Saturday, May 12, 2012

Big Wave Trading Portfolio Update And Top Current Holdings

To anticipate the market is to gamble. To be patient and react only when the market gives the signal is to speculate. — Jesse Livermore “Every once in a while you must go to cash, take a break, take a vacation. Don’t try to play the market all the time. It can’t be done, too tough on the emotions.” — Jesse Livermore “FYI – JPM $2b loss was someone’s $2b gain.” — Big Wave Trading’s second-in-command, MarketSpeculator The Big Wave Trading Portfolio continues to be under a SELL signal triggered on 5/4. This has been the strongest SELL signal YTD as multiple confirmations in various futures/ETFs were triggered. However, due to the current choppiness of the market, possible QE3, and frequency of recent false signals, we are moving slower into our ETF positions. Still the bottom line is that the signal remains true and proper price/volume action is following. While we remain under a SELL signal we have been getting a lot of long signals from the Biotech and Housing related sectors of the market. Indeed it remains a mixed tape. There is more bad than good out there but it is still not weak enough to push short positions heavy. If there were not any long signals in quality stocks, this would have us wanting to push. Instead we will be patient and wait for real follow-through to the SELL signal that was produced on 5/4. Overall we remain like water. Very liquid and willing to move from one direction to the next until we get what we need to push us all-in on full margin. Right now, capital preservation instead of hitting home runs remains the name of the game and has been since our large gains in February were completely taken away by March and April false signals. It’s a tough environment but professional traders know that a big trend always follows. This type of tape is meant to wear you out not necessarily knock you out. Those that are patient and careful with their capital when signals are not immediately followed-through are going to do much better than wild and loose trading. If we do not break down here and instead reverse back above the indexes 50 day moving average obviously the SELL signal will be taken off. We remain under the thesis that any rally here to new highs would be even more bearish than before. Volatility is too low and breadth is too poor for any sustainable uptrend to come about. A market being lifted by a few stocks always crashes. Before we can have any real uptrend to make some real powerful gains, this market needs to correct. If QE3 comes to the rescue we believe that it will only lead to a more powerful and vicious black swan swoon. A correction here would be healthy. A rally would not. Only after a correction will we be looking to get heavily long high quality breakouts in stocks or fully long a BUY signal with leveraged ETFs. Top Current Holdings – Percent Gain – Date of Signal LQDT – 79% – 2/1/12 AVD – 75% – 1/10/12 BVSN short – 64% – 3/16/12 MNST – 42% – 1/13/12 ABR – 28% – 2/29/12 VRNM short – 27% – 4/10/12

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