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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, July 30, 2010

GDP Slows to 2.4% in Q2

The second Quarter GDP grew at 2.4%. Consumer spending, which is 70% of the economy grew at 1.6% down from 1.8% in Q1. The other .8% came from inventory building and government stimulus. Consumer spend peaked on this cycle in 2009 Q3 at 2%. Government spending was the highest since 2009 Q2, which means the government carried the economy in this quarter.

Consumer spending is being squeezed by jobs and a tightened of credit to them. The interest rates are a record lows for banks and corporations but not for the average guy on the street. He is getting his credit reviewed by banks every day. If he is late on a payment the banks cut his credit line. If thought the mortgage rates a at record lows their is little equity to borrow on so those loans that he used to transfer his credit card debt to are not available to him.

The debt bubble is going to take a long time to wind down. It is cutting off money flow to the consumer and it is putting pressure on prices. Commodities and stock prices are being held up by government intervention so the consumer should have 1 dollar gas is still paying 3. His house is declining in value and so is his 401K.

The ECRI fell again this week to -10.7 that is the lowest reading since May of 09. What we have is a picture of good earnings brought on by government stimulus and increases that are compared to recession lows that paint a picture that the economy is in recovery. On the other hand, the leading indicators are pointing back to the lows of 2009.

In conclusion, if you look back things are getting better if you look forward it looks like we are going back to the lows. Stocks are at the present time in a trading range between 9700 and 10700. We closed Friday at 10465 and the Mike Power index (MPI) closed at 50 which is short term neutral.

Mikey
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