outlook. I pointed that out to you and posted the article on CNBC that said the new game would earnings and outlook.

Shazaam almost every earnings report has beat expectations and in almost every case the outlooks are positive. That is remarkable considering the state of the economy. Either these analyst and companies are lying or they are not seeing what everyone else sees. After Intel's earning Bob Pasini said that the earnings proved that there will not be a double dip recession. Thanks Bob, I feel better now.

Meanwhile, in the economy:

Demand for loans to purchase U.S. homes sunk to a 13-year low last week, and refinancing demand also slid despite near record-low mortgage rates, the Mortgage Bankers Association said on Wednesday.Requests for loans to buy homes dropped 3.1 percent in the week ended July 9, after adjusting for the Independence Day holiday, to the lowest level since December 1996, the industry group said. Refinancing applications fell 2.9 percent, and the mortgage market index that reflects total loan demand also fell 2.9 percent.


Home Sellers Slashing Prices, While Banks Mow the Lawn

That heady buzz from the home buyer tax credit is now turning into a grinding headache, as home sellers realize their very temporary, government-induced catbird seat has now fallen back to earth. As of July 1st, 24 percent of sellers on the market had cut their asking prices at least once, according to Trulia.com. That's up 9 percent from the previous month and represents about $27 billion worth of vanished national home equity (or home equity hopes).

WASHINGTON - A second straight month of declining retail spending will likely keep unemployment high and help weaken the recovery. Retail sales revenue fell 0.5 percent in June, the Commerce Department reported Wednesday. That followed a 1.1 percent fall in May.

"Clearly, the consumer is being more cautious now," said David Wyss, chief economist at Standard & Poor's in New York. Consumer spending accounts for 70 percent of economic activity. It grew at a solid rate during the first three months of the year. But consumers have since held back in the past two months. Many are worried about high unemployment, a volatile stock market and a housing industry that has struggled without government incentives.

In other words the bad numbers are being covered up by the earnings that are being compared to 1 year ago. One year ago is an easy number to beat. What they are doing is drowing out the bad news with the earning news and then saying that everything will be OK. They they give you a list of 10 stocks that will do well. This is all extending and pretending. The very thing that was happening in July of 2008.

By the way our buddy Warren Buffett is going to the White house to talk to Obama about the economy. I am sure they will emerge with a very positive picture for the economy. The state of the economy now is not good. They need the father figure to come out and assure us that everything is OK.


Mikey
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