Posting Times

Posts will be between 8:30 PM to 10:00 PM PST
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

Monday, February 21, 2011

Thr risk trade and its implications

The risk trade that has driven equities and commodity prices since the Federal Reserve started talking about the second round of quantitative easing last year is under threat from inflation

"The turning point in the markets last year was at the end of August when Ben Bernanke started talking about QE2 "Interest rates shot up and the 'risk move started which drove up more risky assets like equities, emerging markets, commodities and commodity currencies like the Aussie dollar "This move happened in the most correlated way I have ever seen in the markets and was provoked by the Fed putting liquidity in the system.

The change from deflation worries to soaring inflation is behind the crisis in the Middle-East and will have big implications for the market as the year progresses."Remember that hunger starves civilization, food price inflation has clearly been a big driver for the turmoil in the Middle-East."

The Fed still thinks that inflation expectations in the US are too low, focusing on the weak labor markets and keeping quantitative easing going, . "This inflates everything everywhere else and is provoking a policy response in emerging markets in general and China in particular. This is potentially dangerous for our economies and our markets.

"We should be given the debt situation and a lot of other characteristics of a deflationary period. However, we see inflation popping up. So in fact in fighting deflation, the Fed may be creation inflation.
On the surface, growth conditions look good but a lot of this growth is artificial because it has been driven by an unprecedented amount of fiscal and monetary stimulus. "QE2 changed the rules of the game. Markets will be vulnerable once that the liquidity flow dries up or reverses but the timing of this is difficult.

Commodities, a traditional inflation hedge, may have some way to run but this current manipulation by the Fed was created before the economy was rebuilt. The result is that assets other than financial assets have not appreciated and job growth did not recover. That means that the inflation is built on a shaky foundation. A foundation that cannot be supported by the current economy.

"We should remember that in the long run returns of commodities corrected for inflation are quite low, eventually there is always a supply reaction." The troubles occurring in the Middle East are just one problem that has been created. The net result will be what should have happened in the beginning of this crisis, a deflationary collapse.

Mikey
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)