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Friday, April 23, 2010

Friday Investing and Trading Review for April 23, 2010

"No pleasure endures unseasoned by variety" - Publilius Syrus

Well, it's Friday. Usually on Friday, I have a video that recaps my investing and trading efforts for the last week, based off of comments in last weeks "Airelon's Market Tactics".

But I didn't trade at all this week. As I mentioned in an earlier blog entry? I took it easy this week. So although I developed a definite bias towards some markets, and not others? I didn't trade.

So what are we to do for the "Friday Investing and Trading Review"?

Well, I thought I would do something a little different this week. I would let everyone read my thoughts straight out of "Airelon's Market Tactics", as they existed last week. So please remember that the market comments below were written last week, so these thoughts are not current. As well, I won't be trading today, I'll be away from my desk. So keep that in mind as well.

But I figured I'd just do what I'm known for ... putting it 'all out there' for everyone to see, and we can see how I did together. I'll include my present comments after various sections with bullet points ...

"Outlook for the Week of April 18th, 2009
Dividend Investment Outlook for the Next Week:
Hedging:

Well, I've been saying for a few weeks now that it was a good time to put on a hedge for larger accounts. I do not view the Model Portfolio's 'investing sister' account as a large enough account to be worried about hedging. The equity holdings themselves in the Model Portfolio's 'investing sister' account only equate to about $675.00. As there is still $4,268.40 in this hypothetical portfolio … the 86.30% cash position acts as that hedge.

But were an account to hold approximately, say … $18,000.00 in equity holdings alone, beyond cash … then, as I've been saying, the last two weeks provided a wonderful time to be hedged.

I had mentioned possible volatility hedges with the VXX, or there is also broad market hedges by using the SDS, or RWM. At the present time, I personally feel that it would be well advised to keep such a hedge 'on', for any larger accounts ... but it's not yet time to increase the size of that hedge. It's simply time to watch, and wait to see what the market gives us.

Of course, that's speaking to accounts that are much larger than the Model Portfolio's “investing sister” account. So turning our attention back to accounts the size of the Model Portfolio's? Remember, that cash can act as it's own hedge. How is this possible? Because that cash allows for further dollar cost averaging (D.C.A.) down the road, to increase the size of the dividend yielding stock.

Past that? We now have four dividend yielding stocks within the model portfolio. Let's now switch our focus in the future to building the size of those positions, while simultaneously controlling risk."

  • I still believe that was, and is a good move for a larger accounts. An Insurance policy is never a bad thing. Now back to the newsletter comments ...
"Trading Outlook for the Next Week:

You know, it's been a few months since I've launched “Airelon's Market Tactics”. Since November 9th of 2009 as a matter of fact.

To tell you the truth, I'm still figuring out the exact format that I want to use, to discuss trading concepts and ideas. As you have seen in recent issues of the newsletter, I mention not only the market I'm thinking of, but also different ways to play that market … be it an ETF, ETN, or possibly even various options.

Beginning with this newsletter, I'm going to experiment with mentioning markets that I don't want to trade, but I have definite thoughts and ideas regarding. So I'll differentiate between markets that I personally have “actionable trading thoughts”, and mere “observational thoughts”.

Observation #1
June Gold (GCM0 or YGM0 for the smaller contract. GLD Put Options, or the GLL for short Gold ETF): I'm not really willing to trade this market at the current time. I got whipsawed last week, and didn't catch this short that I thought was coming.

I basically see gold as moving lower until the end of this month, and that the seasonal trade that I discussed last week? Well … it's on. But I'll never, ever chase a trade. That simply leads to more whipsawing.

What would cause me to trade this market? To move from simple observation, to something that I could trade?

Perhaps a rally up to the $1,147 to $1,149 region. As things stand this Sunday night, in such a situation with the proper congestion near those types of levels, I may move from simply observing this market, to moving in to short it among congestion of the moving averages."

  • As I mentioned, I didn't trade last week. But we did rally up to that $1,149 level, and then have preceeded to sink, and there would have been a great short. It will not show up in the model portfolio trading account since I didn't manage it as a trade as a "win", but I think we can safely count this one as a "win".

"Observation #2 July Silver (SIN0 or YIN0 for the smaller contract. SLV Put Options, or the ZSL for short Silver ETF): My thoughts regarding Silver pretty much echo my thoughts regarding Gold. It's a move that I would have loved to catch. I hope subscribers were able to catch it. It's just not a market that I was actively trading, or had my focus last week.

What would cause me to trade this market? To move from simple observation, to something that I could trade?

Well, as with Gold, a rally up to the $18.12 region or congestion up to associated moving averages, with a break lower would cause me to move into shorting Silver."

  • Well, we did rally up to the $18.12 region and a little above it. But a double top formed midweek, to form a good day trade. Like Gold however, it would have only been good as a day trade, which is what we are focusing on at the present time for the newsletter, since the trading accounts only started out with $9,000.00. Regardless, as we have been focusing in on day trades, I would personally count this one as a "win" - although again ... since I didn't actually trade this week, it will not count up as a win in the "Model Portfolio Account".

"Observation #3 June Crude Oil (CLM0 or the USO for Crude Oil ETF): I'll tell you what, Oil has me a little interested at this point. I think it's beginning to tell a “contra-seasonal” story. I'm not firmly in that camp yet? But as I'm writing out this newsletter? Oil has opened, and dropped another $1.50.

Now I'm not saying that this is a seasonal-contra move. Yet. But we're getting there.

I've very interested in seeing what happens coming if we approach the $82.60 region. That's the next area of major support.

But just that we're moving so much lower during this seasonally bullish time?

It makes me cautious.

I begin to wonder … have we hit a 'recessionary demand ceiling'? There is not only supply factors? But also demand factors in a very difficult economic period."

  • I'm glad I didn't get involved here for a long, but it pays to keep 'observing' this market. I'm still interested for the above reasons I noted in the newsletter.

"Trade Idea #1 June U.S. Dollar Futures (DXM0 or the UDN for Bearish Dollar ETF): I'm short this market in regards to my bias, thus the UDN for bearish Dollar exposure. We're at a beautiful “S Swing Point” region. Seasonally we're weak from here until the end of April.

So what will cause me to move in, and start shorting the U.S. Dollar Index Futures?

Well … as I write this, the only chart I see any sort of entrance on? Is the daily chart. Which as of right now would be a break below the lowest low of the overnight trading, or a break below 80.96.

But honestly, we've rallied enough in the overnight? That I know that the shorter time frames between then and now may present an opportunity that I cannot foresee.

So I'll keep my eye on events as they unfold. The first step, is that I would like the 10 minute chart to start trading underneath the exponential moving averages (ema). Then, with a rally on the 10 minute chart, I would look to short this market."

  • CA-LEAN miss on this bias. But since we never got a clean break below 80.96. We sunk lower, but would have been stopped out a bit later if someone got involved. But woah ... to be honest ... I missed this one completely. Especially with the open today. Wow. So it's about keeping those trading losses small, and keep to the plan! I think at the present time, the average loss I've had for the Model Trading Portfolio translates into an average of $128.07 per contract. You have to keep those losses small.

"Trade Idea #2 July Corn Futures (ZCN0 or the ZCN0 Puts): I'm short this market in regards my bias. I'd like to see a rally up to the 370.75 region, and look for congestion to short.

We're in a very seasonally weak period for Corn, continuing until the end of the month, and I'm willing to play that bias, since we've had a small rally on the daily chart."

  • If somehow, someway, someone made it into this one as a short, it would have been EXCEEDINGLY profitable on Monday, but again - for portfolio management reasons, we're day trading the Model Portfolio accounts. So you would have had to grab those profits right away.

I'll also include last weeks money management performance statistics for the newsletter, which are included in each weeks issue. The numbers are on a "per contract" basis ...


Well, that does it. A sneak peak into Airelon's Market Tactics, and comments as they existed last week.

* * *

Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have over 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.


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