Sunday, March 31, 2013
The Big Wave Trading Portfolio remains under a BUY signal re-triggered on 3/5/13 following the original signal on 1/2/13. There are currently zero conditions weighing on the model, despite the below average volume. Any assumptions and presumptions we have towards the current volume on the rally have been eliminated due to the QE and ZIRP policy being initiated by the Federal Reserve. We continue to go long signals as they arise and will not try to guess when the market will “top” or “pull back.” At this point the only signal that we are paying attention to is price. Price is the only thing that matters, as we have been saying all year long. Volume has not mattered on rallies in four years and there is no reason to believe it will matter any time soon. While it would be nice to see the market pullback for more than a couple of weeks on below average volume and then rally on higher volume it should not be expected. What seems most plausible given the situation that is occurring world wide is that we will end up in another asset bubble where higher valuation multiples are placed on stocks. Despite the lower earnings growth expectations investors are still paying higher prices for stocks believing that the Federal Reserve has eliminated the tail ends of the curve. As all experienced traders know this will eventually end badly. However, that is not happening yet and the only thing we can do is ride the trend until the end when it will bend. If another asset bubble is to occur we are in great position to profit handsomely and then will be in a better position to sell our winners as they break below key trailing moving averages on heavy volume. If the market can get parabolic that will allow us better entries on the short side (puts). For now, there is nothing to do but continue to follow price. As you can see below, following a very choppy 2011 and 2012, it is finally paying off like it normally has for us at Big Wave Trading. Someone asked recently that if the stocks below are our top holdings (top 50%) what are our our worst holdings. We currently have two. Both are automobile related equities and both are showing less than a 1% loss apiece. We do not hold losing positions at Big Wave Trading. Before any order is given to our brokers we know where we will exit if we are wrong. We religiously obey our final exits. We never let a loss run and are quick to leave if we are not proven correct immediately. As we go through equity/derivative drawdowns like we did in 2011 and 2012 we reduce the size of our positions and are quicker to cut losses. As our equity/derivative profit/loss line trends higher we will subsequently increase size and allow more “wiggle” room in our trades. The bottom line is that losses are never tolerated. They are always eliminated. No excuses. Have a great rest of your long holiday weekend everyone. Aloha from a very, yet again, windy and overcast Maui. Top Current Holdings – Percent Gain – Signal Date HIMX long – 127% gain – 12/19/13 CSU long – 113% gain – 9/4/12 EAC long – 98% – 12/17/12 POWR long – 96% – 12/11/12 CAMP long – 95% – 4/26/12 FLT long – 72% – 9/6/12 CPSS long – 70% – 1/31/13 HEES long – 70% – 9/4/12 ASTM short – 64% – 7/17/12 GNMK long – 48% – 11/16/12 AXLL long – 46% – 1/4/13 MNTX long – 43% – 1/17/13 WAGE long – 38% – 1/8/13 V long – 32% – 8/31/12 CHUY long – 30% – 1/10/13
The market was hit with disappointing GDP and Jobless claims figures prior to the market open. Then again just after the open with a very disappointing reading from the Chicago PMI. Despite the disappointing economic reports the market as able to find enough buyers to keep stocks in green territory. Small caps lagged the broader market as the S&P 500 led the way. VIX slipped again as buyers continue to remain complacent as fears over a correction are simply non-existent. Our current uptrend remains intact and although we do have a bit of distribution we aren’t going to throw in the towel on this rally just yet. GDP growth was revised up from .1% to .4%, but still below the expectations of .5%. At this rate, .5% is not going to cut it for the US. Even 2% GDP growth will not improve our situation greatly. Perhaps the size of the US economy is a hindrance, but we need growth in order to pay for all the services we want the government to provide us. It is anyone’s best guess if this translates to higher or lower stock prices. If we were growing like Chile with 5% GDP growth we’d be creating jobs like gangbusters! The economic pie needs to grow and we need policies that aid the growth. Enough of the economic talk and get back to price action. Gold and silver continue to trade in downtrends while Oil has resumed an uptrend. One commodity in particular, Copper continues to trade in a downtrend. Copper is a decent indicator of economic growth and right now it is not singing the praises of the economy. JJC is an ETF to track Copper and it shows quite clear the commodity is in a downtrend. Natural gas continues to remain in an uptrend even with some high volume down days. It wouldn’t surprise us if the October high is breached. Outside of Crude Oil it doesn’t appear the freshly minted cash from the Federal Reserve is finding its way into commodities. Enjoy the long weekend. Next week we’ll get a bombardment of Economic data from across the world. It should be a fun time. Cut those losses.
Wednesday, March 27, 2013
European stocks fell hard on Cyprus fears and continued economic slump the Southern Europe states are in. Cyprus, Italy, Spain, and now Slovenia are in the midst of falling stock markets and higher cost to insure debt. Pending home sales were slightly disappointing, but the market rallied off the disappointing figure and continued for the rest of the afternoon. The NASDAQ was able to close in positive territory while the Dow failed to notch another all-time high. Volume rose on the day, but remained well below average. The past two trading days has seen NASDAQ volume the lowest for this year. Volume continues to be non-existent despite this market continuing its uptrend. Institutions are either continuing to stay on the sidelines with cash or they are all-in. We can make all sorts of guesses, but we do know activity in the stock market continues to slide lower. Short-interest ratio continues to be high because volume is low. Actual short exposure measured by total shares outstanding is at a five year low. Things are not as they appear and we can certainly blame Quantitative Easing for the state of the markets. However, if you employ a trend following system based on price these matters simply fade away. It is important to stick to price and ignore the noise. The prevailing theme from market pundits is QE will continue to push stocks higher. While this may be true do we know this to be fact? Can we say QE is a tail wind or a wind at all? We do know the Federal Reserve’s balance sheet is highly correlated to the S&P 500 and why would this change? What if it does change? Do you have a plan of attack? Do you know when to head for the exits? Often times assumptions are made, but a plan of attack is never hatched. We do not know the future, but we can identify potential trend using price as our guide. Tomorrow we’ll get another read on GDP and the market is looking for .5% just like last month. To add some flavor to the day it is also the last day of trading for the month of March. Enjoy the last trading of the month! Cut those losses.
Tuesday, March 26, 2013
Early morning economic news did help the market at the open. However a disappointing consumer confidence, Richmond Fed, and New Home sales figures did halt the enthusiasm. Europe continued to remain in no man’s land with Spain leading the market lower. If I had to make a guess the IBEX 35 would be the next stock index to see a major break lower. The FTSE MIB may not be that far behind. Back here in the States the story of the day is the extreme light volume as the Dow hits all-time highs. There simply isn’t the institutional interest in the market here despite the bulls CNBC parades out on their sets. A last minute push from the buyers pushed the markets to the highs of the session. The Dow once again led the way with Small caps lagging behind. We can debate the validity of this market rally because of QE or we can simply just take the gains. It is up to you. I’d rather take the gains and have an exit strategy. SPLK gave up majority if its breakout gains from yesterday. Volume was well above average and this type of action has become the norm as of late with breakouts. LNKD has tried to continue to hit new highs, but has struggled as of late. FLT has been able to escape the reversal fate and continues to act like a true big wave trading stock. The market is not making it easy hanging onto these stocks, but if you stick to a rules based trend following system you’ll avoid pitfalls. Volume was once again lower on a day where the markets close in positive territory. At this point you could simply ask if volume is higher or lower and you’d know whether or not the market was up or down. QE has certainly thrown a wrench into the markets, but it has certainly pushed away volume. Sure option volume has jumped, but it has not replaced the volume lost since the Fed’s printing began. Price is number one in our books, but it does beg the question will volume ever return? We remain in an uptrend and will continue to stick to the long side.
Monday, March 25, 2013
This uptrend is hanging by a thread, but continues to find just enough support to halt any correction. It is very easy to blame the Dutch Finance Minister even after clarifying his statement. However, even after clarifying his statement the market still couldn’t find its way back to positive territory. LNKD wiped out Friday’s gains while V broke through a buy point. SPLK, V, AMBA, and LL broke out of bases on strong volume. The fear is will they end up like LNKD wiping out Monday’s gains? Questions only tomorrow will bring and we’ll continue to plug along in this uptrend until we get a signal of a possible change. There was quite a bit of noise over the Cyprus bailout and it being the new template for future bailouts. From a trading perspective we do not care one way or another. Our rules will guide us with the help of prices. However, it begs the question why would you ever have a deposit account balance above the insured amount? It’ll be interesting when they do open the banks what depositors with balances greater than 100,000 Euros will do. It is a side show now and we’ll draw great comic relief from it. Our two leading stock indexes continue to show weak relative strength to the general market. For the past two years both of these indexes have shown weak relative strength. The search for yield has not come from the growth side of the house, but the value side. Dividend paying stocks yielding higher than the 10 year treasury yield have been very popular. However, focusing in the top performing stocks like FLT and cutting laggards like AAPL will reap you great rewards. Tomorrow we’ll get a reading on durable goods orders. Alongside durable goods more Cyprus bailout talk will likely continue. Focus on price and ignore the opinions. We remain in an uptrend and there are stocks breaking out like AMBA, LL, V, and SPLK. Distribution count stands at 4 days on the NASDAQ and S&P 500. Any further distribution will likely tip the scales in favor of a correction. Time and price will tell. Cut those losses.
Sunday, March 24, 2013
The Big Wave Trading Portfolio remains under a BUY signal, as the market consolidated recent gains the past week. Volume was lower overall for the week and that is always bullish for a continuation of a trend. Unfortunately, when the market rallies it rallies on below average volume. The good news the past week was the selling volume was also below average. This action the past week has helped form a lot of solid consolidation patterns out there and two stocks that are on watch from the 3D printing arena include DDD and SSYS. If the market decides to move higher those two stocks will definitely be closely followed. On top of that, there are plenty of other stocks forming constructive weekly consolidation patterns. If the market breaks out to new highs here, expect these stocks to follow. Another positive for the market was the inability to really sell off following the Cyprus and Eurozone news all week long. The fact the market held up so well, despite this development, is a testament to the power of worldwide QE. When the market does not sell off on bad news, that is always a short-term bullish development. The other side, of course, is that a market that sells off on good news is a market flashing that it is in trouble. So, so far, so good. As long as leading stocks continue to do well and trend higher there is nothing to do but to follow the trend until it ends. While we are long a lot of stocks doing very well, we have our trailing moving averages to tell us when to get out partially or completely. To think that any emotion is involved in our current long positions is a grave mistake. We do not have emotions in regards to the stock market at BWT. We only have quantitative signals. Nothing more and nothing less. When we are wrong we cut our losses immediately like in a recent long signal generated in WNC on 3/15 that we had to reverse on 3/19. The good news about that loss is that the stock is now setting up in an even more constructive consolidation pattern thus making the next long signal a higher reward to risk ratio setup. On that same note, however, a further follow-through on the recent breakdown below the 50 day moving average will have WNC completely wiped off our watchlist for now. OK everyone. Try not to get caught up in all the Euro news dramafest this upcoming week, let your winners run and cut your losses short, and most importantly have a great rest of your weekend and upcoming week. Aloha. Current Top Holdings – Percent Return – Date of Signal CSU long – 104% – 9/4/12 EAC long – 92% – 12/17/12 CAMP long – 90% – 4/26/12 POWR long – 80% – 12/11/12 HIMX long – 76% – 12/19/12 FLT long – 70% – 9/6/12 HEES long – 69% – 9/4/12 CPSS long – 56% – 1/31/13 AXLL long – 46% – 1/4/13 WAGE long – 42% – 1/8/13 ASTM short – 41% – 7/17/12 GNMK long – 38% – 11/16/12 MNTX long – 36% – 1/17/13
Thursday, March 21, 2013
European markets were dealt with poor flash PMI data with France flashing a very weak PMI figure. Futures were set to open lower ahead of the 830 data release. Despite a better than expected Jobless claims figure and inline housing price index futures simply couldn’t muster the buying power. Sellers took hold of the market just after the release of the better than expected Philly Fed survey pushing the market to the lows of the session. Like a broken record as the Feds POMO began the market found its footing and rallied until the close of POMO. It is quite uncanny how POMO keeps this market afloat. Sellers had one more shot to send the market lower and did so just before 2pm rolled around. However, the support at the 2pm lows wasn’t able to keep the market from closing above the mid point of the day. The NASDAQ did notch a distribution day bumping its count up to 4 days. We remain in an uptrend, but the caution flag has been raised. Cyprus continues to be a thorn in the side of the market here. It may just be an excuse for pundits to use as this rally has gotten long in the tooth. However, we are seeing disappointing earnings from the likes of FDX and ORCL suggesting the economy may not be what people think. Both these stocks were acting well up until their most recent earnings report. Coupled with distribution piling up is something we are keeping an eye on. Mind you, we aren’t trying to anticipate a turn, but preparing to take the signals in whatever direction. Sentiment remains tilted towards the bulls, but we aren’t at extreme levels we saw back in February. AAII bulls came in at 39% and bears at 33%. AAII is a volatile survey and a stiff breeze will shift sentiment. II survey saw bears drop to 18.6% from 18.8% and Bulls drop to 47%. Again, bulls aren’t at extreme levels while bears are nearing an extreme. Sentiment is by far a perfect science, but an interesting talking point. Sentiment like overbought/sold conditions can remain for long periods of time. The market does feel like it is heavy and will correct here. Unfortunately for those who try to predict these moves were wrong last month when the market looked like it was about to correct. Anything is possible and sticking with trend following will reap the greatest returns over the long term. Have a great weekend and best of luck on your March Madness bracket!
Wednesday, March 20, 2013
Another Federal Reserve meeting and the central bank vows to continue to print billions of dollars a month until the Unemployment rate drops to acceptable rates. Cyprus fears seem to die down as it appears Russia will protect its own and give a bailout to the small island nation. Banks will not reopen to next Tuesday, but the situation begs the question will the next EU country who needs a bailout and is not involved with Russian Oligarchs will be required to confiscate bank deposits? Philosophical question, but we digress. Price action continues to indicate this uptrend will continue higher. Volume was lower on the day despite the Fed’s Chief promise to keep the printing presses pumping liquidity. How high and how far we’ll go is anyone’s guess, but we’ll continue to operate in an uptrend. Two blemishes on the day were HPQ and FDX. These two stocks have been leading this market higher, but both today turned lower. HPQ appears to have run out of steam after doubling since its November lows. FDX earnings release disappointed the market. Falling more than 7 points on the highest volume since 2010 it blew through its 50 day moving average. FDX had been leading the Transports to new heights, but after today it places a blemish on the current uptrend. Perhaps a bigger earnings story is what happened to ORCL in after-hours trading. When all was said in down in the after-hours session the stock fell more than 7% from today’s close. The stock missed its earnings expectations and was punished. ORCL has been pushing higher and leading the NASDAQ higher along with GOOG. We’ll see how the stock reacts in tomorrow’s session, but the drop in after-hours is quite telling. Now with the Federal Reserve out of the way it will be interesting to see if the market can continue to remain elevated. Time will tell and price will guide our trading.
Tuesday, March 19, 2013
Positive housing data kicked off the trading day with Building permits jumping higher than expected. However, it was just after the 10 am hour the market dove as CNBC blame worries over the Cyprus bailout. Volume started the day off light despite the positive housing data. Institutions were jumping in the market buying up shares as volume suggested. It wasn’t until the hysteria over Cyprus did volume kick into another gear. The S&P 500 and NASDAQ did notch a distribution day, but they weren’t as bad as they could have been if the market closed at its lows. Volatility measured by the VIX jumped more than 8% as it appears traders and PMs alike are beginning to buy protection. We remain in an uptrend and with the Federal Reserve tomorrow we’d expect activity to pick up after the Fed releases its policy statement. The Dow continues to be the leader among the major indexes. Today KO led the way for the index, but with the Dow leading it does give us pause if we’ll see this rally continue. At this point we do not have enough to say this rally is over as distribution simply isn’t piling up (YET). Leading stocks aren’t screaming higher suggesting we can continue. However, on the flip side they aren’t breaking down in droves saying we are about to crater. Stay disciplined here and do not rush in to be a hero. Wednesday’s Federal Reserve meeting will certainly be something the financial media will savior. I am sure Ben Bernanke will try to calm any fears the Federal Reserve will withdraw “support” of the financial markets. We’ll kindly remind everyone the Fed has more than tripled its balance sheet since 2008 and provided Trillions in guarantees to the market. I suppose a few trillion more won’t hurt. We are in an uptrend and while this could change tomorrow there is no telling if it will. Those who tell you they know where it is heading are full of crap. No one can predict the future. Know your exits and let your winners ride!
Monday, March 18, 2013
Over the weekend the biggest news story was the Cyprus Bailout news. The terms of the bailout had depositors losing roughly 10% of their deposits. World markets reacted negatively from Asia to the US, but unlike Asian markets Europe and the US markets were able to rebound from the lows. A bit of a blow to the housing market was a dip in NAHB survey registering at 44 down from 46 in the prior month. This did little to hold back dip buyers from pushing the markets back into positive territory by the afternoon. However, the last hour saw sellers hit back and send the indexes off their highs. Volume ran lower than Friday’s level inflated by quadruple witching. We remain in an uptrend despite today’s open and we’ll remain operating in an uptrend. Why the media is making a big deal over Cyprus is the theft of depositor cash. Cyprus is a safe haven for many Russian Oligarchs and their cash. While it is easy to say the rich should pay, but to steal deposits to increase private cash in bailouts is a tough pill to swallow. The real fear is if this will be the norm in future bailouts in Spain and Italy. At some point these two countries will likely need a bailout unless their economies miraculously begin to grow again. How safe do you feel your cash is in the bank now? Could you imagine if the Federal Reserve and the US government had taken 10% of deposits in 2009? The EU is in unchartered territory and this will be something to watch from a non-trading perspective. At the open the market opened in quite the oversold territory according to the McClellan Oscillator. The indicator has not been keeping up with the market highs suggesting the strength in the move is not sustainable. Anything is possible, but at extremes this oscillator does offer some value. Let’s not forget the Federal Reserve kicks off a two day meeting tomorrow and releasing their policy statement on Wednesday at 2pm. I do expect to see the market to at least drift higher into the Fed meeting where we’ll hear how accommodating the Fed will continue to be. When you boil it down it comes to price. Know your exits.
Sunday, March 17, 2013
The Big Wave Trading Portfolio remains under a BUY signal that was reinitiated on 3/5/13 following a quick, yet ugly, pullback. However, while we are under a BUY signal we are very cautious up in these stratospheric levels in relation to the major market indexes respective 200 day moving averages. That being said, as we know, the trend is your friend until the end when it isn’t. Overall, the low volume new highs is problematic on a technical level and at the same time is getting problematic on a bullishness level. Before 2008 there is no time in the history of the United States stock market you could find the stock market rally on low volume to new highs, sell off on heavy volume, and then make new highs on lower volume. Yet, that has been the same pattern since 2010. Over and over. Eventually, it is going to end and when it does it will be ugly. While there could easily be more new highs and further upside, the fact that we are getting such an extreme level of bullishness in the Investors Intelligent survey is worrisome. With bulls now at 50% and bears at 18% we have some very extreme reading seen before market pull backs. Like I said while more upside is possible, and would be welcome as per our current holdings below, we are aware of how frothy stocks look up here. On top of the extreme level of bullishness and bearishness in the II Survey, we have seen Richard Russell go long and have seen Mila Kunis finally enter the stock market as it is clear stocks do nothing but move higher. Right? Well, we will see. Going into this holiday-short week, we will remain cautious bulls and position any new long trend following signals accordingly. However, holding current longs and looking for exit signals is going to be the priority. Have a great week everyone. Mahalo for reading and aloha from a Kona-wind blown-out west side of Maui. Top Current Holdings – Percent Return – Date of Signal CSU long – 115% – 9/4/12 CAMP long – 90% – 4/26/12 HIMX long – 76% – 12/19/12 EAC long – 72% – 12/17/12 POWR long – 71% – 12/11/12 HEES long – 71% – 9/4/12 FLT long – 56% – 9/6/12 CPSS long – 44% – 1/31/13 AXLL long – 44% – 1/4/13 WAGE long – 41% – 1/8/13 GNMK long – 37% – 11/16/12 ASTM short – 35% – 7/17/12
Thursday, March 14, 2013
Once again the Dow was able to close higher as volume jumped on the day. It was nice to see volume expand above Wednesday’s level. However, volume remained well below its 50 day volume average. We can’t have everything. Jobless claims fell less than expected a sign perhaps the labor market is improving or there just aren’t that many people working to sustain a high level of job losses. Producers prices came in as expected. It appears we have carbon copies of intraday action with this market. We near lows of the session around 2pm EST only to find buyers pushing us back to the highs of the session. Sellers simply cannot find any footing to sustain any pressure. Thus, we have a lack of fear as seen with the VIX hitting another 6 year low. More gains in our uptrend and we aren’t about to argue with the market. Sentiment has swung back in the favor of the bulls with every sentiment survey showing a healthy amount of bullishness. While we do have quite a bit of bullishness we aren’t at extremes. One extreme we are at is with the II survey showing bears at 52 weeks lows. The reading of 18.8% hasn’t been seen in quite some time. AAII bears register at 32%, but the individuals in this survey typically flip flop and is difficult to get a solid reading of sentiment. On the other hand, the II survey of professionals tends to be a bit more smooth and reliable. NAAIM survey showed the positioning of its members fell a bit, but still well in the bull camp. We aren’t in extreme territory for the bulls, but with II bears in an extreme territory may at the very least signal a short-term top is nearing. We simply cannot know whether or not today was the high of the year. There are plenty of signs this market can still go higher despite the risks involved with endless QE. Inflation, so far remains tame and we’ll get a reading of CPI tomorrow prior to the market open. If you have gone to the gas station and/or grocery store you know prices have been steadily rising. However, I doubt these price increases make their way into the figure tomorrow. The government uses techniques to distort the truth in the inflation figures. Any hints at a possible early end to the Federal Reserve’s QErever plan may scare the markets. Anything is possible and if you follow price and leading stocks your trading results will be just fine! Make it a great weekend and as always cut your losses short.
Wednesday, March 13, 2013
A surprise uptick in consumer spending helped boost the market in the early going. Advanced retails sales jumped in the month of February by 1.1% (seasonally adjusted) much more than the expected .5%. Import prices rose 1.1% more than the expectations, but retail sales overshadowed the higher prices. Another early morning dip was once again found support as buyers stepped up to push the market to the highs of the session. Volume was lower than Tuesday’s level and it was even lower than Monday. Monday’s are notorious for light volume days and to see such a light volume day on Wednesday is not normal. We aren’t going to argue with the market and if it wants to reach these heights we are okay with it. To quote Buzz Light Year: “To Infinity and Beyond!” What was interesting about the retail sales figures is in order to get the jump in the number the government had to “seasonally adjust” the number. Actual sales fell on the month! Gas stations were the biggest benefactor of consumer spending in the month of February. With gasoline prices as high as they are it isn’t that hard to figure out this is where the consumer’s cash is going. Tomorrow we’ll get to see more Jobless Claim figures as well as PPI figures and endless squawking over the state of the economy. Volume has been low and we have certainly pointed this out to you. Options expiry weeks tend to have inflated volume capped off with Friday’s seeing tremendous volume. We do find it odd during an option expiry week we simply do not have the volume. Sure some of the stock trading volume has moved to options, but can it explain all of the volume loss? It is an interesting question and one that will not help your trading. However, it is still interesting to ponder where the heck everyone went! This market is in an uptrend and the small gains we have experienced since e last week’s follow through has frustrated many. We may have turned a new leaf and these types of gains are the ones we should expect moving forward for uptrends. No one knows, but the important thing here is to remain disciplined and do not try to be a hero. Cut your losses.
Tuesday, March 12, 2013
Another late afternoon lift helps send the Dow into positive territory to end the day’s trading session. Just after 2 pm stocks sat near the lows of the session, but buyers stepped up keeping the market from pushing lower. Volume ended higher on the day, but the early high run rate fell as the market moved higher. At this point volume hasn’t mattered to this market whatsoever. However, it does provide a nice talking point. Not too many standouts on the day, but AAPL resumed its march lower as the stock continues to remain in no man’s land. The S&P 500 and NASDAQ did notch technical distribution days. Despite the distribution the support at the lows we aren’t going to be a lot of weight on the day. We remain in our uptrend and until we see distribution pile up we’ll change our approach. Two leading stocks who had tough days were SLCA and EVER. Both stocks had been moving quite nicely but a secondary offering and downgrade both stocks find themselves under pressure. SLCA issued a secondary offering, but the stock found support. Like SLCA EVER was downgraded and it too found support by the close. This type of action will shake a lot of people out of positions especially without a game plan. If you have defined positions size, entries, and exits you will not be so easily shaken out of positions. Tomorrow’s advance retail sales will be the talk of the financial media tomorrow morning. The question they will try to answer is whether or not the Payroll Tax hike had any effect on consumer spending. I would expect it would not greatly move it one way or another just yet. We can sit here and waste time trying to figure out if the consumer was hurt or not. We are in an uptrend and price is much more important to us rather than guessing. Stay disciplined and always cut those losses short.
Monday, March 11, 2013
For the 7th straight day the Dow Jones Industrial Average closed higher. Volume fell across the board, but this is normal for this uptrend and Mondays. VIX fell to new lows as buyers continue to show extreme complacency. AAPL reversed off its lows in the afternoon pushing the NASDAQ to new highs on rumors of a “plan” for their cash. The stock is so beaten up any rumor will force shorts to flee for the hills. The Yen and Pound continued their declines as both currencies appear to be racing towards zero. Although it appears the Yen will likely win this race. We aren’t surprised by new highs and we’ll continue to operate on the long side of the market. There weren’t too many negative signs in the market other than the extreme light volume. NYSE volume was extremely low and you have to wonder where the institutions are. Where did they go? KORS a leading stock dropped below its 50 day in high turnover. The stock has continued to struggle after reporting earnings. SLCA issued a secondary after the bell and this leading stock will need to prove it can absorb the excess supply. The Fed’s money printing has seemingly put a floor in the stock market and any downside will be limited. However, we know better and we will continue to work our process. Wednesday is a big day for the markets as we get a reading on February advance retail sales. Many have made a big deal over the pay roll tax increases. WMT stock price has ignored the internal memos regarding sales. TGT has broken into new highs despite consumers having to deal with higher taxes. It will be most interesting to see how the market reacts to the release. Friday’s job report was finally a good sign, but we’ll need to continue to see jobs created a large pace. Unfortunately with the Federal Reserve printing $85 billion a month and continuing ZIRP. At some point either the Fed or the market will stop QE and ZIRP. We need a healthy economy without endless money printing.
Saturday, March 09, 2013
The Big Wave Trading Model switched back to a BUY mode on 3/5/13 following a switch to a NEUTRAL mode on 2/25/13. The switch to NEUTRAL on 2/25/13 in our analysis of over 130 years of stock market history should have not switched back to BUY mode so quickly. The price breaks on 2/20 and 2/25 have historically led to months of choppy trading or started downtrends outright. The fact that we switched back to BUY mode so soon is historically extremely out of the norm. However, this entire market choppy and slow uptrend from the 2009 lows coming on such below average weekly and monthly volume is also historically extremely out of the norm. Huge volume selloffs are quickly absorbed and new highs, not on higher volume but, on lower volume are soon followed. As we have stated before, nowhere else in the history of the United States stock markets can you ever find this trend. Low volume rallies have always been quickly destroyed by higher volume selloffs or do not last long and are followed by heavier volume accumulation to the upside. The odds times continue. On that note, that means the only logical thing to do is to follow price here and be very careful with the size of long commitments. While Big Wave Trading misses the days when we plunged on margin, today’s market environment does not bode well for that type of investing. A more conservative approach is respected here knowing that a 2010 and 2011 shock experience is always just around the corner with a low volume market rally. Therefore, we will continue to operate on the long side enjoying the paltry gains we see below (paltry in comparison to the gains we produced before the QE and ZIRP world we have been living in since March 2009), until a clear trend change becomes apparent. For now, the trend is up. We will obey our master–Price. Top Current Holdings – Percent Return – Date of Signal CSU long – 115% – 9/4/12 CAMP long – 95% – 4/26/12 HIMX long – 84% – 12/19/12 HEES long – 71% – 9/4/12 EAC long – 65% – 12/17/12 POWR long – 64% – 12/11/12 FLT long – 58% – 9/6/12 AXLL long – 36% – 1/4/13 WAGE long – 34% – 1/8/13 PFBI long – 31% – 11/19/12 CHUY long – 29% – 1/10/13 CPSS long – 26% – 1/31/13 V long – 25% – 8/31/12 GNMK long – 25% – 11/16/12
Thursday, March 07, 2013
Better than expected Jobless Claims figures helped start the market off in the green. Around the globe markets lifted on continued hope endless money printing will assist in ushering in economic growth. Volume ended mixed with NYSE volume expanding while the NASDAQ saw volume shrink. There isn’t anything from this market after this week to give us pause our market cannot go even higher. Things weren’t all great with the market moving lower in the early afternoon before buyers stepped back up. Closing near the highs of the session we get another bullish day in our uptrend. We have escaped a critical time frame in an uptrend with the first two days avoiding distribution. The likelihood of the market failing now drops considerably. A distribution day after a follow-through day is never a good sign as the failure rate above 90%. Another good sign for this uptrend is the lack of bullishness in the AAII survey showing Bulls only at 31%. I would expect after this most recent rally the number of bulls rise. However, the NAAIM Sentiment survey shows investment managers are 90% invested on the long side. This reading is quite high, but off the highs set in January. It is clear the Federal Reserve’s QErever has market participants feeling any selling will be brief. Tomorrow’s job report will be a big focus for Bloomberg TV and CNBC. Does Fox Business count? None of them count unless you need to see scrolling quotes. Given the Fed’s stance on unemployment we simply cannot see a scenario where the market will view the report as negative. Perhaps a big decline in unemployment would trigger the market participants to think the Fed will reduce QErever. A positive would be to see job growth outpace growth in food stamp participants. We still are seeing plenty of stocks to get long in this uptrend.
Wednesday, March 06, 2013
A positive reading from the ADP employment survey helped fuel stocks early pushing the Dow further into all-time high territory. BAC helped push the Dow as the stock aims to hit new highs on strong volume. By mid-day the markets were off their highs awaiting the Federal Reserve’s Beige book. The Federal Reserve noted growth in the economy due to gains in housing. Initially pushing stocks off their lows it appeared the Beige Book would send the stocks into new highs on the day. The rally would stall out just after 3pm. A late day small push off the lows by the bulls kept the major indexes from closing on their lows. It was good to see the market avoid distribution just after hitting new highs. GOOG and AAPL were drags on the NASDAQ today. AAPL continues to act poorly while GOOG pulls back after two big sessions. Both companies are fighting over the smart phone universe and both stocks are heading in different directions. A key point in both stocks is their relative strength. Focus on stocks with high relative strength and in the case of GOOG and AAPL is demonstrates the importance of relative strength. A few IPOs continue to act well. Our Platinum members were alerted to EOPN Monday morning to its potential. When IPOs act well you can bet the market is healthy. We’d love to see stocks like EOPN and EVER continue their moves higher. There is a lot of chatter about how far this market rally can go. Does it really matter where it ends when you focus on your exits? Sure, we’d love for this uptrend to never end and we go up every day. However, we know this is simply will not occur. No one knows how far or how long this will last. Therefore, we must have exits we know maximize our potential to take the maximum gain possible from the market. Otherwise, we’ll be leaving gains on the table and we strong dislike leaving gains on the table. Stick to your game plan. Let your winners fly and cut those losses.
Tuesday, March 05, 2013
A better than expected ISM Non-Manufacturing reading on the back of strong new orders helped push the market to the highs of the session. Volume expanded on the day a good sign for the markets as the NASDAQ had a follow-through day. AAPL reversed its downturn heading back to a key pivotal point. GOOG continued to power higher along with YHOO and AMZN. The last 30 minutes of trading certainly helped the NASDAQ as the final hour did not start well. It appeared sellers were going to take over and leave a big blemish on the day. However, buyers stepped up and saved the day. New highs across the spectrum and we are now back in uptrend mode. The recent action was quite volatile and many were calling for a broadening top. Unfortunately, the pattern is not a great indicator of market tops and it was debunked today. Tomorrow may be a different story, but all we know is the market wants to continue to hit new highs. The market will turn to Friday’s job report for hints at an improving economy. At this point if anything points to the Federal Reserve pulling in QE will be bearish. Given the pathetic GDP growth one would conclude the jobs report will not be good and in turn bullish for the market. We are going to follow our process and execute flawlessly. There is plenty of debate on where the market will head from here. We will tell you that we have do not have a clue if this will continue or not. All signs point for this market to continue higher, but there aren’t any guarantees this will be the case. Sure, endless QE should keep this market a float. Will conventional wisdom be right? Remember, to cut your losses and ride your winners.
Monday, March 04, 2013
Stocks moved higher despite the Shanghai dropping 3.65% as the country tries to solve its real estate issues. Intraday volatility continued, but stocks were able to find their footing after the lunch hour. Lows were set just after noon time and did not look back. Volume throughout the day ran well under Friday’s levels. We aren’t surprised volume was running lower as we have seen Mondays have been low volume days. GOOG and AMZN lead the NASDAQ along with YHOO while AAPL continued to lag. Today’s price action is bullish, but we still remain in Neutral mode and looking for a follow-through day. AAPL continues to remain weak and we are not surprised one bit as the stock has been in a downtrend for quite some time. We can point to many different reasons for the stock’s decline. Does it matter what reason we pick? Not one bit. At this point you will have many trying to pick a bottom in the stock and will fail miserably. The stock does have a pivotal point of 435 and a move above that would be a buy signal. We can’t predict moves and can only react to how the stock moves. GOOG broke out to new highs on big volume today showing the big cap technology stock continues to see accumulation. Perhaps GOOG Glass will be a big product break through adding to GOOG’s bottom line or not. The action in this stock while not ideal is quite bullish. At this point, you are chasing the stock if you are thinking of buying it here. If we get more stocks acting like this we’ll see this market push to new highs. Tomorrow’s economic release will be from the ISM Non-Manufacturing. Later in the week we’ll get the Fed’s beige book. While these will provide an excuse for the market to move and we’ll be ready to react. Short-term Trends TICKER ST TREND TREND CHANGE DATE CLOSE % SPY DOWNTREND NO CHANGE 3/4/2013 152.92 0.53% IWM DOWNTREND NO CHANGE 3/4/2013 91.13 0.26% QQQ DOWNTREND NO CHANGE 3/4/2013 67.68 0.45% USO DOWNTREND NO CHANGE 3/4/2013 32.40 -1.04% UNG UPTREND NO CHANGE 3/4/2013 19.45 1.99% GLD DOWNTREND NO CHANGE 3/4/2013 152.30 -0.09% SLV DOWNTREND NO CHANGE 3/4/2013 27.60 -0.07% DBC DOWNTREND NO CHANGE 3/4/2013 26.84 -0.37% FXY UPTREND NO CHANGE 3/4/2013 104.86 0.10% FXE DOWNTREND NO CHANGE 3/4/2013 129.13 -0.03% TLT UPTREND NO CHANGE 3/4/2013 118.9 -0.53%