Wednesday, February 29, 2012

Bernanke speaks as stocks reverse hard closing out the Month

Big volume throughout the day signal a distribution day across the market making the count up to four for the NASDAQ. Four distribution days is certainly a cause for concern and after today’s reversal on big volume it does call into question if a correction is on the horizon. Market pundits certainly had a field day with Ben Bernanke’s testimony in Washington, DC today. But, the day’s action more than likely had much more to do about money managers’ allocation strategy than anything else. Speculation about the why is just that, but what is more concerning to us is the price action of the market. Today’s action was certainly another blemish on this uptrend under pressure.

It really is no surprise this uptrend would come under pressure at some point in time. This is not something that surprises us. Given the move since the day after Thanksgiving 11/25 and the 10/4 rebound a bit of rotation out of the uptrend’s leading names is expected. Mutual funds continue to raise cash for redemptions, but after 3 month run in the market they are likely to take gains off the table. A quick 3-5% correction is not out of the question here. The most important action is to make sure you are staying disciplined in your portfolio by cutting laggards and sticking with winners.

Gold and silver took it on the chin today with the dollar pushing higher. Perhaps Bernanke’s comments spooked traders or not the push lower was quite entertaining. Some are blaming a large quantity of Treasuries coming to market causing the big declines. Whatever the case may be what we have in front of us are precious metals giving up sizeable gains after breaking out. Caution is certainly warranted.

It is anyone’s guess if this market has indeed topped. Like I said in last night’s commentary, there are quite a few looking for a top. Stick to your plan and do not let opinions and thoughts from others plague your ability to execute your trading plan. Cut those losses short.

Monday, February 27, 2012

Stocks find big support; PCLN books after-hours gains

Warren Buffet’s CNBC interview was not well received by the futures market as the market was shaping up to open lower. While I don’t think nor care if Buffet was really pushing the market lower pre-market what I do care about was the market’s ability to find support. A rush of support showed up just after the first fifteen minutes of trade, just as the market appeared to be taking a swan dive. Volume jumped on the day finishing above Friday’s level showing a few institutions joined the party today. It was important to see the market find support at the lows and now we need to see the power behind this potential move.

CNBC can’t get enough tossing headline after headline of asking if this market is tired or not. We have tools to alert us to potential trouble and it isn’t guess work. Using distribution counts we can see whether or not a market is heavy and due for a potential BIG correction. At the moment the NASDAQ has three distribution days and it is not at a point where we are going to sound the alarms. A few more distribution days and/or stalling days would certainly raise high alerts. Do not guess if something is about to occur, always react to the market and its clues. Stay disciplined and stop the guess work.

PCLN was a big winner in after-hours trade after the company beat sales and revenues. Guidance for the first quarter was higher than expectations and the market rewarded the company nicely. The stock now joins GOOG at the $600 level a big priced stock with growth is very hard to come by. Yet again another growth stock posts better than expected earnings. Let’s not forget many stocks took the plunge in October as many took down estimates allowing for comfortable beats here.

The market remains in an uptrend and no matter your opinion on the health of the trend…it remains up. You are not smart enough to know precisely when it will end and if you do I have some south Florida real estate to sell you. Always and I mean always cut your losses short.

Saturday, February 25, 2012

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading margin and retirement accounts remain fully invested. There have been two distribution days in the Nasdaq in the past week but the selling has been orderly. While we remain cautious on new positions with the market in a non-stop uptrend, we continue to ride the trend higher. We do not know if the market will or will not pullback. We can only prepare for both outcomes. If the market begins to pullback we will continue to sell laggards and look for new leaders. If new leaders do not appear then we know there are problems with the underlying market. As of now, every time we sell off a laggard we are presented with another leader giving a legit BUY signal. As long as this occurs, Big Wave Trading will remain fully invested flipping out the laggards and using that capital to invest in the new leaders. While a pullback seems like the appropriate and necessary thing for the market to do, we know the market usually does the opposite of what we want. Therefore, if the rally continues without a pullback, we at Big Wave Trading will not be surprised and will just ride the wave.

Top Current Holdings – Percent Return – Date of Purchase

IRE – 52% – 1/12/12
KORS – 47% – 1/17/12
MOTR – 46% – 2/2/12
LCAV – 46% – 2/13/12
FFN – 35% – 2/7/12
UMDD – 34% – 1/5/12
YINN – 34% – 1/5/12
RENN – 34% – 1/11/12
FAS – 28% – 1/5/12
TNGO – 28% – 2/3/12
CRMT – 28% – 11/30/11
RF – 28% – 1/5/11
VNET – 25% – 1/10/12

Thursday, February 23, 2012 Dazzles in After-Hours as Stocks Close higher

Volume rose on the NASDAQ as the index was able to find its footing again. The S&P 500 had a good day, but volume continues to be below average a sign institutional investors continue to stake out in NASDAQ listed stocks. Jobless claims fell more than expected and the Kansas City Manufacturing index rose more than expected. A few positive signals from an economic stand point certainly didn’t hurt the market today. in the after-hours session CRM posted positive earnings sending the stock higher by 10%. The cloud computing space is making a bid to become a leading industry again. The end of day surge into the close was another positive signal for this market and we continue to remain in an uptrend.

It is Thursday so we have a look at the release of the AAII sentiment survey as well as the II survey. Yes, these are released on Wednesday, but AAII does not become available to me until today. In the AAII survey we see both Bulls and Bears edge slightly higher, but nothing major in terms of a sentiment shift. There continues to be a bullish tint in investors’ attitudes towards the market, but it is not a surprise given the recent run-up in stocks. Only 51% of II survey respondents are bullish despite the recent run up. Extreme sentiment levels come when the II survey posts 60% or more. Perhaps we’ll get there soon, but for now sentiment isn’t at extreme levels where a possible major pullback could occur.

The NASDAQ does have 3 days of distribution and is something we’d get concerned with if we do see a major distribution day soon. However, concerning ourselves “if” it happens is silliness. We are discipline and react to the situation. Many times guessing is based upon a hunch or fear which rarely works out in your favor. Staying disciplined and following your rules will ensure your survival! Stick with it and follow rule #1.

Enjoy the weekend ahead!

Wednesday, February 22, 2012

Small caps lead the market lower; Volume slips again

Another quiet day on Wall Street where stocks close near the lows of the session, but volume falling below yesterday’s level avoiding a day of distribution. We did receive downbeat news from the housing sector sending homebuilders lower. Gold (GLD) and silver (SLV) continued to add to their gains today showing the precious metals believe in continued expansion of central banks’ balance sheets. The close was somewhat disappointing not being able to lift off the lows of the session, but with volume really light institutions weren’t selling stock in droves. We continue to consolidate the most recent gains, but we would like to see a bigger push by leaders to emerge from this consolidation.

Existing home sales did disappoint today, not badly, but enough to send home builders much lower today. XHB – the homebuilder ETF was down 1.46% today after the news. It is important to note the homebuilding stocks have been what have led this most recent rally. To see the group struggle certainly signals a possible rotation by the market or worse a top. While we can’t predict tops, or rotation it is best to stock to a sound trading discipline to avoid confusion. Stick with the rules.

Outside the XHB, GLD and SLV took center stage moving higher. Yesterday, the precious metals performed very well and today the group continued yesterday’s strength. Continued strength in precious metals certainly hints at continued expansion, better yet money printing by central banks. Typically, when precious metals rise in the case of balance sheet expansion stocks rise along side the precious metals. Central banks do not have any more ammo other than to print money and they will do so until the system breaks or they are successful. Either way, easy money translates to higher asset prices.

Remember to always cut your losses short.

Monday, February 20, 2012

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Market Model remains under a full BUY signal. This buy signal was signaled on 1/5/2012 and has not had a change since. The distribution day had zero effect on the model and thus being fully invested on the long side continues to be the mode of operation. Big Wave Trading will continue to ride its winners higher while selling off any new long that does not trade higher immediately. The capital raised from selling these losers will continue to find its way into new longs and current winners as long as the model remains under a full buy signal. A string of 3-4 distribution days in 2 weeks would no doubt, following the non-stop uptrend we have had, throw the model into a neutral position until the next follow-through day or BUY signal is alerted. We are ready for a pullback at anytime at Big Wave Trading. We do not know if a pullback will be the start of a new bear market or a pause for the rally to continue. Based on the very heavy and clear accumulation in multiple stocks across multiple sectors, an upcoming FB ipo, and the more than likely event of QE3, we do believe any pullback will lead to better buying opportunities as we come upon the bullish months of March to May. However, Big Wave Trading in no way project these opinions into our trading methodology. If the market rolls over, instead, on huge volume, with multiple leading stocks breaking down everywhere, you can be sure we will not be waiting to buy stocks and will instead be short the market. This is a very strong market and trends can last longer than shorts can stay solvent.

Top Current Holdings – Percent Gain (Non-Margin) – Date of Signal

FFN – 58% – 2/7/12
IRE – 56% – 1/12/12
KORS – 49% – 1/17/12
MOTR – 41% – 2/2/12
RENN – 41% – 1/11/12
YINN – 39% – 1/5/12
UMDD – 34% – 1/5/12
RF – 32% – 1/5/12
FAS – 29% – 1/5/12
JKS – 28% – 1/27/12
CRMT – 27% – 11/30/11
DVR – 25% – 1/13
LNKD – 25% – 1/19

Wednesday, February 15, 2012

Nasty Intraday Reversal Led by AAPL Sours Uptrend

Positive economic data helped set the tone early for the market. Empire manufacturing and the Home Builders confidence survey both came in better than expected. By noon, the high of the day was set and AAPL’s roll over pushing stocks lower. Volume jumped on the day over on the NYSE giving the S&P 500 another day of distribution. The magnitude of the roll-over gives the NASDAQ a distribution day, but it is only the second day. AAPL was the big disappointment of the day with GIGANTIC volume the stock has run into major resistance and does spell a bit of trouble for the market overall. While one day doesn’t make a market we are certainly on watch with this uptrend, this type of action is not what you want to see.

There are many reasons to like AAPL as a company. The stock is much different than the company itself. Removing emotion and opinions the move in AAPL today does resemble a possible top. Let the hate comments begin! In all honesty, it is too difficult to say AAPL’s run is completely over, but for the time being it appears the upward momentum has come to a halt.

It will take more than one day to knock this market off its kilter. Cluster in a few more distribution days it would certainly mark the end of the rally. A more likely scenario is a 3-5% pull back to digest all the recent gains we have seen from the market since December. One quick look at the QQQs and this rally has been non-stop! A normal reaction to this move is certainly warranted. If you have an exit strategy in place you already know what you are going to do. If you do not, the big question is why you haven’t put one in place. Get one.

Stay the course and stick with the game plan. We have had a nice run and perhaps it is time we see a pullback. What happens is anyone’s guess, but with a plan we’ll profit from it.

Monday, February 13, 2012

Barron’s Declares Dow 15,000 and Stocks Respond Closing Higher

Leading the way Small Cap stocks closed higher followed by the NASDAQ. Volume fell across the board, but coming off a weekend it isn’t entirely surprising volume was off. AAPL pushed through the $500 level for the first time. Another stock hitting $500 was ISRG; two big growth stocks hitting big milestones is a positive sign for the market. While volume wasn’t impressive across the board select stocks saw plenty of volume. Institutions certainly targeted a select few today and despite the overbought conditions this market continues to motor higher.

Besides AAPL and ISRG another stock making a splash was PCLN. The stock has been stagnant for quite some time. For almost a year the stock has been unable to gain much traction, but the move today is certainly a good one with volume up more than 75%. The stock is set to release earnings on 2/27. 2012 estimates have been coming down, but given the move today it appears there is a bit of excitement prior to earnings.

Riots in Athens were broadcasted throughout the world. The markets certainly cheered the passage of the new, new, new austerity bill, but a few folks in Athens weren’t in agreement. I just wonder if Greece will uphold to the agreements they have put in place. My money is they will not meet the austerity guidelines. We’ll be back again where we’ll be hearing another round of haircuts until 99.99% of Greece’s debt is liquidated. If other countries haven’t taken notice they should. Take the initial pain of the budget cuts to be better off later. We are going on year two of the crisis; it shouldn’t have taken this long.

After-hours Moody’s put a few Eurozone nations on negative watch. France was one of the countries and is a big deal. France and Germany have been the two countries financing bailouts. If France’s borrowing costs it will be increasingly difficult for France to support bailouts of the rest of the Eurozone nations.

Despite the Eurozone woes our uptrend continues higher. All the shenanigans going on across the globe really are just a discussion point. Even the cover to Barron’s is a discussion point. Perhaps we’ll look back and say today was the top or we won’t. While it would be fun to call the top, we’ll let price and volume dictate our actions.

The trend is our friend and until it breaks we’ll ride it. Cut those losses short.

Saturday, February 11, 2012

Big Wave Trading Portfolio Update And Top Current Holdings

Big Wave Trading Margin and IRA accounts remain nearly fully invested (85%-95%) as our Market Model remains under a full BUY signal. That signal was triggered on 1/5/12. Big Wave Trading is currently watching the current pullback to see if it will result in a short-term top or a normal pullback that will lead to a resumption of the current uptrend. As of Friday, there are no distribution days to signal that anything more than a pullback is occurring. Big Wave Trading will use this pullback to sell off any stock showing a loss or any stock lagging the overall market by a significant degree. The money raised from selling our laggards will be deployed in new long positions or current long positions accordingly as they arise. If the pullback gains steam and distribution days mount, measures will be made to raise cash as indicated via our Market Model as it switches to NEUTRAL or SELL.

Top Current Holdings – Percent Gain (non-margin) – Date of Signal

FFN – 51% – 2/7/12
IRE – 51% – 1/12/12
JKS – 37% – 1/27/12
MOTR – 49% – 2/2/12
RENN – 34% – 1/11/12
YINN – 30% – 1/5/12
UMDD – 26% – 1/5/12
RF – 25% – 1/5/12
FAS – 24% – 1/5/12
HK – 22% – 1/9/12
LNKD – 21% – 1/19/12

Thursday, February 09, 2012

Greeks Agree to Austerity; NASDAQ Leads, but Small Caps Lag

The big news of the day was the Greek’s finally were able to come to terms on a new, new, new austerity agreement. Yes, another plan they will fail to deliver on. Volume ended the day mixed as NYSE volume slid underneath yesterday’s levels as NASDAQ volume jumped nearly 10%. AAPL was a clear winner today with their announcement of the iPad3 set to hit store shelves during the first week in March. Small cap stocks did not fare as well today closing in the red; one small blemish on the day. We continue to power higher in the market and the NASDAQ continues to see signs of accumulation. Today was another reminder to avoid fighting the trend.

Sentiment is getting a bit frothy according to the most recent AAII sentiment survey. The Bulls stampeded to above 51%. A level that is quite extreme while the bears finished above 20. Bears didn’t set a new low for this uptrend, but certainly the number of bulls set a new high. Is this “the” top in the rally? It is anyone’s guess given the amount we have run and not to mention the number of bulls. With that said, we still have plenty of stocks looking good and solid accumulation to make us believe we can continue higher.

This uptrend now has a few blemishes that could stall this rally. This does not mean it ends the uptrend completely, but it does signal we could see a quick shake out. So far, we see 1-2 hour shake outs only to power higher. Small caps were certainly a blemish, but today’s breadth was weak considering the market move. NASDAQ breadth favored decliners rather than the advancers today. Normally, an update will sport many more advancers than decliners. New highs continue to be healthy and be a positive force for the market. Given the number of stocks over respected moving averages and breadth weakening it would appear something amounting to a shakeout will occur shortly.

I could be wrong and we never see a shakeout, it is precisely why we react to price moves rather than anticipate them. Our success depends on our ability to react to price changes rather than guessing or anticipate a move. No one individual is that smart and can hit turns in the market often. Don’t anticipate the move, go with it and react as it happens.

Have a great weekend.

Tuesday, February 07, 2012

Stocks Close in the Green Again; Uptrend continues

Just another day in this uptrend as stocks close higher on the day recovering from early morning lows. Volume rose on the day showing institutions had an appetite supporting the market on the morning dip. It is truly amazing this market is on, a straight line to multi-year highs from what appeared to a market heading for fresh bear market lows. For now, it appears the market is more focused on the Fed’s printing presses than any country from the European Union defaulting. Stop fighting the trend as it has been very painful for those who have been.

Yes, the market is “overbought,” but it has been for quite some time. Sentiment has come down off its highs as of late, so the crowd is anticipating some sort of pullback. Anticipation is a problem if you act upon a hunch. It will lose you money either by missing out on a move or compounding your losses. While it is true we are overbought, the market can continue higher. We have defined rules for exits and until those are met, we’ll stay long.

It will be nice when Greece finally defaults. The past few weeks every morning and night headline has Greece “close” to a deal with its creditors. Just get it over and done with, they are going to default one way or another. Greece has not shown it can stick to any terms it has promised, why even bother with a new set of terms? In the end, Greece cannot pay for its obligations and liquidation needs to occur. This is a painful process for those who are dependent on the government and it will take time for it to resolve itself. Trading off this situation is too difficult; we’ll stick with the trend.

A dangerous tactic here is chasing. It is never wise paying up more than 5% beyond a proper buy point. Often time stocks will reverse shaking out weak holders and late buyers. At this juncture and with the amount of stocks extended it would not surprise me a few of them shakeout weak hands here. If you do chase, make sure you are lightning fast cutting the position if it turns against you.

Stay disciplined and cut those losses.

Monday, February 06, 2012

Stocks Finish off the Lows as Volume Drops

Settling near the highs of the session stocks put in a solid day of consolidation. Volume fell more than 20% across the board, a very good sign institutions weren’t selling. After such a big run up, a day or two of consolidation is a very healthy signal. Crude oil settled lower, but natural gas is in the midst of forming what it appears to be a bottom. While a positive sign for those drilling for the natural resource, but not a particularly good sign for consumers. At the end of the day, we saw a very positive signal out of the market and we continue to ride this uptrend starting at the beginning of this year.

Another few days of the market pulling back would do us some good. 88% of stocks are above their 50 day moving average. Normally, at these extreme levels we do get consolidation. Does this mean you act upon thinking a pull back is about to happen? No, pullbacks are apart of the market and we welcome them as we live within this uptrend. If big volume selling takes place we’ll start taking a different tone, but for now, we stay the course and execute our game plan.

BAC continued its tear leading the Dow Jones Industrial average higher. Financials continue to perform well despite the negative press. It is nice to see banks perform well; they tend to lead the market higher in new uptrends. WFC and PNC are two other stronger BIG banks doing well. A bit of consolidation for the bank stocks around their respective 200 day moving averages would do them a bit of good.

NFLX and GMCR two former top quality stock All-Stars continue to mount comebacks. We are seeing quite a few of these old names like AKAM and CSTR come back to life. DNDN is another former high flyer coming back to life. As always, sound money management is a must and cutting losses should not be avoided at any time. Even these former high flyers coming off their lows are not exempt from the plan.

Solid start to the week and would not be surprised if the market continued pulling back. The uptrend remains strong and there is no reason to think otherwise.

Saturday, February 04, 2012

Big Wave Trading Portfolio Update

Big Wave Trading remains fully invested in all margin and IRA accounts. Big Wave Trading has been fully invested since the full BUY signal was generated on 1/5/2012. While many traders/investors tried to deny the uptrend as just another suck out our model told us to expect more via the price and volume action across a myriad of stocks across multiple sectors. The past week the market finally took off and our long positions were rewarded greatly. We at Big Wave Trading could care less how much the market moves up from here. We know that we can not control the gains. We can only control how much we lose in the stock market. Therefore, if the trend persist, we will continue to sell stocks underperforming and move the bad cash to good stocks outperforming the market on a Relative Strength basis. We do not get emotionally involved with gains at Big Wave Trading. We could care less. It is simply doing the process right that gives us the pleasure. Being right is meaningless. Getting rich is meaningless. It is the process that allows us to be right and get rich that matters. The most important ingredient in this process is cutting losses fast. Big Wave Trading never holds losers. If the stock is losing money, we sell it and move on. No questions asked. Big Wave Trading’s win/loss ratio is at a point that we could be right 10% of the time and still not lose money as we refuse to lose 1% of our total account value in any one trade. Losing is not an option. Winning is the only goal. We will continue to stay fully invested until poor action among leading stocks (Relative Strength basis) and distribution days start to litter this market. If many distribution days occur, the Market Direction Model will switch back to NEUTRAL and possibly switch to SELL. Switching to a sell signal depends on the amount of distribution days and time frame in which they occur. We do not expect that to happen any time soon but expectations are resentments waiting to happen. Therefore, we remain completely agnostic towards the future. We are prepared for a continuation of this uptrend, a top, or possible consolidation. All game plans for each outcome have been analyzed and our ready to be used accordingly.

Top Current Holdings – Percent Gain (non-margin) – Date of Signal

IRE – 64% – 1/12/12
YINN – 37% – 1/5/12
RENN – 35% – 1/11/12
FAS – 28% – 1/5/12
UMDD – 28% – 1/5/12
RF – 24% – 1/5/12
DVR – 23% – 1/13/12
MOTR – 23% – 2/2/12
RAM – 21% – 1/9/12
RGR – 20% – 1/5/12
VNET – 20% – 1/10/12
RATE – 20% – 12/28/11

Thursday, February 02, 2012

NASDAQ Closes off its Highs as Volume Slides, but Above Average

The market ended off the highs of the session, but with volume coming in lower we avoid a day of stalling. Russell 2000 small cap index raced higher tying the NASDAQ composite for the top index of the day. Interestingly, enough both indexes have yet to have the golden cross yet continue to lead the entire market higher. Bernanke’s testimony on the hill helped spark some buying, but as the testimony wore on sellers began to take over. We continue to play in overbought conditions, but this rally is healthy and remains that way. Tomorrow’s job report will certainly set off fireworks. At this very moment, we have a healthy rally that is a bit over-extended.

The unemployment rate will be the key statistic the market pundits will be paying attention to. Last month’s surprise move to the downside for the rate helped spark some confidence for the market in general. However, the denominator, the total employment pool continues to shrink driving down the percentage of people out of work. It is very difficult to measure unemployment, but judging by the U-6 figures as well as the number of people on food stamps our situation remains weak. Why else would the Federal Reserve hold rates steady near zero percent all the way out to 2015? If employment was actually improving there would be no need to continue to hold rates down. Enough of the economic talk, it’s about the trend.

Trend following is not an art form and trading based upon gut feel is not our style. Disciplined trading, rule –based trading is our game; it’s our edge to outperform the market. I know we harp this one lesson: CUTTING YOUR LOSS SHORT. It is vital, letting losses run ruins capital and ruins traders. Breaking your rules is another major flaw. Jesse Livermore would often break his rules only to see his net worth crumble. If you find yourself in this situation, what separates the best from the rest, the best rise again!

Have a great weekend!

Wednesday, February 01, 2012

Facebook $FB Files for an IPO as a late day sell-off takes down the S&P 500

The big talk of the town was FB filing for its IPO. Despite the news of the IPO sellers hit the market late day pushing stocks from its highs. Over at the NASDAQ despite sellers on the NYSE the NASDAQ appeared to be somewhat immune. Volume soared on the NASDAQ as institutions pile back into technology stocks. It is clear the leading index of this rally is the NASDAQ and we view this as a positive sign. A solid day for the NASDAQ while it appears the NYSE related indexes continue to lag.

We have a good start to the month of February as we get ready for Friday’s job report. As usual the talking heads will be looking to find clues of an improving economy. More people are fleeing the job market helping out the unemployment rate. As usual we will not try to predict what the number may or may not be and gauge a plan of attack based upon a guess. Discipline is paramount, we’ll stick to our proper buy and sell rules and let the guessing be handled by others.

What to do about FB? We are going to wait and see how it trades. We’d love to see the stock consolidate and form an IPO base. It’s anyone’s guess where the stock will go. Perhaps it will pull a LNKD and catapult on day one. Truly, it’s anyone’s guess and we’ll wait to attack the stock if it meets our buying criteria.

Our uptrend continues and without any major distribution it is hard to be calling for a top here. Perhaps a major reversal day on mega volume would do it, but we don’t have that situation. Anticipating moves will only leave you on the sidelines. Stay disciplined!