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March 5, 2012

Dan Shy

dan.shy@gmail.com

IN FOCUS:
Review

Equities and Dividend Investing Outlook

I often describe Aileron Market Balance as a 'look over my shoulder' as to


Trading Outlook

Summary of A.M.B. Model Portfolio

my week. And as I mentioned at the Forum as well as emails to you all, I was on the road from Wednesday to Friday, traveling back to the United States for a month. The wife and I stayed just ahead of the storms that ravaged the south, sometimes by as little as an hour. I hope you all experienced no problems after that devastation. We arrived here in Michigan, safe and sound. I will thus be able to take care of taxes, take care of some other matters, and recharge my batteries after the events of the last few weeks. But the thoughts from last week were highly profitable. Shorting Gold, which I was able to take advantage of in the beginning of the week, which I detailed live, as it happened over at the Forums. There was also shorting Silver. Shorting Sugar after a very specific top pattern emerged. That top pattern developed and a short opportunity developed as outlined. April Live Cattle rallied as I hoped between the areas mentioned, and then the congestion broke down for a beautiful short on the last day of trading last week. Naturally, not all issues of this newsletter can be so accurate. And as I have outlined in previous newsletters such successes, although they can be taken advantage of by anyone, will not be counted towards the portfolio that benchmarks the results of this newsletter. If I was not actually present in front of the monitors, managing the trade (as I did the Gold trade over on the forums), then I will not count accurate trend predictions as successes for the A.M.B. Portfolio. I was busy traveling from Mexico to the United States. The only successes that are counted towards the success of the newsletter are actual trades that I manage and exploit out of the trend. As I have often mentioned, what matters is not trend prediction, but trend exploitation. Too many 'gurus' like to point to the success of their accurate trend predictions, but speak very little of the practical manner in which they exploit such trends,

March 5, 2012
or if they have at all. So although I was able to mention specific trends that worked out well (which I hope ones were able to take advantage of), for the purpose of this newsletter, only the Gold trades will be counted profitably. Johnson & Johnson (JNJ): There's not really a whole lot of action here as far as the price is concerned. We're are stuck within a channel of $64.00 and $66.00. We can allow the DRIP to do it's work from the dividend, and simply observe events as they unfold. Pepsi-Cola (PEP): A beautiful channel of congestion has formed for Pepsi-Cola. Since technical patterns are somewhat 'objective', some may refer to this as a 'double bottom' pattern in the last few weeks. The market freaked out around the time of earnings, and the announcement that Pepsi-Cola (PEP) would try to restructure a few things. So the price fell. But then we stopped and we've been congesting for some time, unable to break lower than the $62.26 region of support. For portfolio's with a high enough percentage cash to average in further (meaning that even after the purchase, the size of the position would not exceed 6%) this presents a perfect opportunity. If we break higher? An investor could purchase a little more at around $63.83. If we continue to slide lower however it will be more of the same. Meaning that I would simply wait for the market to begin to congest, and then break higher before purchasing any more. Of course, the A.M.B. Portfolio is such that this cannot be done, until a capital redistribution from the trading account. Procter & Gamble (PG): This is a stock that I will simply wait. The time to average in, or purchase PG was a month ago. We're in from $61.94, so we're in great shape at the present time. This means, that since we're trying to build up our trading account for that capital redistribution? We have some time. As with Johnson & Johnson (JNJ) we have a bit of luxury to simply observe. Fundamentally, as I have mentioned in previous issues, I am keeping an eye on their diminishing margins and market share. Waste Management (WM): We didn't have the best entrance at $32.39. But the stock has performed admirably. In recent weeks, we've congested a bit between $35.72 and $34.18; which is where I have set alerts. If we

Dividend Investing Outlook


When it comes to the overall equities outlook? We will be rallying until we aren't. It sounds simplistic, but it's the truth. I've seen nothing that indicates at the present time that the momentum of the current rally will be broken. True, the VIX is falling. But the trend is clearly in place, and such momentum rallies can last for some time. True, there is some congestion on the Daily time frame. But there was also such congestion from February 7th to February 15th of last month. In the end, we simply broke higher. I will simply wait for a break in the momentum, or some other indication that the rally may come to an end. That might begin tomorrow. It may take a month or more. But until that time, I won't fight it. We've developed a portfolio management plan, or 'goal' to build the A.M.B. trading account to $10,700.00 so that we can have another redistribution amongst the accounts. We will then be able to feed capital from the trading account to the dividend investing account. From there, we will have more money with which to maneuver, buy more stocks, average down as the case may be, and generally 'grow' our portfolio.

Specific Stocks Within A.M.B. Portfolio:


Of course, the equities market is one thing. The stocks that we have picked are something else, and there is divergence between the two. True, we don't plan on much action until the aforementioned re-distribution from the trading account. But I think it's important to take a moment or two, and discuss each of these stocks that A.M.B. Has within it's portfolio.

March 5, 2012
break higher? Then great, we'll continue to enjoy that rally. If we begin to progress towards that $34.18 region, I will begin to monitor the situation more closely. But again, I feel we may have a bit of time. So the focus, again, returns to my trading efforts. will wait for any rallies to develop, then congest, and then look to short breakdowns out of such periods of 'congestion' or 'channeling' on the smaller time frame charts. Commodity Market #2 July Wheat (WN12 or /ZWN2 in the ThinkorSwim Platform): I am looking at this market for a short, or selling opportunity. The market is actually already at pretty interesting regions of resistance. I will watch the overnight electronic markets closely. The seasonal selling date approaches, near the 9 th of this month. Sometime around that time period, the Wheat market usually falls lower. So I will watch the region of resistance that has already developed, and try to see how I can marry the developing price action, to a short opportunity. Commodity Market #3 April Gold (GCJ12 or /GCJ2 in the ThinkorSwim Platform for the Big contract. /YGJ2 for the MiniGold or the GLD Puts for the imperfect ETF): I am still looking for lower Gold prices throughout this month. There is price support around $1700. But I would personally prefer to wait for rallies to develop. Rallies to develop possibly to the $1734 or possibly the $1740 region, and then wait for congestion, or 'channeling' at the end of such a rally. Then wait for a break to the downside out of such price 'channels' in order to short Gold.

Trading Outlook:
Note: By way of reminder, since the Model Portfolio has only $10,156.48 in the Commodity Futures and Stock Trading portion of the portfolio, there will only be 'brief day trades' at this stage of the game for Commodity Futures trading in order to escape the risk of over-leveraged gap opens in the commodity futures markets. This is an attempt to demonstrate how account size relates to trading style. As I mention in my methodology series1, as the 'trading sister' reaches $30,000 I will graduate the account into 'swing-trading' and demonstrate how I would go about doing this. Stock trades may last more than one day. The Forex account has $66.32 and is considered a micro-forex account for the purposes of the model portfolio.

Commodity Futures Trading Thoughts


Commodity Market #1 June Live Cattle (LCM12 or /LEM2 in the ThinkorSwim Platform): I am still looking at the Cattle market for a short. Only this week, I am moving to looking at the June contract instead of the April contract. Again, I have to reiterate as I have often done, I am very careful around the opens in the meat markets. I will carefully observe and just wait for the first 5 minutes to ten minutes of the active open to progress, as the opens in these markets can be exceedingly volatile. But as usual and as outlined in methodology series, I
1 Exact Link http://nononsensetrading.com/methodology.html

Forex Market Methodology Creation


Ok, I'm beginning to again look at trades in MicroForex. Also, I've sort of 'stumbled' across a day trading method with Forex that I will be continuing to develop. What I would like to do, is develop this method further, and then when I open the voice server

March 5, 2012
in April, begin to day trade Forex along with the rest of my commodity futures and stock trades live in the voice server as it occurs. Regardless of all of that, let's move on to what I'm looking at currently. EUR/USD: I am looking for a long position. Only 60 units (which Oanda allows you to do, specify exact contract sizes). At the time of this writing, a firm base of support has developed around the 1.3183(7) region. If we begin to break higher, then I'll be looking for a long position around 1.3212(5) region. Initially, I'd be looking to set a 100 pip profit target, with a 50 pip trailing stop. This would allow me to get some sleep, and still allow the methodology I've created to this point to do it's work. It's a mean reversion trade, through and through. They are difficult to time, and especially with the noise that can develop in Forex markets during time periods of consolidation. If the base of support at 1.3183(7) breaks down? Then I'll simply wait, and watch and observe to see if a new base of support develops on the 15 minute chart. Investing Account Balance: $4,059.75 Return / Yield up +0.07148 % Year to date 4.032263 shares of PEP (DRIP on Yield is 3.33 % )
4 shares at $63.31 on 11/15/2011 w/ $5.01 Commissions 0.032263 shares DRIP at $66.95 on 1/3/2012

4.032392 shares of PG (DRIP on Yield is 3.15 % )


4 shares at $61.94 on 11/28/2011 w/ $5.01 Commissions 0.32392 shares DRIP at $64.83 on 2/15/2012

4 shares of JNJ (DRIP on Yield is 3.52 % )


4 shares at $62.31 on 11/28/2011 w/ $5.01 Commissions

8 shares of WM (DRIP on Yield is 4.07 % )


8 shares at $32.39 on 12/22/2011 w/ $5.01 Commissions

Cash: $3,000.61 ( 73.91 % )


Percentages of that Cash - $2,680.61 of this cash I reserve for 'maneuvering' capital / hedging / new purchases ( 89.34 % ) -$80.00 of this cash I reserve to Dollar Cost Average PEP further in the future (2.66%) -$80.00 of this cash I reserve to Dollar Cost Average PG further in the future (2.66%) -$80.00 of this cash I reserve to Dollar Cost Average JNJ further in the future (2.66%) -$80.00 of this cash I reserve to Dollar Cost Average WM further in the future (2.66%)

$503.49 available from Slush Fund ( 12.4 % ) Dividend Investing Sister Inception to Date

Summary of the A.M.B. Model Portfolio


Note: In the beginning of this hypothetical portfolio, the share purchases of the Dividend Investing 'Sister' will be extremely small. It is my intent to demonstrate how to grow the size of these positions from 2 shares, to 300 shares using the three sisters portfolio management style. It is also understood that readers of this newsletter have a firm understanding of my 'three sisters' portfolio management system (See the Special Reference issue of Aileron Market Balance2 for an explanation of this system).

S&P 500 Year to Date: +8.799 % AMB Total Portfolio Return Year to Date: + 4.774 %
2 Exact Link http://www.scribd.com/doc/73238645/Aileron-MarketBalance-Special-Reference-Issue-Portfolio-Management

March 5, 2012
Stock / Futures / Forex Trading Balance: $10,222.80 ( Return / Yield up +7.777 % Year to Date ) Commodity Futures Balance: $10,156.48 Return / Yield up +7.84 % Year to Date Next Re-Distribution Goal: $10,700.00 Original 3% risk tolerance gives us approximately $282.54 for my drawdown tolerance. $503.49 available from Slush Fund We had a few trades last week, that led to a gain for the trading 'sister' account. Short 1 YGJ2 from 1774.90 to 1774.30 PROFIT - $12.76 on 2/27/2012 (including commissions of $7.04) Short 1 YGJ2 from 1773.80 to 1771.10 PROFIT - $82.02 on 2/27/2012 (including commissions of $7.04) Savings Side-Pocket Account Balance: $2,031.37 Return / Yield up +0.04289 % Year to Date $2.00 from Interest Payment on 2/29/2012 All placed within the Getting Paid fund. $504.84 for a Slush fund / Drawdown Kill Switch fund $1,009.69 for a Base Savings
Percentages of that Cash:

Micro-Forex Balance: $66.32 Return / Yield -2.799 % Year to Date $503.49 available from Slush Fund Forex 'Sister' Account Inception to Date

Unfortunately, I left the spreadsheet at home back in Mexico that I record all of my money management stats on. Therefore, I will have to keep strict records of all of my trades while I am here in the United States, and then update my money management statistics at the end of the month, when I return to Mexico. Futures 'Sister' Account Inception to Date

$813.69 of this cash reserved for 'burn rate / maneuvering' capital ( 80.59 %) $120.00 of this cash reserved for CD Ladder creation ( 11.88 % ) - One $10.00 One Year CD purchased on 11/21/2011 at 0.60% - One $10.00 One Year CD Purchase on 12/21/2011 at 0.50% - One $10.00 One Year CD Purchase on 1/21/2012 at 0.50% $20.00 of this cash reserved for the first side-pocket purchase ( 1.981 % ) $20.00 of this cash I reserve for the second sidepocket purchase ( 1.981 % ) $36.00 of this cash I reserve for the hedging account ( 3.565 % )

$504.84 for Emergency Savings Getting Paid Fund: $12.00 Total Portfolio Balance: $16,313.92 - Total Inception to Date Return: +8.759 % Return / Yield up +4.774 % year to date) S&P 500 Year to Date: +8.799 %

March 5, 2012

If you have any questions regarding my personal outlook, or any other comments, please feel free to contact me at dan.shy@gmail.com. I will say that if you have questions about your own trading and you want to ask for my input? Please include your most recent money management performance statistics in any email correspondence.
Until next time, stay safe trade well, and remember that loving other people doesn't cost a dime.
Note: I, the author do not grant this work for wide distribution beyond any single individual subscriber as this publication is protected by U.S. And International Copyright laws. All rights reserved. No license is granted to the user except for the user's personal use. No part of this publication or its contents may be copied, downloaded, stored in a retrieval system, further transmitted or otherwise reproduced, stored, disseminated, transferred, or used, in any form or by any means except as permitted under the original subscription agreement or with prior written permission. The above statements should not be construed as an investment or trading recommendation. Aileron Market Balance is a newsletter that allows subscribers to look 'over my shoulder' as it were, for my own personal specific trading and investing ideas and thoughts for the next week. But they are only thoughts as of the moment of publication, and are subject to change. Any trades or investments that I discuss within this newsletter are simply my own thoughts regarding my own investing and trading outlook. Remember that entering any market is an individual decision. There is no guarantee that I will enter, or have entered any of the trading or investing ideas that I discuss in this newsletter; as larger accounts may require a different strategy as the ones presented here. This newsletter simply contains my trading and investing thoughts for the next week. I personally only enter any market after watching and reading the tape and I trade using money management principles3. The losses in trading can be very real, and depending on the investment vehicle and market, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 15 years of experience in trading and investing in these markets. The Model Portfolio accounts are hypothetical accounts,with all of the inherent problems therein, which are used within this newsletter in an attempt to track the results of this newsletter, and is run for the education of other traders who should make their own decisions based off their own research, due diligence, and tolerance for risk. Any pictures used within this newsletter are believed to be public domain. Any charts that are displayed using the ThinkorSwim platform, and other pictures were obtained through Wikipedia's public domain policy.

Exact Link - http://nononsensetrading.com/MoneyManagement.html

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