Tuesday, July 30, 2013
The NASDAQ hit a new multi-year high prior to noon time only to see sellers rush in and quickly move the index to its lows of the session. The S&P 500 was unable to sustain its morning gains too despite the efforts by technology names. Industrials and utilities helped push the SPX into positive territory. Consumer Services was the largest drag. Volume was up on the session across the board, but like most summer trading sessions volume ran below average. It is not big surprise volume is below average with the Fed on tap to deliver its policy statement tomorrow at 2pm. This uptrend remains intact given the price action we have in front of us. So many are concerned over the actions of the Fed tomorrow and are trying to gamble with how the market may or may not react. You cannot be 100% sure how the market will or won’t react to whether or not the Fed talks taper or not. It is pretty clear at some point they will taper and finally end the QE program. When is another question to be answered only by the Fed. Many do believe it will start sometime this year and with the falling budget deficit it will be interesting to see if the Fed will become the soul purchaser (monetizer) of US Treasury debt. Or will they simply taper their purchases. All fun questions to ask, but it is no way to position yourself to make gains in the market. FB gave a classic entry after posting earnings last week. The stock hasn’t looked back since it took a breather on Friday. There have been plenty of naysayers, but price action clearly shows there is a bias to the upside. AAPL was leading the charge along with FB, but pulled back from its high of the session. There is clear resistance at the February, March, and May highs. It will be interesting to see how the stock reacts at these points. A rising AAPL price is certainly a gigantic positive for the NASDAQ. Aside from the Federal Open Market Committee policy statement release second quarter GDP is set to be released. According to Bloomberg the consensus figure is for 1% annualized growth in the second quarter. Quite pathetic as the Fed has been pumping $85 billion a month since December and one percent growth seems quite pathetic. Common consensus says a higher than expected GDP figure would push the Fed to taper sooner rather than later. How the market reacts will be how we react. We will not try to game the direction of the market. Stay with the trend.
Monday, July 29, 2013
A quiet day on Wall Street today as summer trading continues. Many are likely still trying to recover from their weekend festivities. Perhaps many were with Steve Cohen. Pending home sales weren’t as bad as the market was looking for, but was still negative month over month. Dallas Fed Manufacturing activity index was lower than expected coming in at 4.4 (expectations were for a reading of 7.5). The market was able to find its footing just after the European close. NYSE volume ran just below Friday’s level and closed that way too. NASDAQ saw volume drop too. Major indexes were able to avoid distribution given volume was lower on the day. Today was not a game changer as this uptrend continues to march on. The talk of the town continues to be whether or not the Fed Chief Ben Bernanke will hint or talk about tapering the Fed bond buying program. QE and ZIRP have destroyed those who have saved by compressing short-term and long-term rates forcing folks into riskier assets. How does this translate to how we react in the market? It does not, but as a matter of policy debate we can certainly point out how much we have destroyed the earning power from savings. Who wins out Wed the Doves or Hawks? Leading the S&P 500 higher today were utilities. Despite the 10 year yields rallying slightly today utilities found love. On the downside the two notable groups lower were Financials and Oil & Gas. While Oil & Gas lead to the downside losing .84% Financials were down .72%. If it weren’t for the Financials earnings growth would be downright dismal. ZeroHedge has been quite vocal on this point. Financials or XLF is one sector to watch. While a pullback is normal, but if the group turns into ITB/XHB would be a big red flag for this market. Until then, there is no reason to think this uptrend can’t continue. We can guess if the market has topped or not, but we simply do not have evidence it has done so. Yes, housing stocks have rolled over and are poised to continue lower. However, they are really the only group looking like the downside is the path of least resistance. Cut those losses.
Saturday, July 27, 2013
The Big Wave Trading portfolio remains under a BUY signal with only a minor amount of pressure on the indexes following the weak price action on Tuesday and Wednesday in the overall market. Besides that there is no pressure in our model as leading stocks, speculative stocks, and the overall market continue to trend higher in lockstep. With this being the case, it does not make much sense to drone on and on about the minute details of the trading action the past week. It was a very successful week in terms of playing straddles/strangles before earnings on a few stocks like FB, BIDU, and TRIP and buyable gap ups remain the best way to return alpha in this low volume uptrending market. Overall, it was a decent week with not much to dissect or psycho-analyze. There is no need to waste any more of your valuable weekend time. Enjoy the rest of your weekend and I wish you the best during the upcoming week. Aloha!! Top Current Holdings – Percent Gain since Signal Date – Date of Signal RVLT long – 191% – 3/26/13 CAMP long – 167% – 4/26/12 POWR long – 143% – 12/11/12 FLT long – 103% – 9/6/12 CSU long – 91% – 9/4/12 HEES long – 91% – 9/4/12 WAGE long – 90% – 1/8/13 SBGI long – 64% – 3/22/13 ADUS long – 64% – 4/22/13 INSM long – 50% – 4/19/13 V long – 50% – 8/31/12 TECUA long – 47% – 2/5/13 WDC long – 42% – 1/9/13 MEI long – 41% – 4/10/13 LGF long – 38% – 4/19/13 CHUY long – 37% – 1/10/13 GLL long – 34% – 2/14/13 GMCR long – 34% – 4/23/13 ADS long – 32% – 12/11/12 PFBI long – 31% – 11/19/12 WST long – 30% – 1/22/13 BEAV long – 28% – 3/5/13 CCF long – 26% – 6/28/13 DDD long – 25% – 4/30/13
Wednesday, July 24, 2013
A big jump in New Home sales failed to get the market going as the homebuilders sold off hard on the news. The talk of the street was AAPL earnings and the stock’s big move on the day. Without AAPL the NASDAQ would have notched a day of distribution. The S&P 500 could not escape distribution settling down .4%. Even though the NASDAQ did not suffer the same fate as the S&P 500 it did give up almost all of the gains had at the open. Not typically something you want to see in an uptrend, but it isn’t a gigantic red flag. In after-hours trading we had quite a few earnings moves setting up nicely in the morning. We are still without enough distribution days and negative price action to call the end of this uptrend. While we may be long in the tooth we don’t have the proper signals telling us this is over. AAPL was an earnings winner as many were calling for an atrocious quarter from the technology giant. More earnings in the after-hours session will help set the tone tomorrow at the open. Earnings gaps have been a great way to play earnings season. Stocks must meet certain criteria before they can be considered, but they can be quite profitable. Homebuilders sold off in heavy volume and it comes to no surprise even with a big jump in new home sales. ITB and XHB are certainly struggling and while the housing data points to a positive outlook perhaps fundamentals truly are best at tops. In addition to ITB and XHB another key sector looks to be rolling back over and that is XLU. After rallying along with bonds (yields falling) yields raced higher today putting pressure on Utilities. Utilities are far from sexy, but along with Housing this sector is seeing quite a few headwinds. You’ll find plenty top callers in this market. It has proven to be a fool’s game trying to game a market top. Don’t call tops and ride your winners.
Tuesday, July 23, 2013
Earnings season continues and the prevailing theme is for companies to beat on the bottom line, but fall short on top line growth. There are many things we can extrapolate, but in the end it won’t help our bottom line. A big miss from the Richmond Manufacturing index highlights weakness in the Northeast manufacturing sector and the market reactive negatively to the news. Spending majority of the day near the lows of the session the NASDAQ pushed into new low territory just before the closing bell. Not the type of action you want to see from a price action stand point. The NASDAQ did post a day of distribution and has been piling on a few days here. It is something to keep an eye on despite this market remaining in an uptrend. Much will be made of AAPL’s earnings release. At this time they have yet to release earnings and I’ll make a note of them when they do report. The stock has been a drag on the entire market especially the NASDAQ yet it hasn’t kept the NASDAQ from gaining nearing 19% YTD. I suspect a sharp rise in the stock will have many shorts running for the hills. Initial reaction to earnings: It appears AAPL beat estimates and its guidance is sort of inline. The reaction is positive at the moment, but the stock will need to clear some levels before any long signals are generated. Any positive news for AAPL will benefit the NASDAQ greatly and push the index higher. Stay tuned. The insane stock moves after earnings releases, makes it very difficult to hold into the report. If you do not have a sound process you will certainly lose your nerve during earnings season. If you hold an abnormally large position and are stuck it is likely your position size is too large. More often than not many traders simply do not understand risk management and adopt the “go big or go home” mentality. Unfortunately, this is not the type of approach you want in this market. The idea is to stay in the game for a very long time not just a few minutes. Make risk management a priority.
Monday, July 22, 2013
Today was a quiet day in the Market as participants ease back into trading from the summer weekend. Existing home sales disappointed where by sales dropped 1.2% month-over-month. Clearly higher rates have put pressure on the housing market. Chicago Fed Activity index show a slight drop of .13, but who really follows this index anyway. The disappointing housing figures helped push the market higher. When there are no sellers it is quite easy to push the market higher with very little volume. Volume dropped from Friday’s option expiry inflated figure, but we weren’t really expecting volume to surge. The S&P 500 hit a new all-time high on small gains, but hey it is still a new high. Distribution really isn’t hounding the market and we still no reason to call a top here. This market continues onward and upward with this uptrend despite those who continue to fight the trend. Earnings continue to be the focus and MCD delivered its results prior to the market open. Unfortunately, it missed its estimates and the market punished the stock throughout the day. Overall, those who eat less MCD tend to be a bit healthier people in general. MCD clearly weighed on the Dow Jones Industrial Average and the stock does appear to be entering into a downtrend. MCD is not a typical name we’d be involved with, but given its price action to date we’d avoid the long side. Housing stocks will begin to deliver its earning releases shortly. ITB and XHB continue to look very top h heavy. ITB looking the worse out of the two, but both clearly are struggling at the moment. Nothing in this QE/ZIRP driven market would surprise us, but it does appear the housing stocks are set to go lower. PHM reports before the bell on Thursday and it appears to be rolling over. So much of the economic recovery talk has been surrounded by the housing recovery will make this week interesting. SHW disappointed with its earnings, yet HD and LOW are near or at highs. LL reports on Wednesday too. HD and LOW do not report till the middle of next month. Keep an eye on housing stocks as well as to those who are tied into it. Gold and silver pushed off their lows nicely today. Certainly here in the short-term a bottom is in place. We have certainly seen a few cover here. Does it mean gold and silver are headed back to 2012 highs? It does not. We’ll be patient and wait for proper entries and use proper risk management before entering into any trade. Nice way to kick off the week with gains. Stick with the process and have a great week!
Saturday, July 20, 2013
The Big Wave Trading Model remains under a BUY signal with very little data weighing against its current signal. The stock market climbed higher, across the board, this week and despite the lower volume there remains very little to zero selling pressure in the current tape. Friday’s intraday action confirms that above analysis as a morning gap lower found support early on the SP-500 and DJIA and mid-day for the Nasdaq. This kind of action, following a gap lower, is very constructive and says a lot about the strength in this market considering how extended the major averages are from their respective 200 day moving averages. We are not in the business of attempting to call tops at Big Wave Trading. We simply move like water with the market. As the market’s trend flows upward, we will ride that wave accordingly. When the shift comes, we will be quick to hedge our positions and sell off securities that violate trailing cut loss levels or key moving averages. Despite the strong market and our success this year, we have no interest in trying to limit the gains by trying to anticipate a turn in the market here. Therefore, there is nothing to do here, currently, but ride the trend higher until it does turn. When we see another day like 5/22 we will start a hedge and then operate around that hedge according to the price action in the market. Right now, we have a lot of momentum inherent in this market and based on past historical strength like this, we expect more bases to be formed in the coming months and a resolution to the upside. However, we are not betting on this information and only using it as a possible guide to the upcoming rest of the year. If the market begins a selloff, starts making lower highs and lower lows, with leading stocks breaking down hard, we will be very quick to sell out our long positions and move to the short side. However, in this tape, betting on the short side has continuously been a losing proposition and not one we are interested in entertaining as long as the fed’s liquidity injections via POMO/ZIRP/QE continues. One day the uptrend will end and when it does the short side will be extremely profitable to trend traders. For now, though, the trend is up and I will be more than happy to ride it much higher if it does have much higher to go before the inevitable sell off happens. I would not mind at all if this market went parabolic before climaxing and reversing lower. It would make for a much more profitable venture for our current long positions and give us a better base to begin our short side work on. Right now, that is all forward thinking and planning. The reality of today is a market that is hitting new highs on low volume with no sellers above. To bet against a continuation of this trend would be to make a major gamble against history. One day we will not hit new highs. Until that day happens, I do not advise fighting this tape. I know a lot of traders that decided to do this on 5/22. I got a lot of messages and emails telling me that 5/22 was the top. How do you think these “traders” feel now? Based on my near 20 years of doing this for a living, I can tell you almost for sure that they more-than-likely still believe they are right. Too bad the stock market doesn’t care about what they believe. Either you want to be right or you want to make money. Which is it? I can tell you which one we focus on at Big Wave Trading. I hope you are choosing correctly. If not sooner or later your bottom line results will let you know if you chose correctly. Have a great rest of your weekend and I wish you all the best during this upcoming week. Aloha from the gorgeous island of Maui where all of us that live here are 100% grateful to call this our home. Top Current Holdings – Percent Gain Since Purchase – Date of Signal RVLT long – 196% – 3/26/13 CAMP long – 167% – 4/26/12 POWR long – 150% – 12/11/12 CSU long – 104% – 9/4/12 HEES long – 98% – 9/4/12 FLT long – 95% – 9/6/12 WAGE long – 86% – 1/8/13 ADUS long – 66% – 4/22/13 SBGI long – 63% – 3/22/13 INSM long – 61% – 4/19/13 WDC long – 59% – 1/9/13 TECUA long – 56% – 2/5/13 V long – 48% – 8/31/12 CHUY long – 46% – 1/10/13 MEI long – 43% – 4/10/13 GLL long – 42% – 2/14/13 LGF long – 37% – 4/19/13 PFBI long – 31% – 7/19/12 GMCR long – 31% – 4/23/13 WST long – 31% – 1/22/13 ADS long – 30% – 12/11/12
Thursday, July 18, 2013
Better economic data hit the tape helping push the S&P 500 to new highs. The Philly Fed manufacturing index came in well above expectations. Jobless claims fell week over week. It was certainly good news from the economic front and the market pushed higher. Volume rose over Wednesday’s trade but just was about average. Summer time trade tends to be light and today’s volume is not surprising. We remain in an uptrend, but given the after-hours reaction to earnings tomorrow will certainly be a fun day. We only have one day of distribution and see no reason to call a top. INTC and EBAY struggled after earnings putting pressure on the NASDAQ today. Tomorrow the NASDAQ will have even more pressure delivered by GOOG and MSFT. Both stocks missed earnings in a big way and both were getting hit hard in the after-hours session. GOOG and MSFT had been stars of this most recent rally from December. The NASDAQ can thank these two stocks for its rise in 2013. Sentiment check: we saw the AAII Bulls drop slightly to 47%. Bears did get back above 20% to 21%! NAAIM sentiment climbed over 60%, but overly bullish bets weren’t being placed. Sentiment still isn’t at an extreme point, but it is high. Combine sentiment readings with the percentage of stocks over their respective moving averages is a possible sign we could see at least some consolidation over the next few trading sessions. It is best to stick with the program and know anything can happen. GOOG and MSFT will at least make tomorrow somewhat interesting. Combine the crazy earnings action with options expiry should excite those who watch the market tick by tick. Have a great weekend.
Wednesday, July 17, 2013
Poor housing data kicked off the morning with Mortgage Applications falling along side Housing Starts and Building Permits. However, the data wouldn’t keep stocks from ending positive as Bernanke’s testimony and continued to press the Fed would remain accommodative as long as possible. Gold and silver didn’t buy the Fed’s Chairman Statement as both precious metals turned lower. YHOO shined after its earnings report Tuesday night. BAC jumped as well after reporting earnings earlier in the day. Volume was mixed, but NYSE volume can be attributed to the huge turnover in BAC. Tomorrow is a new day and the evidence we see continues to have us operate on the long side of the market and there is no sense in fighting it. EBAY and INTC reported earnings and the reaction is disappointing so far. EBAY is nearly down 5% after guiding EPS lower for the third quarter. INTC missed on revenues and while it is not trading down 5% it is in the red. On the upside IBM reported earnings and the stock’s reaction is quite positive. The stock is hanging above 200 price level. It will be interesting to see if the stock can hang above this level at tomorrow’s open. SCSS reaction after earnings was disappointing and the stock is down more than 8%. Quite the moves here in after-hours trading making tomorrow’s open very interesting. A quick note on sentiment from the II survey as bulls jumped above 50% while bears went under 20%. Last week we saw a similar spread between AAII Bulls and bears. We’ll post these numbers in tomorrow’s commentary. Sentiment is a tough gauge for market tops as they often hit extremes as the market continues to hit new highs. It does appear we are nearing an extreme point. An area of cautionary tone is the amount of stocks above their respective moving averages. At today’s close nearly 87% of stocks were above their 20 day moving average. 75% of stocks were above their 50 day while 79% of stocks were above their 200 day moving average. We are certainly at a point where a normal correction would occur. Will it occur tomorrow? It is anyone’s guess, but it’s a friendly reminder to make sure you stick to your game plan. Ben Bernanke is keen on keeping the market away from hearing taper talk. Will the Fed chairman simply just announce the taper out of the blue? Who knows, but at this point it seems likely as any mumbling of a taper sends traders scrambling. Cut those losses and ride your winners.
Tuesday, July 16, 2013
A better than expected Homebuilder sentiment reading failed to lift stocks and sent homebuilding stocks lower. Trading volume rose above Monday’s level, but again was below average. The major stock indexes did notch a day of distribution in technical terms. However, the damage was minor and we are considering this to be a light distribution day. The S&P 500 and NASDAQ Composite ended its win streak at 8 straight days of gains. Traders now await Ben Bernanke’s testimony tomorrow. There were pockets of weakness, but until we see more of this action this uptrend still is in play. TSLA was the talk of the town after the stock fell more than 18 points. The stock has had an amazing run since its initial breakout in April. The stock has more than tripled from that point to now. It is not unlikely to see the stock break after hitting new highs. If you bought the recent low volume breakout you are likely underwater and highlight a point of being nimble when buying extended stocks. However, if you are in from April you have plenty of leeway. Just remember to take profits along the way. If you have a sound trading plan you aren’t panicking over the move. If you are, come join us. Yesterday we pointed out the homebuilding sector as being weak. After initially climbing after the sentiment release the entire sector sold off. Today’s action highlights what you think may not necessarily happen. The price action as of late has been bearish, not bullish. Could the sector turn around after tomorrow’s release of Housing Starts and Building permits? The answer is yes, but given the evidence we have now it doesn’t seem likely. Stick with price and ignore the noise. There were plenty other leading stocks like XONE and SSYS who were hit today. It is not unusual to see leaders get hit, but when they begin to get hit all at once over a period of time it usually spells trouble for the overall market. Today was one day and we remain in an uptrend. Until there is sufficient evidence given to us from price we are going to stick to the long side. Maybe the top callers will be right here…or they won’t. Enjoy watching the fireworks go off courteous of the Fed Chief.
Sunday, July 14, 2013
The Big Wave Trading portfolio is currently under a BUY mode across the board, with the Nasdaq fully switching to a BUY signal on the 9th with the SP-500 and DJIA following on the 11th. These indexes now join the Russell 2000 which was placed under a BUY signal last Friday. The Russell 2000 is leading the current model switch and was able to build on the gains nicely the past week. Every index performed well this past week. It was nothing short of extremely impressive. What makes it even more impressive is that the rally in the overall market is on fumes. That goes for many recent breakouts in high priced highly liquid CANSLIM quality securities. Don’t get me wrong, there are plenty of leading stocks breaking out on volume. However, there have been too many TSLA, SPWR, PCLN, GOOG, AMZN, MCD type moves for my personal liking. At the same time, while I may not like it, it doesn’t matter. Those that are focusing on price action alone in leading stocks are enjoying their gains as long as they are buying at the exact pivot points in their technical consolidations. For those that can not watch the action all day, I will remind you that you can use buy stops to buy a stock as soon as it breaks out to new price highs. Even with the overall low volume, the rally is still impressive. Many stocks are moving higher on volume and many others are setting up in price consolidation patterns with solid accumulation/distribution patterns. I am sure that even if the market pulls back here, knowing that the Fed is in full-on QE/ZIRP/POMO mode, support should be found in the overall market. This hypothesis is based on the current technical patterns remaining as they are and in turn developing into even more bullish technical patterns in the upcoming weeks. If individual stock price patterns falter, this assumption on price action will be nullified. Still, the trend with POMO/QE/ZIRP is very clear. Pullbacks are to be bought and stocks can not sell off more than 10%. That will definitely change one day and this will definitely lead a lot of people that are greedy into the poorhouse but until then you simply can not fight the overwhelming trend. Calling tops has been killer to traders the past five years and yet I still see constantly on stock twits and facebook. It was not too long ago on 5/22 that so many new traders/investors were confident this market had top. Now these same traders find themselves underinvested and/or not invested at all. This is the purpose of the market. It is there to fool most of the people most of the time. Looks like they were fooled again. This is why in times like this, if you do not have a system, and invest on emotions, you are going to have a bad time. Emotions are a killer in the stock market. They can only hurt returns over the long run. You must learn to eliminate them, if you are going to learn how to hold stocks like the stocks you see listed below for the big long-term gains. The big money will always be in the sitting and in this market sitting has never been harder. Trust me. I don’t even come close to seeing the gains I saw in my personal accounts from 1998-2008. On top of that, stocks simply do not move like they used to. Compare the performances below to some of my past big winners and you will see times have changed. One day they will go back to normal. However, until that day happens, it is what it is and price action is all that matters. The trend is your friend until it bends at the end. Make sure that you don’t show up late to the trend and ride it lower when it bends and all the smart money is exiting. The Nasdaq has been up 12 of the past 13 stock market sessions yet I see many traders looking to get heavily long here. Seems a tad late to me. However, what do I know compared to what the market knows? The exact same thing you know. Nothing. The market discounts all. Price action is all that is real. Continue to follow price and ignore volume. In this QE world it is leaving many traders underinvested. You must learn to discount it. Have a great rest of your weekend and a wonderful upcoming week. Make sure you obey your systems, especially your stops. Always cut your losses short. Never ever ride a losing position and never ever add to a losing position. Especially in a melt-up tape like we have now. PS: Can you tell I just got done reading my third Jesse Livermore book of the summer? It is an annual ritual. I recommend it both for new and experienced traders. Once again, have a great weekend. Aloha from Maui!! Top Current Holdings – Percent Gain Since Signal – Date Of Signal CAMP long – 181% – 4/26/12 RVLT long – 165% – 3/26/13 POWR long – 150% – 12/11/12 CSU long – 107% – 9/4/12 HEES long – 95% – 9/4/12 FLT long – 93% – 9/6/12 WAGE long – 90% – 1/8/13 ADUS long – 86% – 4/22/13 SBGI long – 71% – 3/22/13 CHUY long – 69% – 1/10/13 WDC long – 54% – 1/9/13 TECUA long – 49% – 2/5/13 V long – 48% – 8/31/12 GLL long – 47% – 2/14/13 INSM long – 44% – 4/19/13 MEI long – 40% – 4/10/13 LGF long – 39% – 4/19/13 ADS long – 31% – 12/11/12 WST long – 30% – 1/22/13 DDD long – 27% – 4/30/13 BEAV long – 26% – 3/5/13
Tuesday, July 09, 2013
Sloppy action began the day as sellers immediately hit the open. However, just after 10:30 and during the Fed’s open market operations did the market find its footing and reverse course. For the fourth straight day the market saw gains, but volume ended mixed on the day. NASDAQ volume was higher on the day, but slid on the NYSE. Traders weren’t too active on the NYSE today. Perhaps tomorrow’s release of the FOMC meeting minutes is weighing on trader’s minds. Whatever it is, trading was not active today on the NYSE giving pause to this most recent rally attempt. Price action remains okay for the markets, but without a confirmation day it is looking like if this rally is to continue gains will be limited. Homebuilding stocks turned things around today. The group has been beat up for quite some time. Higher interest rates will certainly negatively impact buyers’ purchasing power. Price action in the names still needs some work to show any turnaround is possible. For now, we’ll keep an eye on the group for improvement. Any weakness will certainly be a sign of things to come for the group. HYG and JNK continue to act like junk despite HYG’s attempt today. It is anyone’s guess where rates will go next, but for now it appears higher rates are here to stay. HYG and JNK certainly have been hindered by higher rates. Even XLU has come well off its high set back in April. Anything related to yield has been taken to the woodshed. Until we get a signal otherwise, it appears these sectors will continue to be under pressure and see lower prices. It was interesting to see the XLF breakout today approaching May highs. Financials are an important indicator on where the market is heading. First we had Small Cap stocks breakout into new high territory and now with financials nearing a new high this is certainly a positive for the overall market. There are positive signs for this market and there are negative. Confused? Biased? Join Big Wave Trading and focus on winning.
Monday, July 08, 2013
The market got off to a good start thanks to Europe rebounding after Friday’s dismal performance. For the NASDAQ the high of the day would come shortly after the open and it would fall from there. The Dow fared the best today gaining 59 basis points, but it too was off its high of the day. Volume rose across the board. Friday’s volume figure was lowest for a full day of trading. Perhaps traders were still recovering from the holiday weekend. A boring day in the markets with sluggish price action and we are still without a follow-through day. Russell 2000 hit an all-time high today before pulling back, but the small cap stock index has been the best performer. It is a good sign to see the small caps to lead the way. However, we are 9 days deep into this rally attempt and the market has unable to secure a follow-through day. We could certainly get it tomorrow or a week from now, but even if we do we won’t be expecting much from it. Typically your powerful rallies will come from a follow-through day occurring on days 4 through 7. While we won’t rule out a new rally our expectations for gains will be tempered. Consumer credit rose much more than expected at 19.6 billion dollars. Expectations were for a rise of 12.5 billion dollars. Auto loans and student loans have been the primary driver of consumer credit and while many will take a rise in credit as a positive is it really just another bubble? We know student loan debt is an issue as the market has increased over one trillion dollars. At some point there will be a tipping point where we’ll no longer be able to support such a large amount of debt. Alcoa (AA) kicked off earnings beat street estimates. Expectations for second quarter earnings are quite high from Wall Street. However, pre-announcements have been negative. Follow price and have a process and ignore the noise. Stick with Big Wave Trading.
Saturday, July 06, 2013
The Big Wave Trading Portfolio is under multiple signals currently, as small caps are significantly outperforming big caps. Overall the Model is weighed mixed BUY to NEUTRAL with the Russell 2000 being under a clear BUY signal, the Nasdaq under a BUY/NEUTRAL signal, and the SP-500, DJIA, and NYSE being under NEUTRAL signals. For what it is worth, the Nasdaq will switch to a BUY mode with a new high printed on the index, with or without volume. As has been mentioned here every weekend since May 22nd, all signals should be taken with a grain of salt during choppy summer time sessions where volatility increases. This also being a QE/POMO market, all SELL signals must be taken with baby steps until a clear roll over on heavy volume is triggered in all major market indexes, leading stocks, ETFs, inverse ETFs, leveraged ETFs, and inverse leveraged ETFs. Unless there is a complete confirmation, funny money printed by the Federal Reserve will continue to act as a floor. In time that will change but for now betting against that trend is foolhardy. With the switch in the Russell 2000 to a BUY mode and a switch in the Nasdaq to a BUY/NEUTRAL mode, we can now operate a little bit more aggressively on the long side in small cap and technology related positions. We are also taking off our remaining hedges and are now only long individual stocks in the managed accounts. If the market decides to roll back over, we will not hesitate to start building our hedges once again. The biggest lesson to be learned this past week is that trying to call or predict a top in this market is, for now, not a very profitable methodology when the tape is dead. The saying “never short a dull market” comes to mind, first off. Second, “never short a QE/POMO market” follows right behind. The bottom line is that is just does not pay to be a “committed” bull or bear. This market remains very unfriendly to trends and trend followers, overall, and staying constantly neutral and flowing like water is the best advice I can give to anyone trying to navigate it. Overall, it is shaping up to be another no-to-low volume rally, following an above average volume sell off. This pattern was never sustainable before 2008 and now it is the norm for the past three years in a row. It is what it is. OK, it’s time for me to catch one last round of the nine-day swell that has been hitting my backyard in Lahaina. While the market hasn’t been full of action for trend followers lately, at least the Pacific Ocean has been for surfers. If you can’t ride one wave, ride another. Have a great post-holiday weekend. Aloha from Maui!! Top Current Holdings – Percent Gain since Signal – Date of Signal CAMP long – 175% – 4/26/12 POWR long – 140% – 12/11/12 RVLT long – 124% – 3/26/13 CSU long – 100% – 9/4/12 WAGE long – 93% – 1/8/13 FLT long – 89% – 9/6/12 ASTM short – 81% – 7/17/12 HEES long – 80% – 9/4/12 CHUY long – 68% – 1/10/13 SBGI long – 62% – 3/22/13 GLL long – 58% – 2/14/13 ADUS long – 52% – 4/22/13 V long – 48% – 8/31/12 WDC long – 47% – 1/9/13 TECUA long – 46% – 2/5/13 INSM long – 38% – 4/19/13 MEI long – 37% – 4/10/13 LGF long – 31% – 4/19/13
Tuesday, July 02, 2013
Another morning rally turned sour as sellers regain control. The market received positive news as total vehicle sales jumped more than expected. Once again the 50 day proved too much for the S&P 500 and Dow Jones Industrial average. Today’s volume was higher than Monday’s and not a positive for this market. We are still waiting for this market to confirm this recent rally, but the past two days have done very little to build confidence we will see a follow-through day. Tomorrow the market will close early and given the jobs report Friday it is unlikely we’ll see a follow-through day tomorrow. Tuesday’s market action mirrored closely to Monday’s action. Today we can at least blame Merkel and the demonstrations in Egypt for the sell-off, but they are simply excuses. Given the price advancement Monday morning the market would have had a short at following-through had Friday not been the day of the Russell index rebalances. Volume was there today, but price was lacking. Perhaps we’ll need to wait for Friday when we get the jobs report. Next week we’ll kick off earnings season. It will be interesting season seeing if Wall Street remains overly optimistic on earnings. Preannouncements have been on the negative side and not to mention we still have economic data to pour through. The financial media will have a field day speculating the actions of the fed. It is all noise. Focus on the process and stick with Big Wave Trading. Tomorrow’s day will likely be uneventful heading into the Fourth of July holiday. Please be safe and enjoy the day off!
Monday, July 01, 2013
The S&P 500 and Dow Jones Industrial average were both rejected at their respective 50 day moving averages despite better than expected ISM Manufacturing data. At 10 am the market received better than expected manufacturing data helping the market to jump to the highs of the session. Another test of the highs occurred just after noon time, but sellers took over. For the majority of the afternoon the major market indexes experienced selling closing well off their highs of the day. A late day rally helped stopped the bleeding. Small caps ended the day higher outperforming the S&P 500 by more than 80 basis points. Volume simply couldn’t compete and was below average. Not the type of action you want to see from a market trying to confirm a new rally. Day 5 of the attempted market rally was certainly an interesting day. In the early going it appeared we’d be able to confirm a new rally and be poised to run higher in front of second quarter earnings. The NASDAQ did fill the gap from 6/20, but was unable to close above it as sellers appeared to be waiting to unload on the market. Unlike the S&P 500 and Dow Jones Industrial Average the NASDAQ remains above its 50 day moving average. In addition, the Russell 2000 is above its 50 day and appears poised to break into new high territory. This certainly is a positive for both indexes and potential for a new rally to be confirmed. Anything can happen here, but it appears the Dow and S&P 500 are weighing the overall market down. All eyes will be pointing to Friday’s job figure. One big negative in today’s ISM report was the jobs picture. It wasn’t pleasant as the jobs index hit new lows. Hard to believe manufacturing is picking up that much without factories hiring. Could it be humans have simply been replaced to a point where manufacturing can pick up steam without having to hire? We’ll leave the guessing to the so called experts on CNBC and Bloomberg. As long as we ride our trends executing our strategy we’ll end on top no matter what the economy has in store for us. The morning started off great, but the ending was a lot less to be desired. We do live in the QE/ZIRP area where anything is possible. Stick with Big Wave Trading and we’ll lead you to success.