March 11, 2012

Dan Shy

dan.shy@gmail.com

IN FOCUS:
Review and Initial Positive Forex Yields

Equities and Dividend Investing Outlook

Well, as I mentioned on the Forums last week, Forex pulled me in once

again. Since I was busy concentrating on, and trading Forex markets, I was not personally able to take advantage of any of the commodity moves outlined in last weeks issue. Lately, this may seem somewhat a waste of time, since my Commodity Futures thoughts have proved so profitable and my Forex efforts are only based on Micro positions. Looking over to review the commodity futures thoughts, shorting Gold turned out to be wildly profitable in the beginning of the week until I mentioned the rebound in process ... April Gold One Hour Chart

Trading Outlook

Summary of A.M.B. Model Portfolio

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as was shorting Live Cattle June Live Cattle One Hour Chart only to stumble into severe drawdown later that wipes out all of their previous 'wins'. Regardless, as stated, as a Professional I understand that it is a process to build such methodologies. That process takes time, concentration and constant review of what has been accomplished versus what still need to be improved. So I seem to have built a positive yield curve at this point. I've been profitable for a few weeks time. So what happens when I feel that I have completed the 'building process', and I believe I have a 'solid' Forex methodology? How will we incorporate Forex trading into the portfolio? When will I feel comfortable that I have reached my goal? and then there was the short on July Wheat July Wheat One Hour Chart Once I have a 5% yield on the Micro-Forex account, I will have overcome many of the initial losses, as well as a comfortable 'cushion of yield'. A 5% positive yield means almost a 10% gain from our point of drawdown. Once I have reached that point, on the next 'capital redistribution' among the three sisters, I will begin to 'weight' more of the distribution towards the Forex trading account in order to increase it's size. When we increase the size of the Forex trading account, the percentile yield will have a greater impact on the portfolio overall. I will continue to trade, and evaluate the results to determine if even more capital or 'weight' should be placed in the Micro-Forex account. From that point forwards, performance will then determine the amount of Forex trading that will strive for in the portfolio. I will then not have to concentrate so much of my time towards building a profitable Forex strategy. It will hopefully already be built.

I do obviously plan on trading commodity futures, and take advantage of such thoughts and movements in the future. We won't be able to reach our $10,700.00 redistribution goal (mentioned in previous newsletters) to add capital to other 'three sister' accounts if I do not actually begin to trade the commodity markets. But building a brand new methodology takes time, as you have been able to see. And as I mentioned last week within the pages of this newsletter, as well as on podcasts and on the Forums, I have also sort of 'stumbled upon' a new day trading methodology for Forex as well, that has taken time to develop.At this point, I have maintained a positive yield in Forex for a few weeks time. By itself, this proves nothing. Amateur traders routinely will enter a winning period,

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Dividend Investing Outlook

Equities has put in a 'double top'. So now it's just a matter of seeing if we rally past 1379 on the S&P 500 Index, in which case we'd probably see a continuation of the stock market rally. Or, if we congest, and then break lower than 1339 in consistent trading. In which case, the market overall could be hedged as such a movement could spark a more serious downturn in the markets. Beyond that? I'm going to concentrate of trading the Commodity Futures accounts and thoughts to the $10,700.00 goal so that we can have ourselves a capital redistribution among the 'three sister' accounts.

But if $1720 holds as the resistance ceiling, and then we begin to inch towards $1704.90 . I'll be watching that tape heavily and looking for my short. As I mentioned in the email updates, I'll also be looking at the month of April when it comes to actually entering the trade, at least I would for smaller accounts like A.M.B. June, I could probably trade the big contract on Gold for larger accounts. But for smaller accounts, April Mini Gold is the only contract that appears to have sufficient volume to trade. With any breaks lower? I would short those. Then, wait for another rally to develop up to the resistance moving averages, and look to short again, as the week progresses. And honestly, that's the only commodity trade I have at this moment. I was looking at two other markets, but they don't 'pass' my filter methodology for a 'good trade'.

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.

Forex Market Methodology Creation

EUR/USD: The Euro is currently falling. I'll wait for a retrace a bit. I'd like to see the Euro fall to 1.3107 region. If we retrace that far, I'll look for entering a position (increasing to 70 units) of establishing a long with a 100 pip profit target and a 50 pip trailing stop loss. But at this point, the market needs to retrace a bit more, as I stated. If such a retrace comes, then I will have to be very careful about establishing any long positions. I have discovered that the 'static' or 'noise' of the Forex markets during such retracements can be rather extreme, and cause a lot of 'whipsaw' action.

Commodity Futures Trading Thoughts

Commodity Market #1 April and June Gold (GCM12 or in the ThinkorSwim platform /GCM2 or /YGM2 for the Mini-Gold or the GLD for the imperfect ETF. I'll also be looking at April when I enter the trade, to see which has the greater Liquidity especially for Smaller Accounts): My fundamental bias is again telling me to short this market. But as always, only if specific parameters are met. As of this morning, I am waiting for June Gold to break below $1704.90 on a good selling tape. The resistance on all time frames is pretty heavy at around the $1720.00 region. So if we did not break below $1704.90 and broke above $1720.00 then I would back away from this trade.
1 Exact Link http://nononsensetrading.com/methodology.html

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To combat that, I've learned to be very, very patient after the market retraces. Allow time for congestion to develop. If the market rallies quickly, and I miss the move, well then I miss the move. Improving my skill at 'avoiding the noise' at this point is much more important to me than simply missing a trade. GBP/USD: This is another market I wouldn't mind trading to the long side. But at the time of this writing, the Pound is diving, and diving very fast. So as with the Euro, I will need first to see congestion develop.

3.14 % )
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 ( 73.85 % )

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 % )

AUD/CAD: This is the third Forex market I'm looking to trade to the long side; but that will need some time to develop a period of congestion that I look to trade long.

$504.84 available from Slush Fund ( 12.42 %) 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: +8.898 % AMB Total Portfolio Return Year to Date: + 4.798 % Investing Account Balance: $4,063.30 Return / Yield up +0.159 % Year to date 4.032263 shares of PEP (DRIP on Yield is 3.29 % )
4 shares at $63.31 on 11/15/2011 w/ $5.01 Commissions 0.032263 shares DRIP at $66.95 on 1/3/2012

Stock / Futures / Forex Trading Balance: $10,222.90 ( Return / Yield up +12.42 % Year to Date ) I personally had no commodity futures trades last week, despite the profitable biases. Therefore, the balance on the commodity futures accounts remains the same ... 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

4.032392 shares of PG (DRIP on Yield is

2 Exact Link http://www.scribd.com/doc/73238645/Aileron-MarketBalance-Special-Reference-Issue-Portfolio-Management

us

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approximately $282.54 for my drawdown tolerance. $504.84 available from Slush Fund 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 The trades from the long bias on the EUR/USD last week

Long 60 EUR/USD @ 1.3210(9) on 3-5-2012 Exit 60 @ 1.3211(4) PROFIT of 0.5 Pips - $0.0030 Long 60 EUR/USD @ 1.3117(4) on 3/6/2012 Exit 60 @ 1.3118(1) PROFIT of 0.7 Pips - $0.0042 Long 60 EUR/USD @ 1.3123(2) on 3/6/2012 Exit 60 @ 1.3136(7) PROFIT of 13.5 Pips - $0.0972

We still have a bit of work to do however before we cross back above the 'break even' point of $68.23. To add on 5% yield past that point means that our goal for the Micro-Forex trading account is $71.64 At that point, I will begin to share the profits from the other accounts to the Forex account to increase it's weight to the entire portfolio. Savings Side-Pocket Account Balance: $2,031.37 Return / Yield up +0.04289 % Year to Date $504.84 for a Slush fund / Drawdown Kill Switch fund $1,009.69 for a Base Savings
Percentages of that Cash:

Micro-Forex Balance: $66.42 Return / Yield -2.653 % Year to Date $504.84 available from Slush Fund Forex '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% - One $10.00 One Year CD Purchase on 2/21/2012 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: $16,317.57 - Total Inception to Date Return: +8.784 % Return / Yield up +4.798 % year to date) S&P 500 Year to Date: +8.898 %

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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