Tuesday, December 14, 2010

Stocks Escape Distribution, but Leaders Weaken a Bit

The market gets a late day save as the NASDAQ escapes back to back distribution days as the Federal Reserve rate announcement induces volatility. In the early going the market did stumble, but buyers stepped up and supported stocks prior to the Federal Reserve rate announcement. Stocks spent the majority of time heading sideways prior to the rate announcement. Then came the volatility, the Federal Reserved announced its decisions and stocks went into a volatile mode. By 3:30pm EST it appeared stocks were headed for a deep dive. However, buyers stepped up and saved the market, especially the NASDAQ from back to back days of distribution. Despite the market avoiding distribution today was another day of stalling and a bit of underlying weakness casting doubt on the current uptrend.

Precious metals started the day off well, but ended in negative territory. A big key was the reversal in the EURUSD reversal and pop in the US Dollar. Perhaps this was a one day wonder, but it does appear there is underlying weakness in some leaders casting shadows over the overall market uptrend. By no means does this indicate the “end” to the uptrend, but we need to be prepared for what the market has in store for us. Be prepared and stay focused.

Breadth has been waning and it can be seen in the McClellan oscillator a measure of breadth. While this indicator is a piece to the puzzle it doesn’t fill out the entire picture. The underlying weakness in some leaders is concerning and should be taken notice. However, we aren’t jumping the gun. A few of our leaders may be forming right sides of their bases rather than breaking down. However, any further selling here will certainly cast a very dark shadow on the market. Be prepared.

Cut your losses short.

Tuesday, December 07, 2010

Stocks Stage Reversal as Volume Soars

Current market rally stalls on volume

A brokered deal in Washington on tax cuts and the unemployment extension helped boost futures in the morning. Stocks jumped at the open only to face selling pushing stocks to lows by mid day. Volume on the NYSE was lifted by Citigroup after the government unloaded its remaining shares of the company. Citigroup traded 3.26 billion shares accounting for the majority of the change in volume on the NYSE. However, on the NASDAQ volume jumped more than 18%. The market at the end of the day looked poised to push into the highs of the day before the 3 o’clock hour. Rumors on the street of more insider trading probes helped sellers dump stock on the market. By the end of the day stocks finished on the lows putting in a terrible stall day.

Today is not the end all be all, but more importantly you must be aware of your stocks and how they are acting. One must take profits and cut losses. However, you have to go stock by stock and sell appropriately. If your stock is giving you profit signals ignoring them will only have you wishing you would have sold earlier. With today’s action there are a few stocks that appear to be flashing sell signals and we’ll adhere to them.

Sentiment remains high, last week we saw the AAII Bulls jump to 49.66 and has yet to see sub-40% for quite some time. Coupling the reversal today with sentiment a shake out or a deeper correction may be our midst. If today was not a signal of what is to come we’ll certainly see the market reverse course and continue higher. However, if our market leaders which took a hit today; decide to fall apart we’ll certainly see this market push lower.

Before today, the market and leaders were looking decent. Today’s action certainly put a dent into our leaders and we would like to see the damage limited to today. Regardless of what happens always play great defense and that is to cut your losses short. We may experience further selling, but the importance should be placed on your portfolio of stocks.

Monday, December 06, 2010

Gold and Silver Shine as Small Cap Stocks Lead Stocks

Bernanke’s interview on 60 minutes spark fear over his handling monetary policy

Gold and silver soar after Bernanke’s 60 minutes interview on Sunday night. Stocks consolidated nicely with the Russell 2000 index leading the way finishing higher by 4.44 (+.59) points. Volume was lower across the board, but Monday’s have become light volume affairs. Without economic news stocks moved lower during the morning and gained traction just after noon time. Only late day selling put a negative spin on the day, but with market leaders pushing higher the close was only a blip on the day. The markets consolidated nicely with market leaders pushing higher and our accounts higher.

Bernanke continues to push his loose monetary policy forced investors to gold and silver. The moves in the precious metals are an indication the market does not trust Ben Bernanke handling monetary policy. Gold and silver have been a measure of “money” for thousands of years, it has real history. The dollar is in effect a paper currency and is being devalued by the Fed’s loose monetary policy. It really boils down to the Government running surpluses and the Fed tightening monetary policy before gold and sliver stop their run.

Small cap stocks are taking the lead and this observation is a positive sign for the market. When small caps lead it signals risk adversion is taking a back seat and traders are willing to pay up for stock. When large cap stocks lead, the Dow and S&P 500 is a sign the market is getting tired. We saw this in October and November of 2007. In addition, with the NASDAQ showing positive signs and the Russell 2000 leading this market is poised to continue its run.

Not much in the way of economic news out this week and the headlines will certainly be pointed to the Jobless claim figures on Thrusday. In addition, the EURUSD will continue to be a cross currency rate to watch as the market has traded in concert with the rate. At some point the market will break the correlation, but for now they appear to be trading in tandem.

IBD went back into rally mode last week. They used the Dow Jones Industrial Average to turn the market in correction mode. As it turns out, this was not a wise move. We pay attention to our leaders and the NASDAQ, the Russell 2000 is not too far behind. Stick with the leaders and the laggards should be left behind.

Always cut your losses short.

Thursday, December 02, 2010

Stocks Advance as the Euro Rebounds

Stocks approach 2010 highs as European Debt fears subside

A bigger drop in jobless claims then expected, did not stop the market from pushing higher closing just off the highs of the session. What did help the market was a jump in pending home sales figures suggesting buyers were out procuring new homes. Preliminary volume figures showed volume dropped on the day, but the underlying action was still poisitive. Financial and retail stocks were the big winners of the day as the European debt crisis fears subsided giving a boost to banks. Along side the rise in the market was the Euro stabilizing after its most recent run in with sellers. Leaders acted well today and the market had a decent follow-through from yesterday’s action.

It would have been better to see volume jump on the day as if institutions were rushing in to gobble up shares of stocks. Unfortunately, we may be seeing a similar story as we did last year with the market pushing higher without volume. The strong price action is enough to override the lack of volume we are seeing in the overall market. Again, pay attention to your stocks.

Bullishness once again jumped as the survey out of AAII showed bulls heading to 49.66% and bears at a lonely 26.21%. Bulls are off of their highs just from a few weeks ago, but the recent Euro news and market reaction failed to scare bulls from their positions. Perhaps this is the reason why we saw the market hold up on its 50dma. For whatever the reason the fact remains the market still is in position to push back into new high territority before any substantial move lower.

Tomorrow’s headlines will certainly highlight the jobs report set to be released at 830am EST. The market so far appears to be pricing in a decent report showing gain of 145k jobs. This week the market saw a better than expected rise in private payrolls from ADP and an upside surprise tomorrow should help the market. However, we aren’t in the guess/gambling game. We’ll take our clues from our stocks and act accordingly. Panic buying and selling only nets you red in your portfolio. Stick with your market leaders and use their action to navigate the market waters. Remember, “thinking” in this game is a dangerous thing.

Cut your losses and enjoy the weekend ahead.

Wednesday, December 01, 2010

Stocks Jump on Global Economic News

“Simplicity is the key to brilliance” – Bruce Lee

Stocks turn in a big rebound as economic data in the US and China along with a positive Portugal bond offering help ease the fears of a European debt crisis. ADP Employment change was better than expected as its payroll survey showed an increase of 93,000 private payroll jobs. ISM manufacturing index edged down from October, but was slightly better than expected at a reading of 56.6. Mid-day a rumor of the US backing the IMF bailout fund for Europe pushed stocks to their highs only to have the rumor to be false. Stocks closed just off the highs of the day, but in line with the highs before the rumor mill picked up. Regardless, today was a positive day for the market as stocks jump pushing the NASDAQ above its April high.

Volume was lower, but there was a volume surge at the end of yesterday’s session skewing volume. Many funds have November year-ends and we cannot rule out some funds adjusting their portfolios heading into their year-ends. However, for much of the day the pace of volume outpaced Tuesday’s session which is a positive sign for the market. Like September 1st the first day of the month has been helpful to stocks and today was no exception.

Market leaders enjoyed today session despite some negative action a few yesterday. However, we stress we must pay attention to our own stocks and make decisions based upon their action. Your holdings are your most important decision making tool you have to gauge the market. Are your stocks going through “normal” corrections? IGTE is one of example of an abnormal correction where the stock took a dive to its 50dma on big volume. The stock was a leader until yesterday and its weakness carried forward into today’s action. If all our holdings acted like IGTE we’d be out of the market, but fortunately it was the only one despite the broad market sell-off. Stick to your stocks.

There are a few certain things in the market and that is you will never be able to OUTRESEARCH the big instiutions in the market. They have vasts amount of resources at their disposal to conduct research, it is best to follow their movement rather than to outdual them. Many traders feel they can outsmart the big boys as well as the market in general. Unfortunately, you will never outsmart the market despite all your efforts Accept the reality of the situation and it will only be then you’ll be able to become a successful trader.

A positive day for the stock market and as the greats like to say: the trend is your friend.

Stocks Jump on Global Economic News

“Simplicity is the key to brilliance” – Bruce Lee

Stocks turn in a big rebound as economic data in the US and China along with a positive Portugal bond offering help ease the fears of a European debt crisis. ADP Employment change was better than expected as its payroll survey showed an increase of 93,000 private payroll jobs. ISM manufacturing index edged down from October, but was slightly better than expected at a reading of 56.6. Mid-day a rumor of the US backing the IMF bailout fund for Europe pushed stocks to their highs only to have the rumor to be false. Stocks closed just off the highs of the day, but in line with the highs before the rumor mill picked up. Regardless, today was a positive day for the market as stocks jump pushing the NASDAQ above its April high.

Volume was lower, but there was a volume surge at the end of yesterday’s session skewing volume. Many funds have November year-ends and we cannot rule out some funds adjusting their portfolios heading into their year-ends. However, for much of the day the pace of volume outpaced Tuesday’s session which is a positive sign for the market. Like September 1st the first day of the month has been helpful to stocks and today was no exception.

Market leaders enjoyed today session despite some negative action a few yesterday. However, we stress we must pay attention to our own stocks and make decisions based upon their action. Your holdings are your most important decision making tool you have to gauge the market. Are your stocks going through “normal” corrections? IGTE is one of example of an abnormal correction where the stock took a dive to its 50dma on big volume. The stock was a leader until yesterday and its weakness carried forward into today’s action. If all our holdings acted like IGTE we’d be out of the market, but fortunately it was the only one despite the broad market sell-off. Stick to your stocks.

There are a few certain things in the market and that is you will never be able to OUTRESEARCH the big instiutions in the market. They have vasts amount of resources at their disposal to conduct research, it is best to follow their movement rather than to outdual them. Many traders feel they can outsmart the big boys as well as the market in general. Unfortunately, you will never outsmart the market despite all your efforts Accept the reality of the situation and it will only be then you’ll be able to become a successful trader.

A positive day for the stock market and as the greats like to say: the trend is your friend.

Monday, November 29, 2010

* Setting Euro Fears Aside The Market Rallies off the Lows of the Session

Stocks rebound as buyers step up and support the market

The market returned from a holiday shortened week greated by hefty selling as fears over deapening of the European debt crisis. Stocks hung around the lows after a steep sell off heading into the 10am hour. Even a positive Dallas Federal Reserve Manufacturing activity report could not hold off sellers from pushing the markets to their lows. Many leaders were holding up during the sell-off, a positive sign for the markets in general. Just before 2:30pm EST the markets found solid footing and pushed higher back to the day’s high and closing just off the highs of the day. Another positive move by the market bouncing off support and as market leaders continue to act positive the uptrend remains intact.

Market pundits have been pounding the table the market had reached a top. CNBC has been running articles on the market topping and we have seen the highs of the year. While this may be true, as no one person knows the future what we have in front of us says we will push higher. Market leaders remain positive and in control. Not too mention smalal caps are indicating strength and when small caps lead it signals traders are willing to take on risk rather than unload it. The moral of the story is to pay attention to the market leaders and their price/volume action.

In the early going the VIX jumped considerably as fears over a market collapse continued to put pressure on stock prices. By the end of the trading session the VIX index reversed its gains and closed lower indicating further decline in the index is instore. The VIX certainly indicated near capitulation type selling just without the volume. Panic selling over the European crisis is noteworthy, but the action at the end of the day is the most important indication of where the market wants to go.

This week is going to be a big week as far as economic reports. Tomorrow kicks off the week with the following reports: S&P Case Shiller, Chicago PMI, NAPM-Milwaukee report. The Fed’s beige book is out later in the week and CNBC’s favorite the Non-Farm Payroll report on Friday. There should be plenty of noise generated this week, but we’ll be focused on the market action and a laser focus on our leaders.

Tomorrow closes out the month and there will be talk about window-dressing in terms of the market action. We are looking for the market to build upon today’s move off the lows and push higher.

Sunday, November 28, 2010

Top Current Holdings, Total Return, And Date Of Purchase

I am currently fully invested in all of my regular accounts and my IRA. Don't forget to check out the 2010 Big Wave Trading Performance.

ticker symbol – total % return since first purchase – date of purchase

URRE 137% 10/26
MIPS 119% 8/20
RES 89% 7/13
JOBS 81% 8/16
SPRD 59% 8/27
GGAL 54% 10/19
TZOO 47% 9/28
CPWM 44% 11/15
XXIA 40% 8/31
FFIV 37% 10/22
IGTE 34% 9/17
AXTI 34% 9/20
ARUN 30% 8/27
TRS 30% 10/1
IVN 27% 9/14
CGNX 27% 9/24
FVE 27% 9/10
NSU 25% 8/20
MHR 24% 10/12
EPHC 24% 10/15
ACOM 24% 10/4
NNBR 21% 9/1
BIDU 21% 9/20
CWEI 21% 11/2

Friday, November 26, 2010

Performance of Big Wave Trading Ideas

Great performance, but an important lesson to be learned

Cutting your losses makes a big difference in performance and the following charts prove by riding winners and cutting losses you can outperform the market.

How profitable are trade ideas from Big Wave Trading?

Our batting average

Check out our Membership levels here and sign up here.

If you have any questions please email us at sales@bigwavetrading.com



A couple days ago I posted Josh’s YTD trade performance for all but 68 of his 2010 trades. Today I filled in the holes, which consisted of trades closing early in the year. Here are the results for all 614 of his trades YTD. Again, any errors are mine.

Note this confirms Josh’s long term average of 60/40.

I have also included a plot of the Gain/Loss percentage for each trade. If anyone ever doubted the wisdom of “keep your losses small” this should convert you. Going through the trades I was struck again by just how disciplined Josh is at following his sell rules, and how that preserves profits far more often than it results in missed gains.

I have always found it difficult to let my winners run. JH is a master, as this shows; his average gain is 33% with a standard deviation of 44%.

I find these results nothing short of remarkable. Awesome even. It is not a trivial matter to translate Josh’s trades into profit dollars in your own portfolio. But as I said before, there is gold to be mined here.

Thanks Josh and BWT! The CEO should give you a huge bonus :)

Tuesday, November 23, 2010

North Korea and PIIGS Weigh on Stocks as Volume Rises

Fears rise over PIIGS bailouts and potential war in the Korean Peninsula scare traders away from stocks

The markets were rocked with news out of the Korean peninsula where North Korea and South Korea fired upon each other. Futures weakened considerably throughout the early morning session as European fears continued to put pressure on stocks. A better than expected GDP results and a spike in the Richmond Fed Index couldn’t help push stocks higher. Volume on the NYSE rose much higher than Monday’s level where the NASDAQ only saw its volume barely above Monday’s level. Market leaders were largely positive, but overall the damage was done with the banks. Today’s action was not ideal, yet we were able to find support at the lows with a few leaders finishing in the green.

Panic certainly struck the market today as fears regarding Ireland’s bailout, but now attention is turning to other countries making up PIIGS. Spain is the real issue here whereby its bailout will certainly be the grand daddy of them all. It is surprising the European Union hasn’t set up a TARP like program to deal with its banking issue, but what really needs to occur is for governments to run surpluses with slashing entitlement programs. Many will cry foul and ask for bigger taxes, but increasing taxes does not solve the problem of insolvency. It is an easy equation and for it to balance out spending needs to be drastically cut. But, all of this, for our markets with leaders showing promise we may have seen one giant shakeout.

It is entirely possible to see the market roll over here and we’ll be very quick to cut our losses and push to the short side of the market. However, with the market showing support at the lows today along with plenty of leaders finishing in the green today it shows a positive direction for the market. Let’s not use “we are oversold” as an excuse for the market to go higher. We can certainly stay oversold for quite some time, but with the recent selling we should see a drastic reduction in AAII and II Bulls. Stick with the leaders and your stocks.

Tomorrow morning we are going to get a flurry of economic data the market will get a chance to digest. More importantly will be how the market reacts to this as well as any news coming out of Europe and the Korean Peninsula. Any further downside should throw caution to the wind and should get you on the defensive. Always be prepared and have a plan and as always cut your losses.

Friday, November 19, 2010

Reversing Course Stocks End the Day off the Highs but with Big Gains

Better than expected jobless claim figures and a big jump in Philadelphia Fed index pushed stocks higher. Volume rose across the board as traders rushed to get back into stocks. Late day selling did knock stocks off their highs of the day, but gains were plentiful and solid. Today’s action does go a long way in to bring back the current uptrend. Given the gains and volume it is highly probable the rally will continue.

The index I focus on is the NASDAQ and second would be the S&P 500. Outside of these indexes there really isn’t any other index I want to pay attention to. The Dow Jones Industrial average is an ancient index and using this index to put the market in correction is not something I would put much stock into. Recently, the Dow had 6 distribution days yet the NASDAQ had only suffered 3 days worth while the S&P 500 had 4. The leading indexes, NASDAQ and S&P 500 didn’t have the heavy distribution you normally see at a market top. If we do see distribution over the next few days it would signal major weakness, but for now the uptrend still lives.

Many are comparing our recent market with the April highs. Why not, it is recent history and we all tend to think history repeats itself. The major difference is the February through April run came off a 3 week 8% decline in the market. Our recent uptrend came off the back of a longer and deeper correction. Thus, the probability of a 5% pullback and the uptrend remaining intact is high. Perhaps we do roll back over, but until we get full sell signals in our stocks and the NASDAQ/S&P 500 pile on the distribution this uptrend will continue.

Well, my McClellan is still in oversold territory, but that will hardly mean anything if distribution creeps back into the market. One index did see a 17 point drop was the AAII Bull index while the index dropped to 40% while the bears jumped to 33%. Sentiment took a big hit and it isn’t out of the ordinary for a market to shakeout nervous bulls. Especially if sentiment gets out of hand like we saw over the past few weeks. The drop in Bulls does not guarantee we will rip higher over the next few days, but it is a good sign the shakeout over the last few trading days has cut down sentiment.

Tomorrow is an option expiry Friday where volume will be exaggerated in the early going. It’ll be important to see who the market reacts throughout the entire day as well as leading stocks. The most important thing would be to cut your losses short.

Wednesday, November 17, 2010

Late Day Volatility Brings Excitement as the Market Awaits GM’s IPO

Market leaders did little to inspire, but we held Tuesday’s low

The market did very little to calm the nerves of anxious bulls as the Dow closed slightly lower while the S&P 500 closed just higher. Volume ran lower across the board as the market was able to hold off from moving past Tuesday’s low. Closing slightly higher the NASDAQ fared better, but the index ran into a brick wall in the last hour as sellers slammed the index. A wild ride in the last hour made the day interesting and kept traders on their toes. We did see the market close off their lows, but overall the market lacked an impressive rebound after Tuesday’s heavy volume selling.

We may be oversold, but like the market was overbought we can see this market stay oversold for quite awhile. One thing is for sure, we have cleared the overbought conditions from the September 1st market uptrend. It all boils down to your stocks and what they are telling you. Are they giving you complete sell signals? Profit taking signals? Ignore the noise and hoopla from the financial media and focus on your stocks.

Much will be made of the GM IPO as it starts trading tomorrow. At this time we do not have a specific view on GM simply due to the lack of trading history. No one really knows how the stock will act, but it does appear most feel the stock will quickly sell off as the stock begins trading. Speculation is swirling around the company, but at least in its latest quarter it did not lose money on every car it sold. Wait for the stock to trade for a few days and set up a possible IPO base before jumping in. Despite your feelings on the bailout or how the car company has been handled it may present an opportunity to make some money.

If we are to move higher will need to see a better showing out of our market leaders. Today a few leaders did make a move higher, but there wasn’t a contingent of leaders pushing the market higher. It’ll be important for the market to have the leading stocks push higher like we saw on September 1st. Remember to cut your losses short!

Tuesday, November 16, 2010

Stocks Tumble in Heavy Trade As Fears over Economic Conditions Grow

European Debt Crisis 2.0 and Chinese Inflation strike fear in the market.

“If a tree falls in the woods and no one is around, does it make a sound?”

There were plenty of traders around to see the market make take a dive to close lower (NASDAQ) for the fourth straight day. Volume jumped across the board as traders feared the worse in the European Debt crisis 2.0 and Chinese worries over inflation. Late day selling tried to collapse the market, but buyers were able to push stocks off the lows of the session. Despite the last ditch effort the market still closed near session lows.

Investors Business Daily put the market into correction mode after signaling the market in correction. IBD has had a streak of bad luck when putting the market into correction mode. After putting the market in correction we saw the July rally and again in September. While leading stocks have been beat up pretty good after a few days worth of selling they still are holding their moving averages. Remember, taking profits, working a position is a wise strategy and if you failed to take profits on the way up you will not forget in the next rally.

The McClellan Oscillator has moved further into extreme oversold conditions. Remember, these conditions may last longer than you might think. However, the oscillator is about at the same levels we saw at the February, July, and August/September lows just before the market rallied. At the very least, we should see some sort of bounce from the market. Will it turn into a new run, that remains to be seen and quite frankly we’ll need to see some serious strength from leadership. Anything is possible, but panicking and selling out because you panic will only net you heart ache.

It appears many pundits are rushing to be the first to call a top in the market and get on the short side. This includes IBD, who I respect greatly and appreciate the information they provide and that I pay for! At any rate, we did suffer quite a bit of damage, but we have yet to see “the great unwind.” The market is the ultimate pricing mechanism, but speculating on what may happen is gambling. Take cues from your tocks and if they are flashing classic sell signals.

Stay prudent in this market and avoid panicking!

Monday, November 15, 2010

Volume Slides, but Late Day Sellers Push the Market to the Day’s Low

Merger Monday fails to spark buyers

Late day weakness left a sour taste in traders’ mouths as late day sellers closed out the market near session lows. Mixed economic data got the day started with a better than expected Advance Retail Sales figures surprised the market. However, a very disappointing Empire Manufacturing report did not help ease traders’ minds about the economic recovery. Volume ran light throughout the day with the exception of the early morning gap where the NASDAQ experienced volume running higher than Friday levels. At the end of the day we were able to hold Friday’s lows, but the late day selling suggests we have further to go on the downside.

Friday’s sell off did some damage, but left the S&P 500 with 3 days of distribution and the NASDAQ with only 2. Given the bullishness from AAII investors last week it is no surprise this pull back has gone as far as it has. The market is, at the moment digesting more than 10 week’s worth of gains and to expect the market to continue to rise is foolish. Remember, markets do not move in straight lines and history shows us little intermediate corrections will occur in market rallies. While we certainly could be seeing a top form we have yet to see the signs of a “top.” Right now, we are simply in an intermediate correction.

One indicator I have neglected is the McClellan Oscillator. Price and volume reign supreme, but the McClellan oscillator has been a decent indicator regarding oversold and overbought conditions. Keep in mind the oscillators including the McClellan shouldn’t be used in absolute terms but as a guide. Right now the Oscillator, depending on how you calculate it is in oversold territory. Oversold conditions can last much longer than you expect and May/June certainly proved this, but the current pull back certainly seems to be nearing an end. Whether or not a bounce will produce much remains to be seen, but for now we must be prudent investors.

We did see a few big cap technology stocks take a bit of a hit as sellers really took to these stocks as they have been leading the market higher. Even with heavy volume selling these stocks have held key long term moving averages. Intermediate pullbacks like we are seeing right now highlight the importance of buying right and not chasing including these big cap technology stocks. If you had chased these stocks you would be sitting on hefty losses and being forced to cut loose your positions. Staying disciplined is the best course of action.

Be defensive right now; keep any new positions on the lighter side until this market can prove its worth by pushing higher on volume. As always cut your losses!

Thursday, November 04, 2010

Stocks Rebound on Federal Reserve Announcement

The market responds positively to the Federal Reserves $600bn asset purchase plan

Big two market events down, one to go for this week. The Republicans stormed the elections with big wins in the House of Representatives, but failed to make a big push in the Senate. Even with a big Republican victory the market quickly turned its attention to the Federal Reserve’s Rate Decision. More importantly the market was looking for language specific to a fresh round of asset purchases from the Federal Reserve. Ben Bernanke and company announced a $600 billion ($600,000,000) round of buying of the long end of the curve. In true post Federal Reserve announcement action the market swung wildly as it tried to digest the news. By the end of the day the market closed just off the highs of the day with volume jumping above yesterday’s level and our uptrend remains intact.

For most of the session stocks spent a good amount of time in the red as traders feared asset purchases may NOT be as big as previously thought. Fear can lead you to mishandle your stocks and cause you to sell out too early. We have a strong trend with plenty of stocks moving higher. It is best to stick with them rather than to cut out of them too early. Today is a prime example you must stick with your winners until they begin to show signs of major weakness especially in a strong uptrend. Taking a portion of your position off to lock in gains is wise, but removing an entire position will cause you to sit out major moves in some big stocks.

A major hurdle today was cleared with the April highs with big volume. The market along with our leaders will continue higher with such a strong move today. If we do turn with leaders breaking down we’ll adjust accordingly, but all signs right now are pointing for this market to continue higher. Regardless of what you think about the Federal Reserve printing money or if we were pricing the market in gold the bottom line higher prices are to come.

The market will set its sight on the Unemployment release on Friday. Perhaps a worse than expected jobs report will bring on talk of Quantitative Easing part three, but at this point any is pure speculation. So far, this week we have seen the market move in a positive manor despite what we may have seen as headwinds. Friday’s number in the long run may not even matter with strong corporate earnings with the Federal Reserve and elections behind us. The key takeaway is our stocks are acting well, the market is acting well, and our stock leaders are continuing to show strength. Until this changes, all systems are go for higher ground.

Remember, always cut your losses short and ride your winners!

Wednesday, November 03, 2010

The Market Advances on Mixed Volume

Traders anticipate positive news from the mid-term elections and the Federal Reserve Rate Decision

Election Day is here and the market cheered its arrival. Volume on the NASDAQ slid higher while he NYSE volume skidded slightly compared to yesterday’s levels. Mid-term elections and the Federal Reserve were the talk of the market as many debated the effects we may see. Clearly the market was giving a vote of confidence today with the NASDAQ extending its gains. The one drawback was the inability for the NASDAQ to take out its April highs, but we did close just below those levels. All in all, a good day for the market and helped erased any doubt yesterday and last week may have brought.

Today was a great example of why opinions DO NOT MATTER in the stock market. Yesterday’s commentary was cautionary, but I highlighted the fact we need to focus on our stocks and not our opinions. Too many traders try to time the market perfectly and suffer great losses. Identify a trend and find the leading stocks and get long. Fighting a trend is a futile effort and will only lead to you losing more money. For example, in October Doug Kass was shorting stocks because the “rally has gone on too long.” If you stuck with Mr. Kass’ investment philosophy you have been beaten up as of late.

A big win was the move in small cap stocks as the Russell 2000 closed up 2.05%. Volume figures I won’t have available to later, but the move in small caps showed this uptrend more than likely has a lot more room to run. Small caps had been consolidating and lagging the NASDAQ, but today’s move was a good signal small caps are looking to make another big push.

The Federal Reserve’s key decision tomorrow has the dollar moving lower once again. Commodities have been flying as cotton has made another all time high. Sugar and coffee have seen decent runs as of late and with the Federal Reserve continuing to print more money commodities and stocks will continue to reap the benefits of money slushing around. Crude oil continues to push higher as it too as it benefits from the excess money. Clearly the dollar is in a downtrend as it continues to price in the Federal Reserve’s monetary accomodation.

Regardless of what is going in terms of news flow it is all about the stocks. So far we continue to see our stocks acting well and not giving us major sell signals. Of course, as a stock moves higher we want to take profits and to lock in gains. Stick with your winners and cut loose your losers!

Tuesday, October 26, 2010

Buyers Erase Early Losses as Volume Ends Mixed

Market Leaders continue strength

Early selling pressure quickly dissipated as buyers stepped up to push stocks well off their lows of the session to close positive. Better than expected Consumer Confidence and Richmond Fed Manufacturing Index figures fueled buyers just after the 10am hour. Volume ran mixed all day long with the NASDAQ volume running higher while the NYSE fell behind Monday’s pace. All the major indexes were able to close in positive territory, but the close lacked the buying surge we would have loved to see. Regardless, the move off the lows and with a few market leaders pushing higher the day was a positive one.

The NASDAQ gapped down taking out the 2480 level, but it wasn’t gone for too long. Case-Shiller pricing data was not perceived as a positive for the market stoking a bit of fear in the hearts of traders. Once 10am hit the NASDAQ was able to recover and leap frog the 2480, but found a new resistance level. 2500 level on the NASDAQ is playing resistance for now and we’ll need to see the index to push above with volume very soon to avoid the risk of rolling back over.

Market leaders are always important and most important to gauge the health of the market. At the moment our leaders continue to look strong and continue to build on gains. Our cloud computing leaders have even reversed course from their October surprise to turn positive. High fiving FFIV sprinted nearly 7% in after-hours trading after leaping almost 2% in the day’s session. FFIV was a stock that flashed a buy signal on Friday along with another cloud computing play. It is truly a positive signal for these types of move for the market.

A big mistake traders are going to make will be one of two things. Either they will sell TOO early or sell TOO late; it is ok to take profits off the table as a stock moves higher. It isn’t ok to sell off an entire position in a strong uptrend when you own a strong fundamental stock. If you do sell too soon do not hesitate to jump back on a leading stock. Often times traders make the mistake of not getting back on a stock they sold only to watch the stock blast higher. Be sure to take profits, but be wise and judicious on how you sell.

The market is set to continue its uptrend and without major distribution days and major market leaders crumbling it is hard to think we roll over here. In October when our cloud computing plays turned sour, they were able to find support at their 50dma. A good sign and now have reversed their course. If this market were to roll over we’d see more than just one group fall flat.

One group to continue to keep an eye on is the financial stocks. They continue to feel a tremendous amount of pain and for good reason. After a decade of poor management and excess leverage the filth remaining on their balance sheet will haunt them for quite some time. With that said, even small moves to the upside will help out this market and any sustained move will only support this market further.

Always keep your losses short and ride your winners!

Monday, October 25, 2010

Late Day Selling Throws a Dent in Day’s Gains

Good housing data fails to spark buyers, but stocks end in the green.

An unfortunate reversal at the end of the day leaves a sour taste in the mouths of traders. A better than expected existing home sales figures did give a temporary boost to prices, but it quickly faded as the market began its mid-day weakness. Volume ran higher on the NYSE all day long, but it wasn’t until the afternoon until the NASDAQ’s volume began to outpace Friday’s levels. The last thirty minutes of the trading session saw sellers dominate trading. Many leading stocks held up nicely, but a few did follow the general market. We did not see any major reversals from leading stocks as many remain very healthy. Not a great day, but our uptrend remains.

Over the weekend the G20 meetings did have a few notable headlines. In the grand scheme of things we only care about leading stocks and the price and volume action of the market leaders. If we were to pay attention to the noise coming from news outlets would only cloud our judgment and ruin our returns. It is very difficult to guess how the market will react to a certain situation, but if we focus solely on the market action and leaders we can avoid costly mistakes. We see too often traders try and “trade” news headlines and guess a new trend. It simply isn’t a wise move in this game.

We did see the 2480 level taken out, a level I had spoken about last week. Friday we saw sellers keep the NASDAQ from breaking this level even with a few leaders breakout out or getting support at major moving averages. Now the market is receiving headwinds at the 2500 level and this market will need to be able to break above and hold. And of course we’ll be watching April highs as the market approaches those levels.

Right now the NASDAQ has two days worth of distribution with a quasi stall day. Today can be classified as a stall day because volume was higher than Friday, but it was below the 50dma. The caveat is volume coming below average, but be aware if this market does flash another stall day or heavy distribution.

Tomorrow we’ll get another round of housing data from Case-Shiller and a reading from the Richmond Fed regarding manufacturing. However, more importantly tomorrow will be one week until the mid-term elections and continued talk about what it means to the market will continue. Do not pay attention to the noise, focus on the action of market leaders and the overall market!

Always cut your losses short!

Wednesday, October 20, 2010

Stocks Rebound from Tuesday’s Losses

Late day selling ends stocks off the highs as volume slows

Late day selling put a cap on the day’s excitement as stocks rebound from Tuesday’s heavy distribution day. All eyes would point to the Federal Reserve’s release of its beige book at 2pm EST. Prior to the release the market was able to build upon its gains as it moved higher. Volume simply couldn’t keep up with Tuesday’s pace ending lower across the board. The end of the day selling certainly did not inspire confidence, but a few after-hours earnings reports helped soothe any pain. A nice recovery, but we’ll need to see the market flash more accumulation.

NFLX earnings and its subsequent push in after-hours trading gave a cheer to traders. The stock continues to be a favorite of shorts due to its “valuation.” The biggest winners of all time tend to have a high valuations are due to the demand for the stock. Regardless, NFLX stock is a true winner and continues to be a top stock. NFLX is looking to follow in GOOG’s footsteps post earnings release and avoid an AAPL like day.

Another darling in after-hours trade was EBAY as the stock shot up more than 7%. After-hours trading can be misleading, but with EBAY posting strong numbers the stock will look to move along with NFLX. Although its quarterly report didn’t come close to matching NFLX’s growth the report was strong considering the size of EBAY. The NASDAQ will get a boost from EBAY and NFLX

The market remains in an uptrend even with Tuesday’s distribution day. Despite who CNBC parades through their studios or who Bloomberg throws on the radio we have a viable uptrend. History suggests bull markets do not last longer than 18 to 24 months, but for now this rally from March 2009 can still go higher.

From a historical perspective, one our members have heard is we are likely heading for major headwinds over the next 6-12 months. Despite what Ken Fisher or other bulls may squawk about mid-term elections it is highly likely we see a correction of more than 20%. We could even delve into a 1940 to 1942 type market where we simply roll over and take out our March 2009 low much like the 1942 took out the 1938 low. Anything is possible, but for now we are focusing on the long side until we begin to see more “topping” signals from the market.

This market will more than likely push higher, but remember to always cut your losses!

Saturday, October 16, 2010

Top Current Holdings With Total Returns And Date Of Purchase

Long 56 stocks 98-100% invested on full margin. All longs listed were posted on the website before being purchased for subscribers of the silver, gold, and platinum packages under the ‘new longs’ section.

stock symbol – total return – date of purchase

JKS 138% 7/13
LCUT 126% 11/2/09
LGL 101% 9/8
RES 60% 7/13
JOBS 56% 8/16
MIPS 51% 8/20
ISLN 36% 8/31
ASYS 34% 9/1
CHTP 29% 9/3
SOL 27% 9/14
IVN 26% 9/14
NSU 24% 8/20
XXIA 22% 8/31
SPRD 22% 8/27
CGNX 18% 9/24
UFPT 18% 9/15

Friday, October 15, 2010

Bank and Education Stocks Weigh on Stocks

The market side steps a distribution day consolidating recent gains.

New banking fears helped push stocks lower, but a late afternoon buying spree lifted stocks off the lows of the session. Today’s consolidation was not out of the ordinary considering the move in equity prices, but the late day buying did help ease any worry. Education stocks once again were hit hard after APOL had some tough news for the market to digest. Banks and education stocks were the leading cause of the equity decline today even as volume came in lower across the board. The market was able to avoid distribution with volume sliding lower on the day. A great day of consolidation for the market showing this uptrend is quite healthy.

The real story was in after-hours trading with GOOG stock jumping around 9% after the company reported its quarterly results. We can get into the positive news out of the company like a rise in paid per click but the true test will come when the stock trades tomorrow. Will the stock gap and run? Yesterday we saw a few stocks gap and reverse like JPM, IGTE, and ADTN. GOOG on other hand has been a stock beaten up after earnings reports as of late. The strong posting in earnings is a positive sign for technology stocks.

Once again our financial stocks have a new fear to get over. The foreclosure crisis is just another step in our banking system deleveraging a system riddled with fraud and illegal behavior. Removing the excess leverage in the system is uncovering many naughty secrets from the housing boom of the last decade. When the government swooped in and saved the banks it kicked the can down the road rather than dealing with everything up front. We can equate this to taking off a band-aid, when the government stepped in it essential was stopping the band-aid from being ripped off. Now, we are dealing with a slow wrenching pain. Regardless, banks continue to look weak and not a sector we’d entertain, but they do weigh on the overall market.

It is quite impressive given the education stock debacle and foreclosure crisis the market was able to avoid a day of distribution. Normal corrections during an uptrend are to be expected, but we are far from what is normal and to see the market shrug off this type of fear is good news.

This uptrend is very healthy and we continue to find more stocks breaking out of bases it is hard to think this market cannot go higher. Stay focused and enjoy the weekend!

Thursday, October 14, 2010

Zoll Medical Corporation: Strong Growth in a Growing Medical Equipment Market

As per their website Zoll Medical is a leader in medical products and software solutions, helps responders manage, treat, and save lives in emergency rescues and in hospitals; outside the hospital while at work or home; in doctors' and dentists' offices and schools; in public places and on the battlefield. ZOLL's products contribute to managing patient care and savings lives, as well as increasing the efficiency of emergency medical, fire and hospital operations around the globe.

When we look at the recent growth in EPS and sales for Zoll Medical (ZOLL) we can see that their products are clearly in demand. During the past two quarters YOY EPS growth has been 113% (.17 compared to .08) and 271% (.26 compared to .07). Sales growth during the past four quarters YOY have increased 2%, 18%, 15%, and 17%. Even better, 2010 and 2011 EPS estimates are for gains of 89% and 38% respectively.

The company also carries 0% in debt, has a Return on Equity of 3%, an EPS growth rate of 32%, and a cash flow of $1.34. Zoll Medical definitely has strong growth and sound financials.

Stocks do better when they have other stocks in their industry group performing well on a RS basis. Nxstage Medical (NXTM), Dexcom (DXCM), BSD Medical (BSDM), Tearlab (TEAR), Synergetics USA (SURG), CAS Medical (CASM), Hill-Rom Holdings (HRC), and Cephid (CPHD) are just some of the stocks in the Medical-Systems/Equipment industry group that carry RS ratings of 80 or higher. So this is just one more item in favor of Zoll Medical moving higher.

Recently mutual fund ownership has started to increase again from 94 funds in the most recently reported quarter from 90 the quarter before. However, four quarters ago the stock did have 102 funds invested in it. That is OK, since we do have growth in the most recent quarter.

While these numbers are impressive for Zoll Medical, the most important aspect is the chart. Is the stock in an uptrend and under accumulation? Yes. Since that is the case we need to find a good low risk high reward entry. On that end the move on Thursday is definitely what I was looking for.

The stock bounced off recent support on strong volume with the stock breaking above the short-term downtrend line. The stock also closed very near the HOD indicating the buying should spill over to Friday morning. The purchase price for me is the 33.41 close on Thursday.

This is a great stock with strong fundamental growth and a bullish chart under accumulation. With the market being in a current uptrend thus putting the odds of purchasing this stock well in our favor, Zoll Medical will be a new purchase for me on Friday.

If the stock does not move higher immediately, I will be cutting my losses—protecting my hard earned capital—with a close below the LOD of Thursday (32.25).

Disclosure: Long Zoll Medical (ZOLL)

Stocks Slide in Last Hour of Trade, but End Higher on Volume

Current uptrend logs another day of accumulation

Late day selling dampened the mood, but an overall positive day in the markets. Volume jumped across the board as the market mostly cheered about positive earnings reports and tepid inflation readings. Import prices were relatively in-line with expectations despite the overwhelming talk about the Federal Reserve second round of monetary easing. The late day selling is not surprising considering the move in the markets, but the action from stocks post earnings reports leaves a sour taste in the mouth. Even with the weak close the market is still in a solid uptrend.

The weak close suggests we may see a pull back tomorrow. The chances are good we see the market take a breathier. Consolidation is a necessary process for the market to undergo as we simply cannot go straight up. These periods can last a few hours in rare cases to a few days. As long as we do not see market leaders collapse and distribution the resting period is quite normal action. Pay attention to your stocks, if they begin to weaken take notice and make sure you are taking profits.

The earnings curse once again hits this quarter with JPM, IGTE, and ADTN reversing after seemingly good earnings reports. JPM stock is far from one we would like to be long, but the action in IGTE and ADTN both leaders are slightly troubling. Both were able to find support at their 50dma, but their charts are now damaged. It will take some time to repair the damage done today, but it isn’t something we would want to stick around to wait for. We’ll need to see the stock tighten up and form another base before we would get long.

Another big deal of the day was AAPL stock hitting the $300 market. The stock was able to hang onto the mark as the company said it would release a new operating system. AAPL stock has been a stalwart of this market rally and has yet to suffer any major setbacks. If this market is to go higher, we’ll need to continue to see strength in the market.

In a surprising move a deal for YHOO stock surfaced after-hours pushing the stock higher by 13%. The move will certainly help the NASDAQ tomorrow, but the question will be if the rest of the market will respond positively to the bid for a beat up technology stock. On the other hand you have ORCL posting a strong day without a takeout rumor. Ideally, you want to own a stock that is strong and not guess whether or not the stock may be taken out.

Be mindful of your losses, always cut them short.

Top Current Holdings With Total Returns That Closed Higher Today: JKS 140% JOBS 65% LGL 64% RES 57% MIPS 47% SOL 41% ISLN 31%, IVN 30%, NSU 24%, CGNX 21%, XXIA 21%, GBG 20%

Thursday, September 16, 2010

Jobless Claims Drop Along With Volume as Stocks End Mixed

ORCL Posts Positive Earnings as the Stock Jumps After Hours

Today was another day of gains in the market with the NASDAQ closing higher for the 10th time in the last 11 sessions. Early going the market was given a dose of good news with Jobless Claim figured showed a claims fell more than expected. However, buyers weren’t excited as the market pulled back in the morning, even with the Dow finding green territory. Volume ran lower throughout the day as sellers didn’t gain much traction. Small caps pulled back and underperformed noticeably, but with volume coming in on the light side it hasn’t become a glaring red flag. While the crowd continues to look for a pull back this market continues marching higher.

AAII sentiment survey showed Bulls jumping above 50% while Bears dropping below 25%. The shift certainly highlights the need for consolidation in the market. While the sentiment survey isn’t a sell signal it can signal turning points. However, with the market off its lows and still well off the April highs the survey shows how jittery the crowd can be. Back in August we did see the survey along with the Investors Intelligence survey show bears at max levels indicating an intermediate low. Remember, sentiment survey’s aren’t meant to be “indicators,” but reference points.

If you read financial websites and other pundits most will let you know about obvious resistance levels and overbought conditions. We are more concerned with our stocks. Normal corrections or pullbacks happen and are a part of any uptrend. Many will sell out of positions well before ultimate tops and lose out on big gains. With so many top quality stocks continuing to act well it is not likely a pullback here would lead to new lows. In fact, a pullback may offer secondary buy points. Let the stocks guide you rather than opinions about the market.

Tomorrow we have options expiry and most certainly push volume higher. Friday’s action will certainly be helped out with ORCL’s earnings. In after-hours trading ORCL jumped 4.6% after posting better than expected earnings. Revenue jumped to $7.59billion when compared to $5.06billion a year ago. The jump was welcomed by the market and should continue into tomorrow’s market.

Keep in mind chasing stocks away from a proper buy point will only increase the odds you being shaken out of the position. A huge benefit you get from Big Wave Trading is we do not chase stocks and buy properly keeping the emotion out of trading. Always cut your losses short as huge losses are very difficult to recover from.

This economy has been tough for many Americans. While government figures point to unemployment just under 10% other statistics show unemployment in the double digit range. Unfortunately, this has forced many Americans to tighten their belts, but there is something you can do! Take charge of your financial future with Big Wave Trading. Email us at sales@bigwavetrading.com

Top Current Holdings With Total Returns Since Purchase Up Today: JKS 128%, LCUT 137%, RDCM 59%, ISLN 21%, MMYT 20%, QLIK 15%