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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

Sunday, April 14, 2013

Cash in the bank pays nothing...what will bonds pay

David Smith, chief investment officer at Rockland Trust, said individual investors are "especially exposed" to a big spike in bond rates since they've been flocking to bond mutual funds for the past several years in search of place to park their cash.
According to Investment Company Institute, individual investors have plowed more than $1 trillion into bond funds in the aftermath of the financial crisis.
"I don't think average investors understand how much they stand to lose," said Smith. For example, if the 10-year yield moves from 2% to 2.5%, a bond mutual fund with a 10-year duration would lose 5% in value, he said.
"And it's conceivable for the losses to be worse," he said. "Once the snowball begins, we could see massive redemptions, and that will feed on itself." To top of page

The same applies to high paying dividend stocks.  Those stocks have benefited from low interest rates and have been the darlings of the recent rush of money into equity.  The game is over when rates start to rise.  The pros say rates are going to rise but not a great deal until 2015.  The real upside is with rates going up and not down.  The risk is in interest sensitive investments.  The biggest upside investment is in a bank account now.  I see that to be the biggest winner over the next 3 years.

I am posting a section called securities I like.  It will include ETF's that I like for the intermediate and long term.  These may or may not be trend friendly.   A buy against the trend will require the ability to be in a loss position until the tern come.  It is a patience tester and requires to be wrong ...until the world comes to its senses.   I would expect a spike on interest rates at some point within the next 9 months.  I like the SJB 30.92 (High yield short) and the TBF 28.54 (20 year US Treasury short) , SEF (Short Financials) 24.90, VIXY (Short Short term VIX futures) 9.91.

Mikey
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