Stocks Dive on FOMC Statement and Weak ADP report

Small cap stocks lead the entire market lower as the market didn’t respond well to the FOMC’s statement. At the beginning of the day the ADP employment report disappointed showing weak job growth for the month of April. ISM manufacturing did surprise to the upside, but contracted month over month. Economic data continues to be weak across the globe and we continue to see diminishing returns from QE. After the release of the FOMC statement the market found a bid. However, during the final hour sellers took over and pushed the market to the lows of the day. This market remains in no man’s land and on the verge of heading back to the lows of April. Dow Jones Transport index (TRAN) and the Russell 2000 (RUT) were beaten up badly. TRAN ended the day down 2.3% and closing below its 50 day moving average. The Russell 2000 dropped 2.5% and it too fell below its 50 day moving average. In April both indexes were able to find support despite closing below their respective 50 day average. Today’s move for both indexes certainly signals weakness and potential to head for April’s lows. Price action certainly is not telling a pretty story for both of these indexes. All eyes will point towards Friday’s job report after today’s FOMC announcement. An excellent point made by Bill Gross of PIMCO was not the amount of savings we should be worried about, but the cost of savings. ZIRP has completely eroded yield for savers and thus no incentive to spend. The incentives for investment are misplaced and until rates can rise and improve the cost of savings we’ll continue to see lackluster growth. Remember, the Federal Reserve a Central Planning body is trying to manage decentralized data. It is time to challenge ZIRP and QE. Given today’s move in TRAN and RUT certainly should give pause to bulls for the time being. Sell in May just might be turn out to be the thing to do? Stick with your rules and execute. Cut your losses and ride your winners

A hiccup at the Federal Reserve led the central bank to release their latest meeting minutes at 9am EST. Despite several members favoring tapering the money printing operation by mid-year the market took off. Leading the charge was the NASDAQ, but on the Russell 3000 it was the most heavily shorted stocks boosting stock market gains. The Dow and S&P 500 closed at historic highs while the NASDAQ was only able to muster multi-year new highs. We are a ways off from the all-time highs set in the dot com era. Price direction has been spot on here even faced with two slight sell-offs. Stick with the trend and for now it remains up! It is clear the market favors more QE than less. Last Friday’s job report shows this economy just can’t muster enough jobs. Will the QE program work remains to be seen. Again, we have put faith in the Federal Reserve will be able to allocate capital properly to ignite the economy. At least for now a few members within the Fed are keen on curtailing the program. For now our stock market likes it giving us an uptrend to work with and when/how this will end will be something to see. Technology stocks led the way today as seen by the NASDAQ Composite gaining 1.83%. Russell 2000 was right on the NASDAQ’s heels gaining 1.8%. Small cap stocks had been lagging as of late, but finally saw a bit of reprieve from underperformance. The Dow Jones Industrial Average finally lagged as we have seen the Blue Chip index lead over the past few sessions. It is good to see the NASDAQ and Small Cap stocks lead and we’ll like it even more if they continue to stand in front. Earnings season will ramp higher with $JPM and $WFC reporting earnings on Friday. Financial stocks have been the bread winner when it has come to earnings growth for the S&P 500. Bank earnings are particularly difficult due to how much or little the bank decides to release its loan loss reserves. Of course it is a big game and more importantly price will tell us everything we need to know. However, if bank earnings can’t sustain its recent pace the S&P 500 will need to find earnings growth from another group. We continue to operate in an uptrend and cut our laggards as we move forward.

Another Late Day Rally Lifts Stocks near the Highs of the Session

The S&P 500 continued its yo-yo action finishing in the green today as volume fell across the board ahead of the Non-Farm Payroll figures. Once again in the last 15 minutes buyers stepped up and pushed stocks higher into the close. It has become clock work at the end of the day buyers are appearing supporting the market. Jobless claim figures jumped more than expected just as momentum had been to the upside. Small caps were able to jump into the lead after lagging the broader market this week. Major market averages remain above their respective 50 day moving averages and we remain in an uptrend. Commodities fell again today even as the dollar rose on the day. Natural gas still is in an uptrend completely ignoring what is going on with other commodities. SLV and GLD continued to slide lower confusing many inflationist. Remember, GLD and SLV represent paper and are not replacements for actual coinage. There is a reason gold and silver coins are in high demand and is not translating over to the paper representation of the metals. The entire commodity complex is not saying to the market the global economy is healthy. Interesting to see the number of Bulls remain in the mid-30s from the AAII survey respondents. Bears remained in the 20s. II Bears continue to come in under 20% and bulls above 50%. QE certainly has kept many bullish expecting the money printing to keep prices high. This may be true, but we are in unchartered waters and with the Bank of Japan jumping the shark anything is possible. Tomorrow Non-Farm Payroll figure will dominate CNBC for majority of the morning. The Federal Reserve has now put the Unemployment rate in big bright neon lights. Given our PMI figures released earlier this week it wouldn’t surprise me if the jobs number comes in slightly under expectations. This is just a guess and I wouldn’t even bet my worse enemy’s money on what I think may happen. We are in an uptrend and while we are seeing signs of it weakening we aren’t going to guess when this uptrend will end. We’ll stay disciplined. Cut your losses and have a great weekend!

Stocks Claw Back after European Stocks Fall Hard

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.

Home Prices Jump as Stocks End in the Green in Extremely Light Turnover

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.

Big Wave Trading Portfolio Update And Top Current Holdings

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

Dow Winning Streak Continues as Volume Expands

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.

GOOG Soars past $800 Stocks Lift to New Highs on Light Trade

The market is able to shrug off a dip in homebuilder sentiment and move into new highs on the year. Small caps continue to lift despite ultra light volume in the IWM tracking ETF. Volume on the day was below Friday’s option inflated volume. NYSE composite came in second adding 73 basis points boosted by Oil and Gas sector followed by Utilities. High gas prices and higher payroll taxes appear, for now have yet to cause any impacts to consumer spending despite WMT internal memo leaked on Friday. Our uptrend remains and we are going to continue to stick to it until we see evidence to suggest we are going switch gears. Volatility continues to be compressed as this market continues to push to the upside. Fears of any shock in the market have subsided as we have yet to see any major hurdles arise. We have our exit strategy in place so we do not fear any move to the downside. However, it is interesting to see how much volatility has compressed since this market has pushed higher. There isn’t any fear out there. Whether that translates to further upside or not remains to be seen. We have our uptrend and are operating as such. Until we see distribution piling up and leading stocks breaking down then we’ll switch gears. Tomorrow we’ll get the FOMC meeting minutes. The central bank has its work cut out for it trying to navigate the QE waters. Ben Bernanke has committed to an accommodative monetary policy for the United States. The Fed has pumped trillions of dollars into the market and trying to exit this strategy will be extraordinary difficult. How do you remove an addict from its preferred drug without causing the maximum pain? Perhaps we should accept the pain as temporary? Very interesting to see how this all plays out. For us Trend Followers price action will dictate how we react. Distribution remains elusive and with the market continuing to make new highs without any institutional selling is not a recipe to sell. We’ll let the market come to us rather than predicting where it will go next. Short-term Trends TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/19/2013 153.25 0.75% IWM UPTREND NO CHANGE 2/19/2013 92.55 0.88% QQQ UPTREND NO CHANGE 2/19/2013 68.24 0.72% USO DOWNTREND NO CHANGE 2/19/2013 34.96 0.69% UNG DOWNTREND NO CHANGE 2/19/2013 18.30 2.92% GLD DOWNTREND NO CHANGE 2/19/2013 155.33 -0.28% SLV DOWNTREND NO CHANGE 2/19/2013 28.44 -1.35% DBC UPTREND NO CHANGE 2/19/2013 28.24 -0.39% FXY DOWNTREND NO CHANGE 2/19/2013 104.77 -0.02% FXE DOWNTREND NO CHANGE 2/19/2013 132.81 0.19% TLT DOWNTREND NO CHANGE 2/19/2013 116.5 -0.50%

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

Big Wave Trading Portfolio Update And Top Current Holdings

After a quick trip back into the NEUTRAL zone, our models all switched to BUY on Monday the 17th. Unlike the previous BUY signal in which no action was taken, this BUY signal was actionable. The move on Monday came with strong above average volume on all four major market indexes. All four indexes also produced pocket pivot point buy signals on the same day. On top of that, banks, homebuilders, and small caps led on the day. While the signal on Monday was solid, further confirmation came the following day as all indexes followed through on the gains on even higher volume producing a second pocket pivot point buy signal in a row. However, more importantly, all ETFs, leveraged ETFs, inverse ETFs, and inverse leveraged ETFs confirmed the move by moving higher on strong volume. The volume confirmation in all indexes, with bank and homebuilding stocks leading, and an improving macro environment was a good step in the right direction for market bulls. However, as we saw on Friday, it is definitely not going to be smooth sailing ahead with items like the Fiscal Cliff around to spook traders or algorithm HFT programs. Still, the intraday reversal does show that the market has some solid support in it as traders try to play catch up to the almost daily move higher by the market from the November lows. Many traders who wanted to get long but never had a chance because the market never pulled back will statistically more-than-likely due to the solid foundation of the overall market buy the dips. So is it up up up and away from here? Nobody knows because absolutely 0.00% of all human beings alive today can accurately predict the future. The fundamentals and technicals do support that thesis. Sadly, this isn’t a free country or a free market anymore. It is a manipulated economy that is orchestrated to serve the bankers and no one else. The ZIRP and QE policy that they pursue to save the most elite of the elite will absolutely cripple the poor and middle class. While this effects traders on the consumer price level we at least can mitigate the damage by being involved in the only place this toilet paper money is going to go. World equity markets. If you have the ability to trade, you have the ability to win in this game where surely many are going to lose. On that chipper note, I wish everyone a lovely holiday season. I hope everyone has a wonderful time with friends and family. Have yourself a very Merry Christmas and a very relaxing New Years. Aloha from Maui where Christmas never quite feels like Christmas. Hey, it is a little cold. Not long sleeve T-shirt cold. But it’s a little chilly. Once again, aloha. Top Current Holdings – Percent Return – Date of Signal NTE long – 103% – 8/17/12 VRNM short – 56% – 4/10/12 CSU long – 45% – 9/4/12 CAMP long – 45% – 4/26/12 ASTM short – 30% – 7/17/12

Stocks Power Ahead as Strength Continues

Once again the market powers ahead in heavier trade indicating higher prices are ahead. Homebuilder sentiment came in as expected hitting 6 year highs, but a potential deal is likely in the Fiscal Cliff saga. All that matters here is we have a ton of stocks breaking out and price action in the market supporting these moves. We can debate over what printing to infinity will do to the US Dollar, but for now we have a big uptrend in our midst. At this point, not getting behind this rally will only leave you wondering later why you didn’t get on-board. Until we get distribution piled up this market is going to continue higher. The very bullish action at today’s close indicates that this uptrend is for real despite its many flaws. The biggest flaw in the market rally is the Federal Reserve debasing the US Dollar at an alarming rate. Printing more than 85 billion worth our currency and the effect it will have on our everyday life. Japan has been doing forever quantitative easing and it has failed to invigorate its economy. Maybe it will be different this time, but one thing is for sure prices all around will go higher. Initially, this will help our market given the recent price action. The real tricky piece will be when the Fed begins its exit from its endless money printing campaign. We are seeing a tremendous amount of breakouts it is a huge positive for this market. Amazing we have yet to see a true follow-through day despite today coming very close to actually being one. At this point it is about obeying the price action and knowing your exits. There are many stocks breaking out and showing tremendous strength. Ignoring the price and volume action in these names will more than likely be futile. Even if this rally only lasts a month if you have a sound exit strategy you will be out before any harm is done. Opinions mean very little in the market and the market is always right. Believe or not we have a rally and may be we’ll only squeak out a 10% rally, but one we’ll take. Remember, knowing your exits are just as important as knowing when you get into a position.

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading portfolio remains under a NEUTRAL signal. However, we did switch to a BUY signal for 2 days before switching back to NEUTRAL. Fortunately for us, we have already closed shop on our model for the year. After the final and barely successful SELL signal it was decided that with the current price/volume pattern in the overall market, the upcoming Fiscal Cliff drama, and the news driven nature of the current market that shutting it down for 2012 was the right thing to do. This past week proves that point. The past week saw a very noisy intraday nature to the market with a ton of stocks showing erratic to abnormal price action. Rather it was stocks like GMCR, FB, FSLR, AMCC, or RIMM going up almost every day non-stop or the reversal in price breakouts lower in stocks like SWHC, ARIA, QCOM, CNC, or ASPS that scripted what was an odd overall market. Even the big boys like PCLN and GOOG are showing erratic trading. This is a clear sign to us that trend following and stock picking the U.S. markets remain a very futile effort for anything other than a very short-term time frame. If your time frame is going to be weeks to months, on a position, we recommend waiting for better price and volume relationship to develop in this market. At this point for us we are very happy being heavily invested in cash and on the sidelines in our top systems. Short-term daytrading methodologies and very long-term methodlogies in world ETFs with wide volatility/ATR stops are the only two systems working for us now. The world ETF market has been the one very bright spot in all of this. The moves in VNM, DXJ, EWH, EWS, and EWA have been very welcome during a time when the U.S. markets are behaving so poorly. We continue to believe that over the longer-term more capital and bigger position sizes are going to be needed in these markets to return outside normal returns in the future. We are sure one day the stock market will trend in one direction or another for a period of time that will allow old trend following momentum methodologies in high quality stocks to work very well again. Until then, however, other markets should be where investors continue to look to into the future. That is unless we can get a change in the zero-interest-rate-policy, the Quantitative Easing environment, and extremely divided electorate some time soon. I wouldn’t place on hard bets on that happening for a while. Aloha and have a wonderful weekend! Current Top Holdings – Percent Return – Date of Signal NTE long – 118% – 8/17/12 VRNM short – 54% – 4/10/12 CAMP long – 48% – 4/26/12 CSU long – 37% – 9/4/12 ASTM short – 25% – 8/2/12Q

Hope Continues for a Fiscal Deal, but Stocks Fall in Mixed Trade

Just the headline of a meeting between Boehner and Obama helped push the market off the lows. There is desperation for a deal for the fiscal cliff. The market for the second straight day rolled over from the morning highs. Despite doubling down on QE infinity stocks have been unable to crest above last week’s high. Volume on the NASDAQ rose giving the index another day of distribution while volume fell on the NYSE. Price action is not strong at the moment and given the lack of thrust from recent breakouts this uptrend we have been in is at risk for failing. Cash remains king. The fiscal cliff is such an interesting beast. On 11/16 we were close to getting a deal and yet four weeks later we are no nearer a decision than we were on 11/16. Our government spends roughly 25% of GDP by borrowing forty cents for every dollar spent. It is a nice thing to say we aren’t taxing the rich enough, but taxes only get us so far maybe 1/10th of the way. While we have been able to implement tax cuts we have never been able to cut spending. It is time to take our medicine and begin down the path of sustainability. This recent uptrend is still without a true follow-through day and even though we could get one tomorrow it isn’t likely it will produce tremendous gains. Days 3-7 are the sweet spot for a confirmation of a new uptrend. The lack of follow-through day simply underscores how weak this uptrend has been. Where are the stocks zooming out of bases? Sure we have had some breakouts, but they aren’t screaming higher like we normally see in a sustainable uptrend. As of now, we do not have the strength needed to continue this rally. This action is the main reason despite our model switching to a BUY signal two days ago that not one position was placed off of this signal. There was simply too much cross-currents and bad/confusing action. Our model has obviously returned to the NEUTRAL mode. No harm, no foul, this time around. Know your exits and if the situation changes be ready to adapt! Have a great weekend.

Big Wave Trading Portfolio Update And Top Current Holdings

It was a very uncorrelated market the past week with the Nasdaq falling 1%, the DJIA rising 1%, and the Russell 2000 coming in flat. Overall, nothing has changed in our model and we remain under an overall NEUTRAL condition. Despite being under a current NEUTRAL position, we definitely have a long bias currently in big-cap NYSE stocks. Low P/E stocks that pay a nice dividend that show some fundamental growth are beginning to outperform more speculative technology and small cap stocks. The biggest reason for the divergence is obviously AAPL which makes up about 9.5% of the Nasdaq. The near 9% decline this past week definitely was the anchor preventing the Nasdaq from rising. However, if you only think that AAPL is the reason for the weakness in the Nasdaq then why did the Russell 2000 lag? It’s because right now big-cap low P/E dividend producing stocks are in favor. Growth and technology is not. While there was not a ton of market moving news in individual stocks outside of AAPL, there were more oddities this week in more ways than one: 1. The constant overbought and oversold nature of stocks continued this week with some stocks seemingly up every day like GMCR and FB and some stocks actually down everyday like ONTY. 2. Continuous breakout fakeouts in stocks like TDG SWHC ACHC NCR RBA QIHU LPH EDU TOL MHO keep happening. 3. Breakout fakeout re-breakouts in stocks like GEO show up every once in a while. 4. Insane one day price moves in stocks like GRPN which retake their 50 day moving average on strong volume and end up 22% higher on the day. The bottom line is that the insanity continues and despite some pockets in low P/E dividend stocks there is not much that can be trusted or relied on when it comes to our markets. However, the USA is not the only market in the world. Thankfully, there are other nations out there that actually promote free markets and freedom. World ETFs like EWA EWS EWH EWA and ENZL continue to march to new highs. And in other South East Asia nations the same can be said from VNM, CAF, THD, EPHE, EWM and DXJ. Other ETFs hitting new highs include EWO EWN EWQ EWK EWL EWU. On top of that, India is on fire with INDY, EPI, SCIF, and PIN showing Relative Strength versus our market. So as you can see, as long as you do not focus on the US markets, you can make money trend following world ETF shares. Especially South East Asia. Remember, the world is nothing but a flow chart of capital. If that is the case, India, China, Thailand, Malaysia, China, Hong Kong, Singapore, the Philippines, Australia, and New Zealand will continue to dominate over the next decade as money leaves the United States and moves on to the next round of major growth economies. So while we may have an insane Congress with an insane Federal Reserve bailing out and taking care of insane banksters with QE and ZIRP, trend followers can pack their bags and take their money to South East Asia. This is a trend I believe we will continue to see well into the near-term and long-term future. You can’t be $16,000,000,000,000 in debt on the book ($86,000,000,000,000 possibly in unfunded debts) and expect the growth of the 80s and 90s to E-V-E-R return. Especially in a world where big corporations gladly hire cheap overseas labor and grant themselves huge bonuses and paychecks at the expense of the workers wages and benefits. It’s a different world. The manufacturing jobs that everyone keeps screaming that need to come back are N-E-V-E-R coming back. Ever. While everyone is upset about the trendless messy market we have right now, remember, on the other side of the world the trend is clear. Over in our neck of the woods we remain under a NEUTRAL condition with a bullish bias to big cap dividend-yielding low P/E stocks and a bearish bias on the overall macro economy. Aloha and have a wonderful weekend! Top Current Holdings – Percent Return – Date of Signal NTE long – 123% – 8/17/12 AVD long – 121% – 1/10/12 VRNM short – 58% – 4/10/12 CAMP long – 47% – 4/26/12 CSU long – 41% – 9/4/12 ASTM short – 33% – 7/17/12

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio switched from a successful SELL signal back to a NEUTRAL signal the past week as the DJIA, SP500, and Russell 2000 retook their 200 day moving averages. The Nasdaq remains below its respective 200 day moving average but that is due to AAPL and we took notice of last Friday’s very bullish intraday reversal on AAPL coming from very oversold conditions. Overall, we see it as constructive price action in the overall market. While volume declined each day the past week, due to the holiday, it really doesn’t matter. This market has already proven that volume or no volume when the Fed is printing money and manipulating interest rates it simply doesn’t matter. Higher volume selloffs followed by lower volume rallies have been the norm since 2009. Until the ZIRP policy is abolished, we do not believe this will change any time soon. The biggest problem with the low volume rallies is that prior to 2009 low volume rallies would not cause the model to switch like it does now. This unfortunately means that there will be more false signals and thus more times when we will have to cut our losses. Instead of watching the model switch 5-15 times in a year it is now switching around 20-30 switches per year the past two years. This simply would not happen in a normal market environment where the Fed basically lets asset prices rise and fall based on where the market expects fair value. In the intermediate term we are in a seasonal uptrend cycle as we head into the final month of the year. Like always, January will be more-than-likely be the real tell to the trend of December. But being that it is December and that we are refusing to sell off after leading CANSLIM stocks have cracked across the board it means that the odds are in favor of prices rising going into the end of the year. However, if you think we have any positions based on that assumption, you are 100% incorrect. All signals are price based. If prices break higher, we go long. If prices break lower, we go short. If we are wrong, we cut our losses immediately. There is no deviation from this model based on any indiscretions we may reserve about future market prices. I hope everyone had a wonderful Thanksgiving. Aloha and have a great upcoming week. Top Current Holdings – Date of Purchase – Signal Date AVD long – 129% – 1/10/12 NTE long – 111% – 8/17/12 VRNM short – 54% – 4/10/12 CAMP long – 51% – 4/26/12 ASTM short – 40% – 7/17/12 CSU long – 37% – 9/4/12 MAGS short – 25% – 4/18/12

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio remains under a SELL signal on all indexes. However, we do take note of the positive price action and strong volume (even though it was options expiration related) on the indexes and more importantly on the oversold beloved-stock named Apple (AAPL). Volume on AAPL was the highest since March and comes on an excellent intraday reversal. We call that positive price action. However, there is no way, based on Friday alone, to know if this is the end of the downtrend or just an oversold bounce. Some of the positives going for the market is the fact it is very oversold on the short term, the crowd is increasingly becoming more bearish, and AAPL’s price and volume move on Friday. Some of the negatives are that there is still no obvious rotation from old leading stocks into new leading stocks, most recent strong sectors (IBB XHB ITB) are starting to crack on heavy volume, and despite sentiment growing more bearish there was absolutely zero fear in the most recent pullback. Everyone truly believes Ben will save us from every big bad market decline. The only way we see it at Big Wave Trading is that you must keep an open mind to everything and anything in this new QE-fed world. There is only one two ways to trade this market: trend following signals and value investing. The old momentum methodologies that made position traders like me wealthy during our early career have been missing since the 2008/2009 stock market bottom. This is a direct correlation of a QE/ZIRP policy. So, even though it seems the market is not done selling off, you must keep an open mind in the regards that Ben will indeed come to the markets rescue any time it even attempts to move lower. We have taken notice of some stocks that made very strong moves on Friday. However, we will need to see further positive price action next week or the week after to know if it is more than a one day options expiration wonder. The social networking site FB sure has been putting in some impressive price and volume action lately. That stock is definitely a stock that should be on all trend following wizards radar. It is too much of a cult stock and has so much volume that it is mandatory active and inactive traders watch this stock for trend following signals. Overall, we remain extremely heavy cash at Big Wave Trading due to the inability to trust price and volume action in the current choppy tape. Without any spike in the VIX, it is hard to believe a real bottom is here and while we are short some index ETFs we will be ready to reverse those positions ASAP if we continue to see further price appreciation. At the same time we do know another 2010 and 2011 pullback is more than likely to happen sooner or later and we will be ready to act accordingly when the time does come calling. And come calling it will one day. You can not keep an artificial economy up forever. Can you? Maybe you can. It’s a much different world than it was before QE. Get used to it. I doubt it changes any time soon. I doubt it changes any time not too soon (4 years at least). On that chipper note, have a great weekend everyone. Surf is up on the north shore and the sun is shining. Aloha!! Top Current Holdings – Percent Gain – Date of Signal AVD long – 112% – 1/10/12 NTE long – 102% – 8/17/12 VRNM short – 58% – 4/10/12 CAMP long – 47% – 4/26/12 ASTM short – 37% – 7/17/12 CSU long – 33% – 9/4/12

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading portfolio remains under a SELL signal that was triggered on 10/19/12. It was another down week for the overall stock market and it was another above average weekly volume sell off for the Nasdaq composite. This now brings the total of above average volume weeks on the downside this year to 6 vs. 0 up weeks on above average volume. Despite the constant distribution that we have seen the past four years, it simply has not mattered as we are in a QEn environment. This means that despite the weak action in the overall market, and stocks following earnings lately, it would be unwise to assume that the next rally attempt, if it does come on lower volume, will fail. We have seen time and time again how higher volume sell offs are supported around the 200 day moving averages on lower volume and then the next thing you know we are hitting new highs on below average volume. Therefore, despite being under a SELL signal with short positions in the DJIA and SP500, we have an overall neutral/cash bias at Big Wave Trading across the board. We are prepared for the market to find support here and rally and we are ready for the magic bullet of QE to finally run out of firepower. Either way, we are ready. The most telling issue in this downtrend is two fold, for us. One, we still have long positions that were initiated in the previous uptrend that continue to trend higher above key short-term and long-term moving averages. If more of our longs were outright breaking down on huge volume, we would be more “worried” about falling prices. Second, we continue to receive zero extremely high reward/low risk ratio short signals. Without these “screaming” shorts, we find it best to stay neutral on the overall downtrend taking only the 50 DMA trend following signals in the market indexes. Since June we have not had a single stock produce what we would call a 10 out of 10 long or short signal. The new signals that generate, since June, have at best been a 7 or an 8 out of 10. This is not terribly surprising considering the magnitude of this artificial low volume stock market rally the past four years. However, it is annoying as it prevents us from making any substantial money to the upside. Until we receive these “near-perfect” signals, we will continue to operate on a shoestring basis giving preference to trend following signals in high priced stocks, extremely high quality CANSLIM stocks, and index ETFs that trade significant volume. If the market finds support around the 200 day moving averages of the major indexes and we can rally back above the 50 day moving average, obviously the SELL signal will be negated and we will be back looking to operate on the long side. However, until we start to rally on higher volume, sell off on lower volume and then rally on higher volume, on the market indexes, there is no way we will even think about increasing our size. That is unless that 10 out of 10 shows up but it is hard to believe they will when the overall market’s volume is artificial. Low volume rallies followed by heavy volume sell offs that are then followed by more low volume rallies do not produce the quality chart patterns that we require (along with growth in the fundamentals) before going heavily long in any one position. For now, we remain under a SELL signal and will operate accordingly. Cash is king, right now, for those with a time horizon longer than one day. Aloha and have a wonderful weekend everyone! Top Current Holdings – Percent Return – Date of Signal AVD long – 143% – 1/10/12 NTE long – 59% – 8/17/12 CAMP long – 56% – 4/26/12 VRNM short – 46% – 4/10/12 MAGS short – 30% – 4/18/12 HEB short – 29% – 9/24/12 CSU long – 29% – 9/4/12 SHF long – 28% – 8/1/12 TAYC long – 26% – 6/15/12 ASTM short – 26% – 7/17/12

Dow and S&P 500 Lead Stocks Lower as NASDAQ Finds 200 Day Support

More selling hits the street despite yesterday’s end of day rally. The 200 day provided the NASDAQ with some support, but the index failed to put in a big turn around day. Earnings continue to pour in and are only helping a few stocks. FB reported after-hours and is seeing a rush of buyers into the stock, but FB is not the norm. Volatility spiked closing above its 200 day moving average for the first time since the beginning of June when our most recent rally began. Fear has once again crept back into the market, but we lack the panic we normally see in a market bottom. Price action continues to be weak with volume still big on the downside and we remain in sell mode. Earnings season has crushed many growth stocks, but they continue to pile up. BWLD is just another victim to the earnings disaster. FB and PNRA are two bright spots, but they are the exception to the rule. NFLX was hit hard again in after-hours as the company failed to reach its user target. The stock had seen some life, but for a little over a year has been taken to the woodshed. CMG is in the same camp. The ultimate growth stock AAPL reports on Thursday and after failing to rally after its announcement of the iPad mini Thursday’s report will be important to the stock. AAPL has touched its 200 day, but has yet to top out since the 2009 bottom. More than 3 years later the stock has had a tremendous run and Thursday we’ll see if the stock can find the juice to resume hitting new highs. Commodities continue to pull back as crude oil briefly hit an 85 handle on the day. Gold and silver continue to pullback after their run up from the announcement of QE 3 or what we call QE forever. The market has now pulled back roughly 6% (NASDAQ) from the QE announcement. The market dropped roughly 3.5% from its peak from the QE2 announcement. At the moment we have support at the 200 day for the NASDAQ while the S&P 500 has yet to reach its 200 day. The election is two weeks away and it is bound to have an affect on the market. The most recent pullback has not been kind to leading stocks and it appears we’ll see this continue given the reaction to earnings as of now. Have a plan and trade. Cut losses and ride your winners. Volatility is finally showing some fear in the market and will at some point signal a possible bottom. Cash is king for now.

NASDAQ Breaks Six Day Losing Streak; C Jumps more than 5% on Earnings

The market finally bounces from oversold conditions as volume ends mixed. Volume rose on the NYSE and NASDAQ exchanges, but SPY and QQQ volume remained light. Retail sales jumped more than expected helping set the tone early on. Sellers got the upper hand on the NASDAQ, but were quickly turned away as stocks zoomed higher into the close. Price gains were solid and although we did not see the overwhelming volume associated with institutions supporting the market. Today was day one of a new attempted rally on the NASDAQ lead by banks. Banks lead the market today on the back of Citbank’s earnings with the stock gaining 5.5% during the market session. WFC continues to suffer from its earnings report, but other big banks continue to act well ahead of earnings. GS, BAC, and JPM continue to act well and are poised to move higher. When the Federal Reserve will be buying mortgage securities from Banks it is hard to fathom the Federal Reserve will pay anything but the highest price possible. So far, the only group to benefit from QE Forever will be the big money center banks selling mortgage securities back to the Federal Reserve. We were bound to bounce from the selling we saw from last week. The NASDAQ was down 6 days straight and it is quite normal to see the market rebound. There is no way to know whether or not this will turn into a new uptrend or a one day wonder. We’ll need to see confirmation of a move higher before we get excited over one day’s action. We remain in neutral mode and until price action and leading stocks say anything different we’ll remain neutral. There is just 22 days left to the election is over and it cannot come soon enough. As soon as the election ends the fiscal cliff topic will be one in focus and one the market will grapple with and hopefully produce a trend. Today concluded day one of an attempted rally and we’ll be waiting for confirmation one way or another.

Morning Gains are Erased as Buyers Continue to Stay Away

A much better jobless claims figure helped set the early tone of the market. Unfortunately, it would not last as sellers continued their relentless pursuit. It certainly didn’t help that reports of the jobless claim figure being falsified by a large state not reporting its quarterly figures. At any rate what is important is how this market is acting and how weak leaders are performing. Is it finally AAPL’s time to undergo a big correction? Time will tell, but what we are seeing now is some big league weakness. Heading into the weekend it will be interesting to see how we close this troubling week. AAPL is a big concern due to its overall size in the market not to mention its weighting in mutual funds. Growth funds have feasted on AAPL and who can blame them with its ability to produce. However, with the stock over-owned and a LARGE part of numerous portfolios any correction could bring on disaster for those left holding onto AAPL. While the company may be cheap to growth when sellers want out the flood gates will open and when they do look out. The VIX continues to remain suppressed showing the market really isn’t fearful here. Perhaps many still believe QE forever will save stocks. This is where we get SOS – Save Our Stocks program from the Federal Reserve. There are still many market pundits hoping for the S&P 500 to finish the year above 1500 topping out at 1550 for the year. Bullishness among II survey respondents continues to be very high and with bears nearly extinct. It is easy to see why the VIX remains around the 16 level as market participants are very bullish without fear. We are no longer in an uptrend and must be vigilant by staying nimble and cash heavy. If this market turns around we’ll go with it, but for now we are in dangerous territory. Have a great ending to this week and enjoy the weekend!