Saturday, September 29, 2012
The Big Wave Trading Portfolio remains under a BUY signal from August 3rd, following the past week’s market pullback. The pullback was overall orderly with only Tuesday being a session of concern. The fact that there were many stocks that made big moves following that session and that the market did not follow through immediately with the selling shows that the uptrend remains intact and in solid shape. Despite the low VIX and high % of bulls to bears in the Investors Intelligence survey, the atmosphere remains overall toxic. Individual investors based on the AAII survey and the real-time Finviz survey continue to point to a public that is overall skeptic to bearish. The crowd is definitely not overall bullish. At best, it can be said that sentiment data points remain mixed. What doesn’t remain mixed is price. Price is still trending higher on all time frames except the most short-term. If we get another distribution day or two, we might have some more short-term problems. However, the action in individual stocks in regards to long-term base structures, along with stocks already hitting new highs, indicates that the market might want to trend higher for a bit. I just would not expect any kind of explosive gains. Especially when the macro picture is at best not bad. 1% to 2% GDP growth is never going to light the fire underneath a country’s stock market. For now, we will stick with this slow uptrend that is still not offering any what we would classify as “perfect” or even “near perfect” long signals. Trend following big priced stocks that trade a ton of volume by buying in the money options with low implied volatility as they cross above and below whatever moving average one uses continues to be a superior methodology compared to the once extremely profitable tried and true combination CANSLIM/momentum methodology. Aloha everyone and I hope everyone is having a wonderful weekend! Top Current Holdings – Percent Return – Date of Signal AVD long – 141% – 1/10/12 SVNT long – 70% – 9/10/12 NTE long – 61% – 8/17/12 CLGX long – 52% – 6/19/12 CAMP long – 46% – 4/26/12 VRNM short – 35% – 4/10/12 SHF long – 34% – 8/1/12 PRXI short – 33% – 3/30/12 MAGS short – 28% – 4/18/12 STX long – 25% – 6/29/12
Wednesday, September 26, 2012
Stocks continue to struggle with the Fed’s Quantitative Easing hangover as the S&P 500 and NYSE Composite get hit with a day of distribution. Sellers got to work again pushing stocks lower in the morning session. Riots in Europe certainly did not help ease any fears traders have over the economic conditions in Europe. At today’s lows the market returned to the same levels the market was at prior to the Fed’s announcement of Quantitative Easing infinity. While we closed off the lows of the session there wasn’t much to cheer about. A few leading stocks were able to hold their gains, but we’ll need to see buyers step up. Our uptrend is still intact and under pressure. We do not have a pile up of distribution where we’d normally see during a topping market. Today’s distribution on the NYSE and S&P 500 weren’t MAJOR distribution days. In fact, volume just snuck higher. In addition, now with the market at these levels we are quite oversold. McClellan oscillator is not sitting at -200 (T2106 ticker on TeleChart). Conditions can always worsen, but we are at a level where we normally see the market bounce. Add in we only have two days left in the month there is always the possibility of the market window dressing its gains. It will be interesting to see how sentiment has shifted post Fed easing. AAII sentiment has favored the bulls, but last week’s reading pinned the bulls at 38% and bears at 34%. Not overly bullish or bearish. However the II survey had been quite bullish. Sentiment is a tricky indicator, but at extreme points it becomes an excellent talking point. A few stocks like FTNT, SWI, and GNC who were setting up as leaders continued to see sellers today. ELLI has been a tremendous winner and at one point was down more than 7%. This type of action in leaders normally is a bad thing for the overall market. However, we are in QE land where normal is anything but. Given the lack of distribution and oversold conditions this uptrend may still have something left. Great news, the NFL referees may be back! Perhaps the NFL should have listen to one of the golden rules, cut your losses short!!!
Tuesday, September 25, 2012
Heavy volume selling struck the market down marking a day of distribution. One day of a heavy volume selling does not break an uptrend, but this one grabbed our attention. The day started off well with the market pushing to the highs of the session prior to noon time. Just as it appeared we were ready to take off to new highs sellers jumped on the opportunity to push stocks lower. Just as the sellers got going riots broke out in Spain over their economic issues. Fear continued to grow and sellers continued their operations right until the close. Volume ended the day nearly 20% higher than Monday’s level and with the price declines notched a day of distribution. Our uptrend is under pressure, but one day doesn’t change a trend. Since the announcement of QE infinity or QEn the market has been consolidating the gains. The consolidation was going very well up until today’s action. A day of distribution here or there is okay, but when it comes with this type of price decline we must be on alert. Even a quick 5% correction can see leading stocks getting blown out of the water. It is important we take our signals and when sells are triggered we execute. Hanging on to hope is no way to be in the market. Yes, we have QE, but will it overcome the economic troubles? Can this market continue to push higher? The $64,000 question only price will answer. One day does not make a trend, but a collection of distribution days will not be a good signal for the market. Leading stocks have already begun to move lower and today was no exceptions. Stocks setting up in bases like GNC have suffered some nasty selling. The market will need to stabilize and move higher otherwise we can expect this market to correct deeper than 3-5%. It is anyone’s guess if today was a fluke or not, but this uptrend is under a bit of pressure. Stick to your signals and always cut your losses short.
Monday, September 24, 2012
The story of this uptrend has been Mondays closing lower. Volume was lower today, but even with Friday’s volume today’s trade was quite light. On the face of it we do have a market continuing to consolidate its Fed induced rally. Friday’s session saw sellers knock down the early rally and they were able to continue their operations today. Growth stocks as well as technology stocks saw the brunt of the sellers operation. GOOG escaped their wrath, but on the whole growth stocks were the ones under quite a bit of pressure. We continue to escape distribution, but we haven’t seen the push from growth stocks we normally see here. Many are close to breakouts, but as time progresses we’ll need to see them lead the market higher. There is still quite a bit of talk over the fiscal cliff and continued European worries. Europe’s woes will not be solved here any time soon. Deleveraging takes time if the masses are not able to withstand the pain needed for a quick recovery. The same goes for the United States. With Obama in the lead and the Democrats looking like they’ll take the senate it appears we won’t see any resolutions to our debt woes in the near future. Democrats if they continue with control will undoubtedly raise taxes and cancel and reduction in spending. While raising taxes may or may not raise revenues not cutting spending is what will add to the deficit. Now the real question will be how will stocks react? It is anyone’s guess, but if you stick with leading stocks and price you will not lose. The last week of September and it is hard to believe Fall is here. All of the gains in the month have come on only central banking days! It would be nice if the market could get some gains without the help from central bankers. In addition, it would be nice if High Frequency Trading was outlawed and stopped from distorting price and volume on our stocks. Mark Cuban said it best: “High Frequency Trading simply adds volume not liquidity.” Even with High Frequency Trading we still have an advantage and that being price and focusing on a leading stocks. Another week in this uptrend starts lower and with very little distribution we can’t help to think this uptrend will continue to march on. Cut those losses short.
Saturday, September 22, 2012
The Big Wave Trading Portfolio continues to be under a BUY signal that was generated on August 3rd. The past week was another overall solid week with solid intraday price action outside of Friday. Another positive was the Nasdaq having two up sessions on volume well above average, continuing the trend from the previous week. We continue to believe that this uptrend can last longer based on the overall public (AAII Survey bulls: 37.5%) still not showing that bullish fever and the NYSE short interest ratio sitting around 5-year highs at 21.03. As long as the trend is up, the public is not overly bullish, and the short interest ratio remains high, the trend should continue to be our friend. We know what to look for if that changes but so far we have absolutely no signs of a change in trend coming. In fact the last distribution day on the Nasdaq was on August 21st (according to Telechart’s data). That is one month without a distribution day. Clearly, for now, there is nothing to worry about. We will cross that bridge when we get there. As for stocks, we continue to find a ton of attractive long positions and continue to see many others setting up. If this continues, it bodes well for the continuation of the rally. Despite some trading sessions the past week being quite boring, there were plenty of stocks that made exciting dynamic price moves higher. Seeing these stocks move like they are on quiet days is a clear sign of real accumulation. The only bad news, so far, in this rally is that we have not had a single stock set up in a “perfect” setup. However, that isn’t surprising as beautiful green filled chart patterns have been in decline since the 2008 crash. Trend following is definitely where it is at. Playing hot charts is not. I am sure one day that will change but as of right now it has not. We’ll keep hunting. Have a lovely rest of your weekend and aloha. Top Current Holdings – Percent Return – Date of Signal AVD long – 141% – 1/10/12 SVNT long – 70% – 9/10/12 NTE long – 65% – 8/17/12 CLGX long – 58% – 6/19/12 SHF long – 36% – 8/1/12 CAMP long – 33% – 4/26/12 PRXI short – 32% – 3/30/12 MAGS short – 30% – 4/18/12 VRNM short – 30% – 4/10/12 STX long – 25% – 6/29/12
Thursday, September 20, 2012
The week of consolidation continues as debate over whether or not this market can go higher rages on. Overnight China’s flash PMI disappointed showing the country continues to slow significantly. China’s disappointment sent futures lower across the board. US economic data continues to be uninspiring as jobless claims remain high. Buyers did step up at the end of the day putting a bullish tint on the day. Volume ended the day lower across the board as the NASDAQ escaped a day of distribution. Week’s like this one will certainly shake the confidence of those who are long the market. Our uptrend remains and we’ll remain long this market until price tells us otherwise. For those who simply follow price do not concern themselves with whether or not a trend is over. At the moment we have plenty of folks including Elliot Wavers citing extreme bullishness as a reason the market is about to head lower. Hey, they could be right. No one knows the future and the way the market is acting says the uptrend remains intact. Tomorrow may change and those calling for a correction may be right, but what if they are not? What happens then? We follow price action of our stocks and the market. Everything else is noise. The one sentiment survey I do talk about here is the AAII survey. At the moment the split between bulls and bears is 38% to 34%. Both figures remain at extremes and this survey was done earlier in the week. As the market heads sideways are those who are bullish going to remain so? We can come up with an infinite about of scenarios and guesswork on what may or may not happen. Guess what, it doesn’t matter! Football season is in full swing and we’ll have another fun filled weekend after tomorrow’s option expiry. After a long week of consolidation tomorrow will be interesting to watch. Have a great weekend!
Wednesday, September 19, 2012
Small cap stocks lagged the general market by closing in the red with the major market averages close just barely in the green. Buyers stepped up their operations just after 10:30 am EST showing this market has support. However, buyers weren’t able to keep the market at its high of day closing off the best levels of the day. Volume rose across the board, but we failed to make significant gains. At this time, it appears the market continues to move sideways digesting last week’s gains. Our uptrend remains intact and we continue to expect this to continue. Housing data hit this morning was mixed, but existing home sales saw some promise. Homebuilders continue to be stellar as they come off their beaten down levels. Regardless of your opinion of the housing market homebuilders have had a heck of a run. Stocks like PHM and LEN continue to look like they want to move higher here. Of course anything and everything can happen, just look at QCOR today. What we know now is homebuilders continue to look like they are going to continue to move higher. We are still waiting for this market to push higher. We have plenty of leading stocks on the verge of running higher and it may take this market pushing higher to kick these in high gear. This week has been a good week for the market and very tight despite options expiry on Friday. Usually the week of expiry tends to be volatile and in high volume. So far so good in terms of volume and how tight this market is trading. Of course, we need the market to move higher at some point before we get too bored with it. In any event, this uptrend remains healthy. Keep pushing forward!
Tuesday, September 18, 2012
Turnaround Tuesday didn’t quite work out, but for the second straight day the market puts in an excellent day of consolidation. The past two days have certainly done enough to work off overbought conditions in the near-term. Volume inched higher on the NYSE and roughly 15% higher according to preliminary stats from IBD. Monday’s volume was so light that it didn’t take much for volume to creep higher. All in all another solid day for the overall market as our uptrend continues to stay intact. A few retail stocks took it on the chin today, but all in all leading stocks held up relatively well. KORS and ROST look weak and with KORS secondary pricing soon it appears the stock wants to continue to head lower. ROST on the other hand remains below its 50 day as traders sold the stock today. The stock has been on quite a run since last August and is now looking tired. A quick observation here is QE3 will not help out retail stocks. Why? Who cares, price action in leading retail stocks shows investors are looking elsewhere. Given the back to back consolidation days we need this market to resume moving higher. At the very least leading stocks need to get going with or without the market. We have escaped distribution, but we can’t consolidate gains forever! It is important not to get impatient with the market and allow your stocks to work. But, at some point we need to keep our money moving and stocks that are not moving do not belong in our portfolio. Keep in the game! We have plenty of opportunities with this market and if you give up or “take a break” you may miss a golden opportunity. I don’t like missing out on gains and if you do it makes it infinitely more difficult to capture superior gains. Cut those losses short.
Monday, September 17, 2012
The market stages a very nice day of consolidation as volume dropped well below Friday’s level. For most of the day’s session stocks traded in negative territory as last week’s gains were being digested by the market. Nearing the close it appeared stocks were set to close near the lows on the day, but buyers stepped up and pushed stocks well off the lows at the close. Buyers are lurking and the end of the day action certainly highlighted the case. A great day for an uptrend as days like these help work off overbought conditions the market may be in. We continue to operate in an uptrend and continue to look for this market to push higher. It is clear stocks love further monetary easing by the Federal Reserve. The unintended and intended consequences are pretty significant, but the unintended consequences will only hurt those who cannot keep up with inflation. Just to think in four years after gas prices plunged to well below $2 a gallon they have risen back to near $4 again. In many places, gas is well above the $4 mark and this hurts those whose income levels do not keep up with this type of inflation. I just do not see how buying more mortgage securities is going to help the poor rise up or create more jobs. As for our trading it appears it will be a positive, but then again we just follow price. A big positive was the fact that volume was running well below Friday’s level throughout the session. Running mostly 30% behind Friday’s level and remained that way at the close. NYSE volume ran 34% below Friday’s level and the NASDAQ 26%. Expect volume to move higher tomorrow and we’ll see if buyers step up and avoid distribution. We have not seen too many bad distribution days and at this point we only have two distribution days on the books. The key is to pay attention to see if we have a clump of distribution days together and leading stocks falling hard. Your stocks will tell the tale of the market if you are in the right ones. A good start to the week and now we’ll need to build upon it. Remember, it is very important you need to have a game plan and execute!
Friday, September 14, 2012
The Big Wave Trading portfolio remains under a BUY signal, generated on August 3rd, as the market continues to move higher on well above average volume. On Thursday, for the first time during this rally, we saw the indexes, ETFs, leveraged ETFs, inverse ETFs, and leveraged inverse ETFs all move in the right direction on well above average volume. This is the confirmation we need to start to increase positions in new longs and to look to buy the dips when the dips do come in leading stocks that are short term too extended from their 50 or 200 day moving averages. The increase in volume during the past seven trading sessions and the improvement in the breadth of the advance/decline line and the upside to downside volume is excellent to see, if you are long and/or are expecting further price gains. September and October have historically been months when the stock market stages strong rallies. March is another month where powerful rallies begin. This rally started before Labor Day and the current action is definite confirmation that the trend for now must be respected. Now, I know a lot of individuals are upset at why the market is rallying (backed by Quantitative Easing). I share your concern and agree that it is the wrong policy for wiping the slate clean and starting a real economic rebound. Putting a band aid on a femur shaft fracture isn’t going to fix what is really wrong. However, maybe they don’t want to fix what is really wrong. And this is my point. Price is all that matters to us. These individuals that are in charge around the world, that make horrible decisions against the voice and concerns of the tax payers, are going to do what is in there best interest. Not in what is our best interest. What is in your best interest, knowing this, is to take control of your future by learning how to invest in a solid time tested proven trend following methodology. That is the only way those in the bottom will ever be able to save any money. With inflation the way it is and with bank CDs rates so low, what other choice do you have? That is what we are here for. Aloha and enjoy your weekend! Top Current Holdings – Percent Gain – Date of Purchase AVD long – 115% – 1/10/12 BVSN short – 82% – 3/19/12 NTE long – 54% – 8/17/12 CLGX long – 54% – 6/19/12 CAMP long – 32% – 4/26/12 PRXI short – 30% – 3/30/12 VRNM short – 29% – 4/10/12 PXD long – 28% – 7/17/12 MAGS short – 28% – 4/18/12 SVNT long – 25% – 9/10/12
Monday, September 10, 2012
Big cap technology stocks and financials struggle as the market gives back more than half of last Thursday’s breakout. The good news on the session was the fact volume was lower and institutions were not big sellers. INTC was an excuse for the broad market sell off as the company took down 3rd quarter estimates. AAPL stock hit an all time high before sellers ransacked the stock ahead of its September 12th new product launch. Sellers pushed hard at the end of the day as VIX rose more than 1.85 points. The fear index is still sub-20 mark, but the move at the end of day showed fear crept back into the market. While we didn’t hit a day of distribution this not exactly the type of consolidate we were looking for, but we remain in an uptrend. The lone bit of economic news the market received today was consumer credit. In the month of July consumers reduced credit by 3.28 billion dollars. Economists expected the figure to be at 9.6 billion. It is nice to see consumers reducing their credit and not further their issues with even more debt. Tuesday will be a bit more active, but nothing that will make headlines on the day. Besides, everyone’s attention will be on AAPL’s even on Wednesday and the FOMC rate decision on Thursday. Leading stocks did not fare too well today either. One notable leader TDC was hit hard on the news of INTC. Volume across many names were low, but the price action among them were not kind in the slightest and does create a heighten level of doubt in the market. One day does not make the market, but we cannot see this type of action continue. We’ll need to see the market gain some traction with volume support. It is one thing to be defensive it is another to act on fear. Stay focused on price and where your exits are. Many traders fear they may lose gains and take profits too early finding out later their stock is higher. Know your exits prior to entry and you will not need to worry about anything in between. We aren’t off to the best start to the week, but there is plenty of time for the market to turn around. Ignore the noise and cut your losses
Saturday, September 08, 2012
The Big Wave Trading portfolio remains under a BUY condition with strong confirmation of the original signal coming on Thursday when every single important stock market index we track broke out convincingly on enough volume to qualify the breakout as strong. The tight intraday action on Friday with a HOD close in the NYSE and SP500 confirm the move on Thursday. This strong move is coming on the back of the NYSE short interest ratio hanging out at 5-year highs around 21.27. This breakout is also coming with bulls, bears, and those on the sidelines coming in at exactly 33% across the board. That means that NYSE short interest is very high, the crowd is not particularly bullish, and stocks are breaking out everywhere with some big names making clearly bullish moves. GS, BAC, CS, JPM, DB, GM, and many other corporate global behemoths are making very bullish moves. If the crowd continues to stay bearish we could see a very powerful short covering rally released. The only odd thing about this move is that it is coming with bulls at 52% and bears at 24% on the Institutional Investor survey. However, bears crossed above the bulls way back in October where the market actually bottomed and it is still nowhere the 5-year bulls high of 62% and the bears low of 15%. Our advice is to follow the price action. While it has been pretty shady for the past couple of years, in terms of trusting this price action, there have been times trends have developed. Let’s hope this time it is for more than one or two months. The potential good news that this rally could last is that we received a lot of strong buy signals in high quality individual stocks last week and this week before the Thursday breakouts in all major important market averages. We shall see what the upcoming weeks and months leading into the election give us. Remember, one or two distribution days is not reason to sell the market short. The key is to watch for 4 to 6 of these days showing up over a two or three week time frame. If you see that, then we can start to worry. However, if that happens I am sure buying unlimited bonds in the USA is not out of the question for the ugly monsters that are Congress and the Federal Reserve. Aloha and have a wonderful and fun weekend! Top Current Holdings – Percent Gain – Date of Signal AVD long – 114% – 1/10/12 BVSN short – 82% – 3/19/12 NTE long – 46% – 8/17/12 CLGX long – 46% – 6/19/12 VRNM short – 37% – 4/10/12 CAMP long – 35% – 4/26/12 PRXI short – 31% – 3/30/12 MAGS short – 29% – 4/18/12
Thursday, September 06, 2012
Mario Draghi and the ECB took center stage this morning announcing a new bond buying program. The ECB delivered on its rhetoric it would do all within its power to save the EURO. Stocks cheered the move and futures rallied. ADP employment figures came in better than expected as well as jobless claims. However, neither the ECB nor these economic reports got the market moving like the ISM non-Manufacturing index. Institutions stepped in a big way scooping up shares after the service sector expanded. Buying continued and the gains of the day were locked up with the market closing at its high of the day! A very bullish day and today is precisely the day we were looking for as a continuation of the summer uptrend. There are plenty of stories out there with all the hedge funds and other institutional players that are massively under invested. Headwinds like the fiscal cliff and European debt crisis have kept many market players from investing in this market. Missing out on today’s move is certainly going to set back many, but the problem really is having an opinion on the direction of the market. If you simply followed where price was telling you wouldn’t have missed out on the rally today. Ignore the headlines you read and follow the price action in the market. Sentiment has been mixed with neither side reaching an extreme level. This week’s reading from the AAII sentiment survey showed bulls and bears equal. The market has been consolidating its gains from the June lows and it is no surprise there was neither a bullish or bearish tint. However, it does showcase how many people missed the rally today. Now, will we see immediate follow-through from today’s action or do we see this rally fade? Until price tells us otherwise we are are going to push forward on the long side! We witnessed a very bullish day ahead of tomorrow’s job report. Unemployment is expected to hold steady at 8.3% and roughly 130,000 jobs added in the month of August. It would be nice to see the labor participation rate to expand and the unemployment rate to drop. That would be very nice. When all is said and done it is about price and we’ll act accordingly. Have a great weekend.
Saturday, September 01, 2012
The Big Wave Trading Portfolio remains under a BUY signal from 8/3/12, following the past week in the stock market. There was not much that went on this week that changed anything from the previous BWT Portfolio update. The only significant event this week occurred on Friday with Gold, Silver, and Platinum ripping higher following Ben Bernanke’s speech. A long position in GLD 150 calls two days ago paid off with a 32% gain today alone. We expect much further prices ahead for Gold, Silver, and Platinum and will use subsequent buy signals to increase our exposure to this area of the market. As for stocks, everything remains under a steady albeit slow uptrend. Unfortunately, there continues to be below average volume on this move higher but NYSE turnover did come in above average on Friday and that is encouraging sign if we are to see continued higher prices. We do realize that historically low below average volume rallies can lead to severe and quick pullbacks as market participants return to the market. While this scenario is plausible, the technical action, along with the high level of shorts on the NYSE (NYSE short interest ratio is at 20.97), indicates that further price appreciation should occur. There is not much else add to this report that was not already stated last week. Our focus will continue to be on commodities and precious metals, until higher overall volume on the general market indexes returns. Have a wonderful long Labor Day weekend everyone. Aloha! Top Current Holdings – Percent Return – Date of Signal AVD long – 104% – 1/10/12 BVSN short – 82% – 3/19/12 NTE long – 55% – 8/17/12 CLGX long – 41% – 6/19/12 VRNM short – 37% – 4/10/12 PRXI short – 35% – 3/30/12 CAMP long – 35% – 4/26/12 MAGS short – 29% – 4/18/12 STX long – 29% – 6/29/12 PHMD short – 27% – 5/11/12