Big Wave Trading Portfolio And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio remains under a strong BUY signal from 1/2/13. There remains absolutely zero indications, via price action, that there is anything to do but ride the trend higher here. Despite the constant discussions of what is wrong with this rally and how extreme it is (we will go over that below), stocks continue to breakout from solid consolidation patterns with other stocks either trending up since breaking out or consolidating in preparation for possible breakouts. As long as we continue to see high quality stocks setup, consolidate, and breakout, we will remain buyers, despite the “overbought” conditions of the market. And trust me we are extremely aware about them at Big Wave Trading. While we remain buyers of stocks “up here,” we are being very selective and using appropriate capital for a market so extended. If we had more of our current holdings looking like they were putting in climax or parabolic type runs we would be more worried and would begin to hunt for protective put positions in the indexes. However, our longs continue to act orderly and do not exhibit the patterns seen at a market that is doomed to soon top. It still very well could but the price action in the market and stocks does not suggest that. We read all the headlines. We see all the news. For instance, 3-month sum mutual fund and ETF inflows are at 10 year highs, weekly mutual fund inflows are at 13 year highs, mutual funds have the least amount of cash on hand in 50 years, the VIX is too low at 13, the bulls are dominating the bears on the II (55 vs. 21) and AAII (43 vs. 30) surveys, and stocks are overbought on short-term oscillating indicators. That is all fine and well and we definitely take all bit of information into consideration as we prepare for the inevitable pullback. However, until it actually happens, there is no reason to take defensive measures now by selling stocks or eliminating new long positions. Imagine not buying the gap up in LNKD on Friday because you thought the market was too high. It clearly didn’t care what you thought and proceeded to move higher throughout the session. Therefore, until we get our 3-5 churning or distribution days in the market over a period of 2-4 weeks, we will continue to take long signals but keep the new positions relative to the overall safety of their pattern and the continuation of the overbought market. When the tide changes, we will take our profits when our signals are triggered and will add some protective put positions. Until then, the trend has been our friend throughout 2013 so far and until that changes it is wise to remain its friend. It will change. That you can be sure of. As of Friday, however, it is still up across all major market averages. Have a great rest of your weekend everyone. I wish you a very profitable upcoming week. Aloha from a very warm and sunny Maui. TOP CURRENT HOLDINGS – PERCENT RETURN – DATE OF SIGNAL CSU long – 70% – 9/4/12 CAMP long – 66% – 4/26/12 HEES long – 65% – 9/4/12 FLT long – 48% – 9/6/12 EAC long – 43% – 12/17/12 VRNM short – 43% – 4/10/12 POWR long – 39% – 12/11/12 ASTM short – 32% – 7/17/12 MNTX long – 31% – 1/17/13 AXLL long – 29% – 1/4/13 CPSS long – 25% – 1/31/13

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading portfolios all remain under a strong BUY signal as stocks tacked on more gains the past week with volume coming in higher than the previous week. Overall, it was another strong week and nothing out there is currently of concern on our radar. Despite the low VIX, the high amount of bulls in the Investors Intelligence survey, and lack of extremely strong volume when we do rally, we find nothing out there that indicates this rally is in danger of failing any time soon. As long as we continue to see breakouts and stocks setting up in tight consolidation patterns, we will continue to operate from the long side accordingly. While some stocks like SSYS and DDD are beginning to get ahead of themselves, overall there is still a lot of upside potential left in many high-quality CANSLIM stocks and stocks with low P/E ratios that offer high dividends. As long as they continue to move higher and set up as they are, there is simply no reason to be looking for a top any time soon. Since there is not much to do but continue to set buy stop orders on stocks nearing breakouts, there is not much to address this weekend. While I do hear some commentators trying to call a top, we believe that price is truth and fresh breakouts from strong consolidation patterns are more important than talking heads. We will become cautious on this rally after we either see stocks go into parabolic price gains on arithmetic charts, see stocks breakout and then reverse (like NTE recently) in mass, or see 5-6 distribution days hit the overall market in 2-3 weeks. Until we see this happen, as previously noted, we will continue to hunt for strong leading stocks setting up in consolidation patterns nearing breakouts and trade accordingly. Remember, even though the VIX is now below the 13 level, it can go much lower. In 2007 the VIX went below 9. That means that we could still see a substantial rally in US equities, despite the low VIX Top Current Holdings – Percent Return – Date of Signal CSU long – 65% – 9/4/12 HEES long – 56% – 9/4/12 CAMP long – 49% – 4/26/12 VRNM short – 44% – 4/10/12 POWR long – 33% – 12/11/12 FLT long – 32% – 9/6/12 ASTM short – 31% – 7/17/12 GNMK long – 28% – 11/16/12 HIMX long – 25% – 12/9/12

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio remains under a BUY condition across the board. This past week was further confirmation on the current strong technical condition of the overall market. While it is not perfect and we can argue about volume on the days we do rally, it is what it is and that is a strong current rally favoring all sectors and market cap size across the board. While this rally is incredibly strong right now with barely any selling able to move the market anything lower than .96% on the Nasdaq, when we do pullback, there are plenty of items out there that could be better. To start off with we hear a lot of chatter about the low VIX. While the VIX is low indeed it is still quite a bit away from the lows it was able to set in 2007 below 9. So to say it is extremely low is a bit of a stretch. However, we do realize that even though individual stocks are creating amazing patterns it sure is not like the amazing patterns we saw in 2003 when the VIX was around the 35 levels. That market had fear in it. This market is very complacent. But it is not an extreme. Also we note that cyclical stocks with dividends are doing better than growth stocks here on a Relative Strength basis. After four years of a market without a 20% pullback it is safe to say we are long in the tooth and if a final run is occurring it would historically match up with cyclical stocks leading and not growth. We can not predict when the market rally will end, and we certainly will place zero capital on that guess, but we do know that these stocks lead near the end of a long cycle. However, it is QEinfinity, the world is printing, and China is growing like mad with exports up 16% in the most recent report. Another item we hear talk of is the Investors Intelligence bull/bear survey. Currently the survey shows 51% are bulls compared to 23% that say they are bullish. That is in stark contrast to the powerful rally that started in 2003 when there were around 40% bulls and 55% bears. Once again, not a market full of fear that produces a fresh new bull market. While this is all interesting it is, once again, something you can place no capital on. It is just food for thought, in case everyone thinks that we are in for another 4 years of straight up prices. However, sadly, once again, we might, knowing the insane sociopaths that are in control of the economy and country. The one last talking point we have heard is that mutual fund inflows were the highest in 13 years right when the market topped back in March 2000. In contrast, mutual fund outflows peaked and continued leading into the 2003 rally. Once again, food for thought, but it is not actionable. Why? Simple, let’s say funds decide to put all that money to work and rally the market 25% before the top. Do you want to miss that 25% rise before “a possible” peak? Of course not. This is why all that matters right now is price. You set your buy stops and execute them when price breakouts of a trading range or a key moving average. It is that simple. You cut your losses if it does not work and you ride the trend until it ends or a trailing stop is hit. The key to this market is to not think. Just follow price. When you start running into bad luck, cut back on your trading more and more and more and more until things start working again. Once that happens, then begin to increase size. When you get the “perfect” or “best” or “most opportune” signal (as Jesse Livermore would say picking up a bag of money in the corner just sitting there) then you press. If you have not gotten that signal yet, maybe the market will consolidate and then breakout higher producing that signal. If this is going to be a real rally then we should rally into March, historically speaking. If this rally has left you behind, you still have plenty of time, if it is real. If it is not, you will be thankful you did not break your rules and chase price. In saying that, a lot of traders that missed YCS and DXJ have been waiting for a pullback. They are still waiting. Have a great weekend everyone. Aloha. Top Current Holdings – Percent Gain – Date of Signal NTE long – 121% – 8/17/12 CSU long – 61% – 9/4/12 VRNM short – 50% – 4/10/12 HEES long – 47% – 9/4/12 CAMP long – 44% – 4/26/12 ASTM short – 31% – 7/17/12 FLT long – 27% – 9/6/12 POWR long – 27% – 12/11/12 V long – 25% – 8/31/12

Dollar Falls and Stocks Shake-off Intraday Sell-Off

Shaking off a late morning sell-off the market was able to rebound closing near the highs of the session as volume pushed higher on the NYSE, but flat on the NASDAQ. The EURO raced higher after comments from the ECB rate announcement pushing down the dollar index. AAPL was the catalyst for both moves in the morning and late afternoon as the stock continues to move sideways after its most recent decline. The NASDAQ and Small Caps hit new highs for the uptrend a good sign for the market in the short-term at least. Our uptrend continues to play out and barring any price destruction should continue on its merry way. Gold and silver rebounded today after their most recent sell-off. Despite the Federal Reserve signaling a possible end to QE forever the metals have been able to rebound somewhat. Crude oil once again moved higher while the rest of the commodity space remained relatively flat. The inflation trade in stocks and commodities still lives. Sentiment has crept back to lofty levels for the market, but not at the highs previously seen. The AAII bull sentiment figure jumped to 46.45. This past year the high for the index hit 51.64 back in February of 2012. The market was still able to rally higher and set a new high for the rally showing sentiment is not a reliable indicator for the market. Bears came in at 26.92 well above the 52 week low of 17.18 set back January of last year. Neither sentiment readings are at extremes, but we are close. The Investors Intelligence survey showed bulls back above 50% at 51%, but no near the high of 58% set earlier. Given the recent action and the lack of ultra-bullishness it appears this market has some room to run. Tomorrow we’ll get a reading on prices on imports and exports followed by the Treasury Budget announcement at 2pm. The deficit is expected to come in at -1 billion dollars. Many took income in the month of January rather than in 2013 due to the fiscal cliff. It will be interesting to see how much money the Treasury will be able to net. I’d think the estimates are off and likely sway when the debt ceiling debate would begin. We can only speculate at this point, but something to keep an eye on. As we ride into the weekend, we expect to see this market hit new highs and stand ready to act as necessary. Cut those losses.

Volume Fades But Stocks Stage Rebound After Yesterday's Loss

A boat load of economic news hit the market early, but it was retail sales creating a stir. Better than expected retail sales certainly did not hurt things today, but you have to wonder with shrinking personal incomes at some point the cycle will break. Volume was running about even with yesterday’s level, but end of day volume yesterday due to end of the month rebalancing kept volume under wraps today. Leading stocks fared well today and continue to act well despite four days of distribution on the NASDAQ. A good, but not great recovery as the uptrend remains with some warning signals.

Sentiment did not change much from last week with a slight shift from bears to bulls. Neither end of the spectrum is at extremes. Despite the run up we have yet to see a big push from Bulls. While we did see bulls hit 50%, but they were unable to stay above this level for more than one week. Even the Investors Intelligence survey has failed to get at 5 year highs of 62% . 51.1% of respondents to the II survey are bullish, quite normal for the survey. Sentiment isn’t going to tell you much here and it won’t until we hit extremes.

What is another interesting point here is the VIX has unable to hit new lows while the market has hit highs. This may turn out to be nothing, but it is interesting buyers haven’t become completely complacent here. In fact, the number of stocks above their 20 day moving average sits just below 45%. Hardly the frothy levels we were seeing last week. Given sentiment, the VIX, and distribution days it appears we may be seeing a market looking for more sideways action prior to breaking out. A reminder, breaking out could mean to the downside. Have a plan of attack and execute it.

The jobs report is next Friday, not tomorrow. CNBC will have to wait another week parading in “experts” talking about the jobs market. Get out and enjoy the weekend!