Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading portfolios switched from a SELL to NEUTRAL signal intraday on 6/6/12 as the Nasdaq rose 1.5%+. The heavier volume selling was drying up before the switch and we warned that a switch was coming last week. That indeed was the case this week. If the next switch of the model is to SELL, this second confirming SELL signal (confirming because the most recent SELL signal was profitable with a 3% gain on QQQ short) will be a strong signal and we will be increasing our short positions accordingly. As of now, Big Wave Trading is very heavy cash. If any new BUY signal comes without volume confirmation it will be a very weak signal and trading will be initiated accordingly. Our model, following all the recent distribution the past three months will not have a strong BUY signal until the market averages can produce a 2%+ gain on volume 25% above the 50 day volume average. Leading stocks via Relative Strength and EPS/sales growth must also confirm the move. It is summer time and we warned investors that it would be choppy and consist of lower volume. The only meaningful move we expect is a move to the downside, if a move does occur. During the past twenty years only one Follow-Through day has led to a rip roaring bull market–twenty years ago in 1992. During the past 12 years only two BUY signals during the summer have generated any meaningful gains– in 2000 in leading stocks and 2009 with the market model/leading stocks. The data is what it is. Price is our ultimate tell and we will invest accordingly. Volume is our guide as to how much capital we will use when price produces a signal. We continue to keep our trades small until the next perfect setup occurs. On the long side, there has not been one since SLXP setup in March (it failed that setup) and the last successful one was LQDT on 2/1/12. On the short side there has not been one since BVSN in early March and PRXI in late March. The most important rule right now is cutting our losses short. If we take a position and it does not move in our favor immediately, in this tape, we begin selling until the final cut loss is hit. We are not playing games in this tape. Cash is king, as of this moment right now. By Monday, it could be completely different. However, the chances of that happening is very slim. Aloha and have a great weekend everyone. Top Current Holdings – Percent Return – Date of Purchase LQDT – 76% – 2/1/12 BVSN short – 76% – 3/16/12 AVD – 74% – 1/10/12 MNST – 51% – 1/13/12 VRNM short – 36% – 4/10/12 PHMD short – 34% – 5/11/12 MAGS short – 34% – 4/18/12 PRXI short – 29% – 3/30/12 SINO short – 29% – 4/12

Bernanke Fails to Mention QE3; Fitch Warns of US Downgrade Sends Stocks Lower

The NASDAQ reversed its gains in a big way after the Fed Chairman does not mention further quantitative easing. To add insult to injury Fitch warned of a possible US downgrade if a viable debt plan was not forged. Preliminary volume figures does show volume was lower on the day, but the day’s action hints at how shaky this market is at this point in the game. Economic news was a non-factor and the market action centered on the Fed and Fitch. This market remains on unstable ground and we continue to lack the necessary conviction to get any sustainable rally. Ben Bernanke’s testimony was quite clear he wanted to shift the burden away from the Federal Reserve and onto policy makers. Fiscal policy has been non-existent since the Obama administration has taken office. We had a policy from the Bush administration, but it was terrible as it simply added to our debt by running unsustainable deficits. At this point, the Federal Reserve Chairman seems to be in a holding pattern until the folks on the hill get together and form a fiscal policy. We can dream of running surpluses and lowering our national debt, but it appears this is just a pipe dream. Cash seems the place to be as the market certainly has signaled a lack of direction. Sellers have appeared to dry up here at the lows, but buyers aren’t coming out in droves to scoop up shares. LULU a former leading stock was hit hard today while CMG and AAPL appear to be on the verge of heading lower. Not the type of action you would normally see in an emerging rally. While we can still move higher from here the likely hood it is sustainable is not very high. Price will always dictate our actions and we will act accordingly. However, the the information from the market in front of us our confidence is very low this rally is going to push much higher. Remember, the last Federal Reserve Bank stress test one assumption was the S&P 500 was down 50%. To think after a small correction from March highs the Federal Reserve would step in is quite overzealous. If the market needs money printing that badly we are all in deep trouble. Cut those losses.

Stocks Rally on Higher Volume as the Fed Releases its Beige Book

Homebuilders and Financials lead the market higher as traders shake off the impending disaster facing Europe. Buyers stepped up their operations in the early going and continued with them until the one o’clock hour. Heading into the release of the beige book the market turn a turn lower fearing what the Fed may or may not say. Volume rose on the day, but failed to explode higher. After the release the market was able to find its footing and push to the highs of the day closing at the highs. Day 3 of another attempted rally produced a follow-through day and we’ll now adjust and act accordingly. While this day could have been better it certainly wasn’t all that bad. June follow-throughs are not likely to succeed. Only one has been successful and that was June of 1992. Odds are not in the bulls favor here as we continue to push forward. It wouldn’t surprise me to see distribution hit the market sooner rather than later with the macro picture. Given the current price and volume action of the market it appears the market is poised to push higher and it is prudent to follow. There were a few leading stocks pushing higher, but many of them had huge price gains today. It is hard to get into a stock after it pushes 5-10% higher in one day. This isn’t 1999 when a jump of this magnitude was the norm. Unfortunately, the type of market we saw in 1999 only comes around once every few generations. It would be nice to get a new crop of leaders to show us this rally attempt has some legs behind it. It isn’t out of the question this market can’t climb back to its 50 day, but gaming where the market goes will be fruitless. Follow price. A rally does appear to be underway and how far and long it will go is anyones guess. Allow price to be your guide! Cut those losses short.

New Seeking Alpha Article: 4 Gold Stocks For A Bear Market

4 Gold Stocks For A Bear Market

Market Finds Relief, but Volume Fades

The NASDAQ managed to regain its 200 day moving average, but light trade confirms institutions aren’t willing to stick their necks out supporting this market. A positive ISM Non-manufacturing figure gave a bit of a boost to the markets. However, the European close provided sellers an excuse to tackle the market. In the end, the markets put in a nice day of gains. We are still a long ways away from getting a healthy market with the lack of volume on the upside. Until we see improvement we’ll continue to see lackluster trading. The fear trade lost traction today as the VIX lost its 200 day today. The index regained its 200 day Friday of last week when the NASDAQ and S&P 500 dove below their respective 200 day moving average. We did not see panic rush into the market during this decline. Panic begins with the VIX racing above the 30 level and so far investors have yet to panic. Sentiment is on the bearish side, but actions have yet to show any capitulation. Tomorrow we’ll get a few economic releases, but the big one will come out at 2pm eastern standard time. The Federal Reserve will release its Beige Book and the market will certainly get active around its release. Every market pundit is foaming at the mouth with the possibility of the Federal Reserve introducting another round of Quantatitve Easing. It is a sad state of affairs when the addict can only survive on the drug. For trend followers we simply do not care if QE will show up or not. Price will always be the first mover and we want to be onboard. Drop the opinions and follow price! Believe it or not today is Day 2 of another attempted rally for the stock market. It is nice we are above the 200 day for this rally attempt. At this point a rally confirmation is on the low end of the spectrum. We failed to see any panic/capitulation in the market and have yet to see any high volume reversal to the upside. However, a confirmation day here would certainly change our tune in the short-term. Until then, we’ll wait patiently and continue to operate under a sell signal. Cut those loses short.

Stocks end Mixed as Volume Slumps

Headlines over the weekend were quite dismal stoking the fire further over the European crisis. The market set aside the fear and jumped to the highs of the day right out of the gate. Factory orders were on the light side sending the market lower. From 10 am forward the market would oscillate throughout the day settling mixed on the session. Volume was lower on the day, but again low volume is par for the course for Mondays. This market is still searching for a bottom here and our trend is still down. Another new low was set today and a lower low at that. April’s high was the lower high we have mentioned in the past and with the market continuing to set lower lows the bear tightens its grip on this market. Sentiment is negative, but we have yet to see any panic get into the market. We may not see panic selling, but we still have yet to see any high volume reversal to signal a possible rebound. In 2011, we saw the market sell off and rally back to new highs a few times before the August sell-off. So far, we haven’t seen the ability for this market to find a bottom. It would be nice for a bit to ignore what is going on in Europe. The situation in Europe feels like it has been going on since the Bear Stearns collapse. However, Greece two years ago kicked off the crisis. There is a lot of commentary on the ramifications of Greece leaving the Euro versus staying and this goes for the other EU countries. When you get right down to it we’ll be hearing about this situation for a long time coming. At some point markets will simply sniff out the plan and price accordingly. The real bogey here is what is going to happen with the Fiscal Cliff and a renewed debt ceiling debate. Tear the band-aid off fast and do what is necessary. It is safe to say many will be predicting the outcome for the stock market. Many will be wrong of course and the trend followers will win. We only care about price and sticking with the trend. This is how wealth is created and built upon. Make this week a great one!

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading portfolios remain under a SELL signal generated on 5/4/12. The current market environment continues to weaken as stocks among all sectors (even defensive–outside of gold) are breaking down. The BWT portfolios will continue to work the short side (long side with Gold) until a real uptrend returns. We do not expect an uptrend to return to the stock market until at least October. While we are short, we understand that the crowd is already getting scared and this could produce a bounce back to the 50 day moving average. Even if this does occur the BWT system model will not be switching to a BUY signal until accumulation starts to clearly outstrip distribution. The bottom line is that individual stock and ETF charts are broken in every sector, outside of the dollar, treasury bills, gold, and gold miners. Until these other stocks can correct themselves with some consolidation on lower volume followed by breakouts on strong volume, any NEUTRAL or BUY signal will be weak and unimportant. It is going to take time to correct the damage that has occurred. There is not much else to add as we have been under a SELL signal for a month now. It is summer time and while it is supposed to be a time of “living easy (Sublime reference)” it is clearly not for the stock market. Until the price/volume action changes on the overall market indexes by a wide margin on the accumulation/distribution readings, we will continue to recommend 100% cash for the public retail investors and short positions for active traders/investors. Aloha everyone and have a wonderful upcoming week. Top Current Holdings – Percent Return – Date of Signal BVSN short – 76% – 3/16/12 AVD – 75% – 1/10/12 LQDT – 65% – 2/1/12 UVXY – 62% – 5/9/12 MNST – 40% – 1/13/12 VRNM short – 34% – 4/10/12 PHMD short – 34% – 5/11/12 MAGS short – 33% – 4/18/12 PRXI short – 33% – 3/30/12 SINO short – 32% – 4/12/12 ABR – 25% – 2/29/12

Stocks Limp Into Month End After a Poor Showing for the Month of May

End of the month volume poured into the market at the close, but failed to end stocks at the highs of the session. GDP came in line as expected, but at a paltry 1.9% far from where this economy needs to be at for a sustainable recovery. Sellers had dominated majority of the session and for obvious reasons. The rumor mill continues to swirl as Europe tries to figure out a way to sort its mess. Bond yields slid to their lowest levels as US Treasuries continue to be a safe haven among investors. Stocks did find their footing by the end of the day, but the rally left a lot to be desired. Sentiment week over week tilted towards the bears this time around. AAII Bulls dropped from 30% to 28% and bears jumped back over 40% to 42% from 38% last week. The story with the Investors Intelligence survey isn’t the number of bulls or bears, but the number of folks who are neutral. Short-interest remains near 5 year highs despite the lack of bears in the market. A very interesting development nonetheless and something we’ll continue to keep an eye on. Tomorrow we’ll get May’s job figure and unemployment figure from the government. Economic news has been disappointing as of late and it is hard to think employment numbers will be any different. However, the government can manipulate the numbers so anything is possible. More importantly will come the reaction to the numbers and the price and volume action for the remainder of the day. We can have all the opinions in the world that sound logical and “right,” but at the end of the day only price matters. We need to be focused on what matters: price. Enjoy the weekend coming up and make sure you get out and enjoy life a bit!

King Dollar Stands Tall as Stocks Fall in Heavier Trade

It is beginning to appear the European Union is on the verge of breaking up. The dollar continued its upward movement as the EURO continues to fall. Volume rose on the day, but wasn’t overly impressive given the losses on the day. Gold reversed on the day after opening the day in the red despite the rise in the dollar. Crude oil continued its downward track closing with an 87 handle. Commodities as a whole continue to fall as the Euro continues to struggle against the dollar. We are in a downtrend and likely when all is said and down a bear market. Unless this market can get a miracle there isn’t a question due to multiple factors we are headed towards a bear market. Anything is possible and we’ll adjust, but given what we have seen from this market there isn’t a reason to be optimistic for stocks in the near term. Spain is a focal point for the Euro right now, but Italy is knocking on the door as contagion continues. Greece was just the beginning and now with other struggling southern European Union countries on the brink the near future doesn’t appear to be bright. Price has confirmed we are in a downtrend and it is anyone’s guess how low we can go. An even bigger challenge for the markets will be if a State like California gets into similar trouble like Greece. California CDS has been widening and the state is $16 billion in the hole. States can’t print money to pay for their debt and must balance their budget. In addition, the United States faces the Fiscal Cliff and not to mention another debt ceiling fight on its hand. We have created a mess because we are unable to simply live within our means and outsource accountability. Keep in mind while things may be dire there will always be opportunity. We are ready, are you? Defense is the best offense at this point and while we understand the rallies will occur it will be some time before we get a healthy uptrend.

Stocks Jump Despite an Intraday Shakeout

Coming off a long weekend stocks jumped early and pushed higher throughout the morning. When Europe closed sellers took to the market sending stocks to new lows. Of course the movement was blamed on the union across the pond and will continue to be the excuse. The afternoon was a much different story with stocks finding support into the close. Volume was higher than last Friday, but was below average. Day 6 of an attempted rally was solid, but did close a bit disappointing given the rise in the early going. We have been touching upon in our chat room the market putting in a lower high and lower low confirming a downtrend. There are many ways to spot new trends, but a classic formation is the market setting lower highs and lower lows. April and May’s sell off did considerable damage to the market and there are a variety of reasons for the pitfall. But, those reasons don’t matter and we should be focused on is price and volume. It is fun to have a discussion and debate what may or may not happen. However, at the end of the day the only thing that matters is price! At the end of the week we’ll get to endure all the hoopla over the jobs report. The last few have been very disappointing and the trend has been to fall on the negative side. If you are wondering how to position yourself in front of the report read the paragraph above. Price! We’ll probably get another poor report with unemployment falling below 8.1%. I don’t trust government figures as they like to “adjust” the number to make the number look better. A true number would include those who have completely dropped out of the workforce. However, that number would be super depressing and not something any administration would want to post. The number will be the number and we’ll be reacting to the movement of the market and not our opinion. I wouldn’t expect too much out of this market even if we do get a follow-through day. We’ll need to see new leadership form, but at this point seems like a long shot. Follow price.

New Seeking Alpha Article

Sometimes Defense is the Best Offense.

Big Wave Trading Portfolio Update And Top Current Holdings

Every single disaster is due to traders not cutting their losses and letting them grow into huge losses. -Dennis Gartman “If you have an edge and if you keep making good bets as opposed to bet on chance over time you will come out ahead.” -Larry Hite The Big Wave Trading Portfolio remains under a SELL signal generated on 5/4/12. We expected that an oversold bounce was coming this past week and indeed it did begin. We expect the rally to retrace back to at least the downtrending 50 day moving average. If it does not make it back to that key technical level before beginning to sell off again, we will see that as quite bearish. Big Wave Trading will not be interested in any new BUY signal generated, if in fact the indexes do retake the 50 day moving average, as there is too much technical damage to individual stocks and the accumulation/distribution on the major market indexes are really out of whack. The only kind of rally that would change our mind would be a powerful 2%+ move higher on volume well above (25%+) above the 50 day volume average. The technical landscape of the overall market indicates further price deterioration ahead. However, as always, we do not have free markets and that means the Federal Reserve can start QE3 whenever they feel enough fear that they have to act. This, obviously, makes it tough for trend following and is thus why we continue to recommend smaller position sizes when trading stocks here. Another big volume move lower, with our current shorts all doing well, would be our signal to increase our short positions. For now, we are being cautious holding high levels of cash. As always cutting losses immediately when wrong is the smartest thing you can do in this trendless 2011-2012 environment or any other environment for that matter. By doing that you can get the one or two moves a year to pay off for all the small losses (like July-August 2011). Enjoy the rest of your Memorial Day weekend. Aloha. Top Current Holdings – Percent Return – Date of Purchase AVD – 78% – 1/10/12 LQDT – 74% – 2/1/12 BVSN short – 71% – 3/16/12 MNST – 42% – 1/13/12 PRXI short – 36% – 3/30/12 UVXY – 32% – 5/9/12 VRNM short – 30% – 4/10/12 SINO short – 27% – 4/12/12

The Dow and Russell 2000 Close Positive as the NASDAQ 100 Limps into the Close

Economic news was mixed with a disappointing durable goods figure and a better than expected Kansas City Fed Manufacturing reading. The dollar rose again as the European situation continues to act as an annoyance to the market. Europeans cannot get their act together and we continue to suffer having to see it used an excuse for bad execution. Volume dropped on the day and below average showing institutions weren’t dumping stock. We have seen the market gain support at the lows in back to back sessions as a sign buyers are willing to step in. Today was day 4 of an attempted rally and we’ll be looking for a follow-through day soon if this rally has any legs. The number of AAII bulls jumped back above 30% since it hit lows last week. Bears dropped below 40%, but held just at 38%. Sentiment remains bearish, but well off the extreme levels we saw last week. The Investors Intelligence survey didn’t move much, but tilted towards the bears. Sentiment is by far from the holy grail of investing indicators, but it does help at extreme points. Last week we saw a market massively oversold and sentiment heavily skewed towards the bears. For now, we have lifted these conditions and move forward. Cloud computing stocks took it on the chin after NTAP reported earnings. The stock got hammered and two other names FFIV and VMW were handed heavy losses as well. These moves along with DELL held back the NASDAQ. FFIV may have found support at its 200 day but cloud stocks have not been the leaders like they were in October of 2010. Former leaders tend to be the best shorts and if any of these stocks give us the signal we’ll jump aboard. This market still remains in a precarious position. The S&P 500 and NASDAQ have put in a lower high (end of April) and a lower low here in May. We are in a down trending market. Remember, in the fourth year of a bull market on average a 9 month bear market occurs. Given the lower high and lower low we could be in the midst of the 9 month bear market. Anything is possible and we’ll stick by our disciplined trading no matter what the market has in store for us. Have a great memorial day weekend!

Stocks Race off the Lows as European Bank Recapitalization Rumors Fuel Rally

A better than expected new home sales failed to spark a rally in the markets as traders turned once again to the European situation as a reason to sell the market. Sellers were in control for much of the day as the European situation remains dire. In particular is the situation going on in Greece and the run on banks taking place with the fear of leaving banks with extremely low levels of capital. Rumors began to float in the market regarding a plan being hatched to recapitalize all of Europe’s banks. Such a plan was certainly seen as a viable plan saving the European Union for now. Volume rose across the day as support at the 200 day is clear for now and a rally to push back up into the 50 day seems likely. Day three of the attempted rally appears to be headed for confirmation. Let’s not get ahead of ourselves as we have had quite the destruction over the past month. The current market looks eerily similar to last year’s where we experienced wild swings in the market. This market is going to fool many here. If this market is going to follow last year’s path we are going to see this market whipsaw many of its participants. The rally off the October 2011 wasn’t going to be easy to handle and neither is the aftermath. INTC and MSFT were two big losers on the day for the NASDAQ as DELL earnings helped send both stocks lower. DELL was hit after it missed earnings and was a complete and utter disaster of an earnings release. Sellers took to the stock and were relentless and with sympathy so did INTC and MSFT. All three stocks were weighing heavily on the NASDAQ, but were unable to hold it back from closing positive. Europe is such an annoying thing to talk about, but it dominates the news media. The best thing that can happen in terms of the US Dollar is to see the EURO collapse. Germany is single handedly holding up the entire currency and without the country the EURO would have already been torn apart. At the moment the US dollar is trading like the EURO is about to head to the toilet to be flushed away. Thus, we get lower commodity prices including lower gold and silver prices. More importantly energy and food prices are coming down as well which can only help our economy. Selfishly the EURO can’t break up soon enough! Continue to stay disciplined despite the market environment!

AAPL Leaps 5% as Stocks Rebound from Tremendous Selling Pressure

AAPL and PCLN help the NASDAQ push higher as FB drops hard on its second day trading on the NASDAQ. Volume on the day was considerably lower than Friday’s level, but Friday we did have options expiry skewing volume. Today’s bounce was not a surprise to many as the oversold conditions in the market had gotten to extreme levels. Given the green close today on the NASDAQ today counts as day one of a new attempted rally. Despite today’s rally the market still remains in extreme oversold conditions and this rally has the potential to have a bit more oomph behind it. The G8 summit only left one headline and that was they were supporting Greece as a member of the European Union. Any other headline not supporting Greece in the Euro would have sent global markets into a death spiral. It does appear a bit dire with many of the European countries having a difficult time containing spending and bringing in revenues. The European central bank will have to undergo a massive liquidity injection to avoid immediate danger. However, simply printing money will only lead to bigger problems if the fundamental problems are not dealt with. The situations remains quite dicey, but it is why we follow price and not our opinions. A lot is being made of the RSI being so low recently, but the amazing part is the lack of fear the VIX index showed as the market pushed lower. We never saw real panic enter the market as we have sold off to the 200 day moving average. AAII Bears did jump considerably last week and Bulls dropped to very low levels hinting at a possible short-term bottom forming. In our forums we highlighted the need not to push on the short side as a snap back rally was very likely. Now, the market will more than likely continue to work itself higher and it would not surprise us to see the NASDAQ make its way back to its 50 day moving average. Anything is possible and we are prepared for anything. Rally attempt is here and if this bounce has legs we’ll see a follow-through day on day 4 thru 7. Stay patient and always cut your losses no questions asked. Enjoy the week.

Big Wave Trading Portfolio Update And Top Current Holdings

“I did not for one moment consider abandoning my chief defensive weapon—the stop-loss order. No matter how well built your house is, you would not think of forgetting to insure it against fire.” -Nicolas Darvas “Remember, the market is designed to fool most of the people most of the time. Sometimes, the market will go contrary to what speculators have predicted. At these times, speculators must abandon their predictions and follow the action of the market. Never argue with the tape. Markets are never wrong, but opinions often are. I only try to react to what the market is telling me by its behavior.” -Jesse LivermoreThe Big Wave Trading Portfolio model remains under a SELL signal generated on 5/4/12. The SELL signal was very strong but four false signals (3 SELL, 1 BUY–first time that has happened in the model since 1979) left us gun shy from going 100% all-in on the most recent strong signal. While this is unfortunate in the IRA/Retirement account (since it can not go short), as we are under-investing in inverse ETFs that are doing very well for us, it has worked itself out in the Aggressive/Margin account. Tons of stocks have produced very strong short signals for us since 5/4/12 and almost everything we are touching is working immediately. A far departure from the past two months. We realize that the market is very oversold here and thus it would be very dangerous pushing new short positions. If the market does not get a bounce on continues to selloff, we will continue to reduce the exposure in each new short signal that we receive. If the market can manage a bounce here and the charts stay broken with no real sign of accumulation in the market or leading stocks, we will look to fully press our bets on the inverse ETFs in the Retirement account and on shorts/ETFs in the Margin account. If the market does bounce, we get some good accumulation in leading stocks, and our current shorts start giving us cover signals, we will be more than happy to get exposure to the long side. However, we believe the fact that Facebook came public in such an environment and the fact that insiders sold over 50% of their personal holdings on the first day tells us everything we need to know as it relates to the 3-year bull”shit” market. I will redirect everyone to this post on April 23rd that I wrote for Seeking Alpha. It was denied publication because of its “technical analysis” content. That sure was unfortunate for their readers as the level of bullish articles that day was extremely intense. Aloha and have a great weekend. Current Top Holdings – Percent Return – Date of Signal BVSN short – 69% – 3/16/12 AVD – 65% – 1/10/12 UVXY – 63% – 5/9/12 LQDT – 62% – 2/1/12 SINO short – 37% – 4/12/12 MNST – 36% – 1/13/12 VRNM short – 34% – 4/10/12 PRXI short – 28% – 3/30/12 WZE short – 25% – 4/10/12

AAPL Falls as Buyers Continue to Stay Away from the Market

Disappointing Philadelphia Fed and jobless claims figures help set a negative tone for the day. Europe continues to dominate the fear index and FB continues to dominate CNBC’s content lineup. The true story of the day was at the end of the day with sellers taking it to the market. AAPL was a large part of the NASDAQ decline of 2.1%. The market is now in a real danger zone with the lack of buyers willing to step up could make it very difficult for this market to regain its footing. Big Wave Trading continues to operate under a sell signal and we continue to look for this market to continue lower. Sentiment continues to be negative, but the Investors Intelligence survey continues to lack the negative bearish sentiment. AAII survey certainly saw bears jump in terms of percentage and its bull ratio near lows, but the lack of bears responding to the II survey is somewhat concerning if you are bullish. The NASDAQ has corrected roughly 10% from its March highs which should be ushering in a bearish view point. However, we continue to see the neutral camp dominate the II survey. Given our current situation nothing that happens from here on out will not surprise us. FB will be an entertaining IPO and will likely be a wild ride given the current market situation. We are oversold and a bounce would not be out of the ordinary for a quick snap rally to occur. Tomorrow’s options expiry will certainly provide the morning with fireworks. The oversold nature of this market tomorrow would be as good of a time as any for this market to push higher to work off the current oversold conditions. Cash is king here and we are looking forward to the weekend. Get out and enjoy the weekend!

Stocks Fall Again As FOMC Meeting Minutes Fail to Inspire

Once again stocks were able to find footing in the middle part of the day, but fail to hold the highs. A few more FOMC members are open to more quantitative easing it wasn’t enough to help the market push back into the highs. Of course we still have the mess going on in Europe, but the market was looking for QE3 to hit the market. The Fed knows any further QE will result in very high commodity prices squeezing the poor even further. We cannot have this situation and given the situation in the Europe and here at home puts the United States Central Bank in a precarious situation. The market remains weak and while we may see a one or two day bounce the trend is still down. If one had to guess just by looking at a chart of the NASDAQ it is quite easy to see the 200 day moving average is a logical next step for the index. Yes, we are oversold and sentiment is getting quite negative we have yet to see any real panic set into the market. The VIX, a measure of fear has yet to signal real fear in this market. Perhaps a move above 30 would signal enough fear, but it has yet to eclipse the 30 level. Talk of another flash crash is always imminent given the even happened only two years ago. For now we have a market creeping lower and lower and even with FB coming public on Thursday there is very little that can save this market from the inevitable. The United States has been on a war path regarding spending. Wars, social security, medicare, prescription drug coverage, etc are a big drag on the government budget. Unfortunately, Washington DC will not tell the American public the truth. Spending needs to be lowered end of story. The Buffett tax is only estimated to bring in a few billion dollars a year extra! We have a 1.5T yearly hole at the moment that Obama feels quite comfortable with. This is nuts! The only fix is to overhaul the tax code into a one page simple code and reduce spending. However, the media and Obama administration do a great job distracting the public from the facts. If anything, the United States fiscal cliff is far more dangerous than a Greece leaving the EURO. As a reminder, this week is options expiry and Friday should be a fun day. Tomorrow will more than likely be a bit more entertaining with FB coming public. We are not planning on participating in the IPO nor trading it on the first day. We’ll sit back and wait for it to base much like EBAY and GOOG did after their debuts. We’ll be patient. Execute you trading plan and cut those losses short.

Surprise Greece unable to form Government Sending Stocks Lower

The only positive news on today’s session was the fact homebuilders are most optimistic in five years. Even Empire manufacturing ticked higher than expect, but the market was unable to take its eyes off the situation going on in Europe. For the second straight day the intraday rally was faded and during the final hour it accelerated. News out of Greece regarding the inability to pick a government provided enough ammo to sellers to push the indexes to the lows of the session. There does not appear to be an end in sight here and not the type of market you’d want to bring FB public. Big Wave Trading has been under a sell signal for a bit here and now we can see why. The market remains oversold, but if the market has taught us anything it is these conditions can last for quite some time. It wouldn’t surprise us if the market produced a rally over the next day or two to resolve some oversold conditions. However, it is quite clear the trend is down and any counter trend rally should be shorted. We can blame the situation in Europe or even point to the fiscal disaster awaiting the United States. It simply doesn’t matter, price wins and we’ll follow its lead. Just to throw a monkey wrench into the mix this week happens to be options expiry (OPEX). Always appears the market tends to get into a volatility craze prior to OPEX. Today we saw the VIX index multi-month highs confirming the selling we see on the S&P 500. This goes for the NASDAQ too, but the S&P 500 has been leading us lower and given the moves in the VIX it appears the selling isn’t done. All signals are pointing to this market pushing lower and there is not much we can do about it. Sure a bounce may occur, but it won’t have the gusto it would need to kick off a new market rally. Too much damage has occurred and it will take a lot to repair the damage. Cut your losses and enjoy the ride.

Stocks Sink as the European Breakup Fears Grow

The market got a double dose of bad news as Greece inches closer to a Euro exit and Italian short-term bond yields jump. Volume rose on the NYSE by a small fraction, but fell over on the NASDAQ. Italian CDS along with Spanish CDS jumped on the day as yields rose for both countries. Traders and investors continue to pound on the PIIGS for their troubles and the global markets are reacting negatively. To highlight the fear VIX jumped to multi-month highs. Everything in the market as well as commentary points to very bearish outcome. There are plenty of reasons for this market to turn lower. A Greece exit is projected to be a very costly, but may be necessary venture. In the long run it may be the best case scenario to stop endless bailouts. In addition, the market is sniffing out the ramifications of the fiscal cliff the United States is headed towards. Higher taxes and lower spending to curb deficits will certainly lead to an economic slowdown. When you include government spending in GDP (remember, government has to take from corporations and consumer) of course when government spending is contracting so will the economy. There isn’t much other than taking our medicine we can do to avoid the inevitable. One saving grace in the near term is the oversold conditions we have in the market currently. While conditions can remain oversold for quite some time coupled with the overwhelmingly bearish talk and lack of bulls it would not be inconceivable for a rally to occur. Shorting at obvious times tends to end in disaster for many. Have a game plan and execute it flawlessly. Over the next 24 hours at some point Greece will decide one way or another if they will pay more than 400 billion dollar principle payment. It’ll be interesting to see if they are going to pay it or not as it will be a significant headline driving the morning buzz regarding the market. It wouldn’t surprise me if somehow the Greeks were allowed an extension or some sort of relief to avoid a potential disaster. Have a game plan and leave the guess work to CNBC’s market pundits. Cut your losses short and enjoy this market.

Big Wave Trading Portfolio Update And Top Current Holdings

To anticipate the market is to gamble. To be patient and react only when the market gives the signal is to speculate. — Jesse Livermore “Every once in a while you must go to cash, take a break, take a vacation. Don’t try to play the market all the time. It can’t be done, too tough on the emotions.” — Jesse Livermore “FYI – JPM $2b loss was someone’s $2b gain.” — Big Wave Trading’s second-in-command, MarketSpeculator The Big Wave Trading Portfolio continues to be under a SELL signal triggered on 5/4. This has been the strongest SELL signal YTD as multiple confirmations in various futures/ETFs were triggered. However, due to the current choppiness of the market, possible QE3, and frequency of recent false signals, we are moving slower into our ETF positions. Still the bottom line is that the signal remains true and proper price/volume action is following. While we remain under a SELL signal we have been getting a lot of long signals from the Biotech and Housing related sectors of the market. Indeed it remains a mixed tape. There is more bad than good out there but it is still not weak enough to push short positions heavy. If there were not any long signals in quality stocks, this would have us wanting to push. Instead we will be patient and wait for real follow-through to the SELL signal that was produced on 5/4. Overall we remain like water. Very liquid and willing to move from one direction to the next until we get what we need to push us all-in on full margin. Right now, capital preservation instead of hitting home runs remains the name of the game and has been since our large gains in February were completely taken away by March and April false signals. It’s a tough environment but professional traders know that a big trend always follows. This type of tape is meant to wear you out not necessarily knock you out. Those that are patient and careful with their capital when signals are not immediately followed-through are going to do much better than wild and loose trading. If we do not break down here and instead reverse back above the indexes 50 day moving average obviously the SELL signal will be taken off. We remain under the thesis that any rally here to new highs would be even more bearish than before. Volatility is too low and breadth is too poor for any sustainable uptrend to come about. A market being lifted by a few stocks always crashes. Before we can have any real uptrend to make some real powerful gains, this market needs to correct. If QE3 comes to the rescue we believe that it will only lead to a more powerful and vicious black swan swoon. A correction here would be healthy. A rally would not. Only after a correction will we be looking to get heavily long high quality breakouts in stocks or fully long a BUY signal with leveraged ETFs. Top Current Holdings – Percent Gain – Date of Signal LQDT – 79% – 2/1/12 AVD – 75% – 1/10/12 BVSN short – 64% – 3/16/12 MNST – 42% – 1/13/12 ABR – 28% – 2/29/12 VRNM short – 27% – 4/10/12

Stocks Finish Well off the Lows as Volume Jumps

I would venture a guess today showed a bit of capitulation selling at the lows of the session. Volume was running much higher than Monday’s pathetic volume level as the market once again turned to Europe as its excuse for selling off. Buyers began to step in after 1pm and continued through till the close. It is going to take much more volume to surge back into the market to regain its footing, but today is the type of day you want to see for the first day of an attempted rally. We are certainly not going to get ahead of ourselves and declare this to be the bottom of the move off March highs. It is encouraging to see the amount of volume coming into the market today. However, if it is just one day wonder we’ll know sooner rather than later. To recap, today was day one due to the amount of volume and the major indexes closing near their highs of the day. We’ll be looking for the market to follow-through on a strong day with big volume over the next few days. Who is going to leave the Euro this summer? It appears the masses believe the Greeks will leave the Euro. However, Germany is the one who should leave the ill-fated currency. Why should the Germans be forced to bailout the Eurozone? Will the people of Germany continue to vote for bailouts of countries that are irresponsible with their spending? Germany should be the country to leave the Euro just on principle alone. In the end, it all boils down to price and we’ll react accordingly. Remember, today was a solid day for the markets. We need to see more from this market before we can confirm a new market rally. Volume is very important here and if we are to confirm a new market rally volume will need to rival today’s level. Keep in mind, cut your losses!

European Elections Give a Scare, but the Market Rebounds

Sunday night futures took a big hit as French and Greek elections spook the market. Futures were able to climb back and wipe out majority of the losses from Sunday night prior to the open. As the market was able to gain itself footing, but lacked any oomph. Volume was lower on the day as it tends to be on Monday mornings. Today was Day one of an attempt at a new rally and it was very underwhelming. A show of support by institutions would have been nice to see. Not a bad day as things could have gotten much worse, but the market is lacking the thrust. The one bit of economic news of the day came at 3pm when the government released figures on consumer debt. It grew and quite big. Economists expected consumer credit to grow by 9 billion, but only to see it grow by 21 billion. This comes at a time when the public should be reducing debt and growing savings. Most private businesses had to adjust to the downturn in 2008, but the government and consumers have yet to experience a similar reduction. Rather than take the medicine now we are running the risk of a much larger problem requiring much more than just medicine. Over in Europe the people have had enough of austerity and pushed toward socialism. The only problem is no one will lend anyone in Europe any money. It will boil down to the ECB getting the nod to print more Euros. Endless deficit spending has caught up with Europe and no one is willing to deal with the consequences of it. Kicking the can down the road will only lead to greater problems and more angst amongst the people of Europe. Take your medicine and move on. The market still remains in a very dangerous area with the S&P 500 and NASDAQ below their 50 day moving averages. It would not surprise me to see today’s low taken out over the course of the next few days. Stick to your game plan and execute.

Big Wave Trading Portfolio Update And Top Current Holdings

“I learned that an opinion isn’t worth that much. It is more important to listen to the market.” -Brian Gelber “Most traders who fail have large egos and can’t admit that they are wrong. Even those who are willing to admit that they are wrong early in their career can’t admit it later on! Also, some traders fail because they are too worried about losing. I’m not afraid to lose. When you start being afraid to lose, you’re finished.” -Brian Gelber The Big Wave Trading Portfolio switched from a weak BUY to a NEUTRAL to a strong SELL signal on Friday. The weak BUY signal was generated by CANSLIM stocks breaking out and the Homebuilder indexes (ITB, XHB). The nature of the BUY signal was problematic and it is no surprise we are now under a SELL signal. What was surprising was the shocking (almost stunning) amount of CANSLIM quality stocks that broke out during the recent signal. This caused our portfolios to definitely be way too long the recent move and thus subjected us to more cut losses than what would normally happen. The mistake was taking any breakout that came within two weeks of earnings. This will now be a hard rule in our methodology. New breakouts in high quality stocks within 10 days of earnings are now completely off the table. Had this one rule been observed the small losses we did take would have been cut by nearly 50%. As for the current market condition, the breakdown we just saw in the market was on above average volume on the Nasdaq. This volume was also higher than the recent upside volume in the index. AAPL, CMG, and PCLN are beginning to see some serious distribution problems. Other CANSLIM quality stocks have reversed their previous breakouts on heavy volume. Other CANSLIM quality stocks failed late-stage basing patterns. Even other CANSLIM quality stocks had total and complete devastation following earnings misses. This all came on top of a horrible jobs report. This definitely weighs on our model. The only problem we have with this SELL signal is that our internal indicators are not confirming the move. They are, however, beginning to have a rollover type look and if the market does continue to selloff these indicators will go into confirmation. Overall, the charts in individual stocks have gotten very ugly very fast. The old market axiom of sell in May and go away appears to be intact. The amount of distribution in this market since February has been very large in comparison to the accumulation. Now that we have the market breaking down below the 50 day moving averages on above average volume it appears everything is in line for a rough May to October period. In all fairness to the stock market, we do know that it can and will do anything it wants whenever it wants. Therefore, if we selloff and then rebound on huge volume and get a massive follow-through day on accumulation, we will go long. This despite Big Wave Trading’s opinion that a serious correction is in our very near term future. I penned an article that was denied publication by Seeking Alpha due to the “technical” analysis nature of the article. I believe it is worth a read for anyone who has recently gone long this market and believes this is the start of a normal pullback. It could be but it probably is not. Top Current Holdings – Percent Gain – Date of Purchase SWHC – 81% – 1/3/12 AVD – 68% – 1/10/12 BVSN short – 57% – 3/19/12 MNST – 32% – 1/13/12 PRXI short – 25% – 3/30/12

Distribution Hits the Market; LNKD Jumps After the Market Close

A better than expected jobless-claims figure was overshadowed by an overwhelmingly disappointing ISM non-manufacturing reading. Sellers dominated the day pushing stocks lower all day as volume rose on the day. The NASDAQ now with two days of distribution and the S&P 500 with four it certainly appears this market is going to play games with both bulls and bears. The late day rally was even lame as it appeared the market was going to coast into the close and a wait tomorrow’s job report. Our cautious buy signal still remains, but it appears it is in jeopardy. LNKD posted its earning after the market close and the stock responded positively. The company has posted amazing sales growth the last few quarters and the past two quarters of EPS have been outstanding. Not too many companies can sport more than 100% of sales and earnings growth like LNKD has. It is no question companies are turning to LNKD for hiring purposes, but will it translate to jobs growth? We’ll certainly find out tomorrow if this economy has been able to produce any jobs. Facebook (FB) hits the market soon and with the IPO set to price anywhere between $28 and 35 will make Mark Zuckerberg an instant Billionaire. Quite the story and amazing what you can do with a business. LNKD came to market and my recollection of the day was LNKD pricing near $45 and catapulting to more than $120 a share. It would not surprise me one bit FB does not do something similar. Don’t bet on it, but it isn’t out of the realm of possibilities. Tomorrow will be just another day, the jobs report is something the CNBC/Bloomberg/FBN talking heads can fill the airwaves with. Their job is to (this is key so remember) sell advertising and not to make you money. Have a sound game plan and execute it. Money management is so pivotal in this process and without it you will be left out to dry. Cut your losses and have a great weekend.

Euro Stocks Head Lower, but US Stocks Find Footing Close Near Highs

A lower than expected ADP payroll figure soured the market mood at the early going. Friday’s jobs report is just around the corner and the ADP figure certainly points at a disappointing figure Friday. Volume started out the day running hot, but cooled as the session turned to the afternoon. NASDAQ volume ended lower on the day and is a bit disappointing as higher volume on a day like today would have been super positive. NYSE volume ended higher giving a day of distribution for the S&P 500, but given the support off the lows the distribution day is relatively minor. We are still in a cautious buy mode and continue to look for full confirmation this market can move higher. Earnings season is in full swing and we continue to see wild swings in stocks posting earnings. MA held up well after posting earnings this morning. We continue to see excellent opportunities with earnings season and tomorrow morning is no exception. Reg FD has certainly produced wild moves after earnings, but we have been able to take advantage of the situation. As long as we cut our losses short we’ll continue to produce solid gains. Europe is in big trouble and their stock markets are beginning to crack once again. Spain’s stock market has hit a 52 week low today certainly a negative sign. Germany’s DAX index has put in a right shoulder of a head and shoulders topping pattern. Things are not looking over in the Eurozone and it appears the US Stock Market has largely ignored the perils occurring across the pond. It will be interesting to see how thins unravel here over the next few weeks. If selling pressure continues in Europe will it spread again? The NASDAQ looks pretty good here along with the S&P 500 despite the index sporting two days of distribution. We are under a buy signal, but it would be nice to get a nice strong lift off the 50 day moving average with tons of volume. Until then, we’ll cut our losses short and let our winners run!

Small Caps Reverse Hard Intraday as Stocks Close Well off the Highs of the Session

Positive ISM figures helped the market surge to the session highs only to see sellers take away the day’s gains. ISM Manufacturing grew more than expected and buyers jumped at the chance to move into the market. However, by the afternoon cracks began to become apparent whereby AAPL and small caps began to turn lower. Selling continued throughout the remainder of the trading session with small caps leading the charge lower. PCLN and AAPL helped drag the NASDAQ lower, but the index was able to close in positive territory. Volume was higher on the day and with the mixed action does not instill confidence in this market. Mixed action overall and we continue to operate under a cautious buy signal. AAPL continues to struggle after its earnings release. The stock is trading quite loose and is in danger of losing its 50 day moving average. There is no doubt that if AAPL turns sour you can almost guarantee the market will move lower in sympathy. Price should dictate on how you trade and this instance there is no need to anticipate the move. Stay patient and let price confirm the move before acting. Crude oil was higher on the day as the commodity continues to hang above $100 a barrel. Given prices are staying high the continued stress on the average Joe continues. What is interesting is the math simply doesn’t compute with oil this high and the market being able to absorb the high prices. This is precisely why we only pay attention to price in this market. Our opinions are very much useless in the market as they are often wrong. Logic simply doesn’t work only price! Tomorrow we’ll get a read on the jobs market with the ADP employment report set to hit the airwaves. This Friday we’ll get a read on jobs from the month of April and if it was like last months we’ll have a very tough market to deal with. There isn’t any sense to go ahead and jump the gun because no one can predict the future, not by a long shot. Stick with the trend. Happy Trading! Cut those loses short.

Stocks End April Lower for the First time Since November

Weak economic news helped put a stop to the recent bounce off the lows as the market put in its first negative month since November 2011. Volume came in lower on the day despite the market closing lower. Certainly a positive sign, but we’ll need to see the market need to build upon the action ending last week. Mostly a boring market day overall with not much doing and we aren’t about to over analyze it. We’ll need to see this market continue to act proper to stay long. There are certainly a few good things going well for this market. The NASDAQ finished out the week with solid gains and volume jumping each day. This was a bullish sign institutions were willing to pay up for positions, something you only see in solid uptrends. We’ll need to see this continue to stay with our buy signal on the market. It is quite amazing the market has been able to keep a float for so long. We have been able to skirt any disaster, but have made things worse for us down the road. At the end of this year there are some $500bn taxes coming due that will significantly impact the economic standing of this country. As a nation the United States has chosen to continue to lay the burden on its younger generation to pay for the mistakes of the prior generation. The amount of debt outstanding will at some point become to0 great of a burden and hold this nation hostage until its liquidated. Pay attention, it will be a historic ride. Certainly the price action of the market will give us an indication if we’ll see conditions worsening. Until such time we’ll continue on our current path and leave the worrying to someone else. Cut your losses short!

Big Wave Trading Portfolio Update And Top Current Holdings

“When you are starting out, it is very important not to get too far behind because it is very difficult to fight back. Most traders have a tendency to take risks that are too large at the beginning” – Gary Bielfeldt “Professional traders manage their trading to assume that each trade may be a loser.” -Peter Brandt The Big Wave Trading Portfolio is currently under a BUY signal after having to suffer through three straight SELL signals that were followed by cutting losses and returning to NEUTRAL. The current BUY signal is mainly being produced by the mere fact that the market will not sell off following all of the recent distribution days and is back above its 50 day moving average. Volume on the upside continues to be well below what we would consider a strong BUY signal and it remains a BUY signal basically due to these CANSLIM quality stocks. A lot of CANSLIM quality stocks have built or continue to build quality bases. On the day of the BUY signal on Thursday tons of CANSLIM stocks broke out of very constructive base patterns. Despite these very high quality long signals, Big Wave Trading is not investing up to the capacity that it should be now due to the recent false signals in our model which in the past has not produced three false signals in a row so fast. This is 100% a function of the current market and not our model as 1976-1978 did not even produce this kind of low volume misinformation. Clearly, price is the only thing that matters when stocks are trending up. Volume is irrelevant. At the same time, even if the chart is in perfect order, our portfolios will not tolerate losses and pair back anywhere from 10% to 25% of our positions in stocks if they show losses. Overall, it appears these breakouts are stronger than the breakouts in January as the current consolidation period has given many of these stocks base-on-base patterns or ascending base patterns. The bases these high quality stocks broke out of in January while sound came from the very volatile July-December period in the market thus making some of them suspect. This recent consolidation has tightened many of these charts up. While saying all of this, we are completely aware that the volatile market may throw us back into a NEUTRAL signal at any moment. Also, we realize we are deep in our third year of a QE led uptrend and we remain in our stance that we are near the end of this big bull market rather than a start of a brand new bull market. However, we do not trade off of our opinions. We trade off of real price signals based on 130 years of stock market history and 200 years of futures history. We may think we are near a top but if the market wants to move higher and we have signals we are taking them long. Top Current Holdings – Percent Gain (non-margin) – Date of Signal SWHC – 84% – 1/3/12 AVD – 71% – 1/10/12 LQDT – 53% – 2/1/12 BVSN short – 48% – 3/19/12 EPAM – 33% – 3/1/12 CPWM – 30% – 3/13/12 MNST – 30% – 1/13/12 SUNH- 27% – 3/9/12 PRXI short – 22% – 3/30/12

Second Day of Solid Gains Pushing Market Model Back to Buy

Another great day of stock market gains despite AAPL taking a back seat consolidating its gains from Wednesday’s market. Volume ended mixed, higher on the NASDAQ for the second straight day showing institutions are scooping up shares on the NASDAQ. The buying spree didn’t begin until the end of the day, but it came on strong and showed there might be some life left to this market. Economic news wasn’t great while jobless claims continue to be weak and is not a great sign for the job market. Just a solid day in the market and it was AAPL getting the ball rolling. Sentiment took a dive this week as the number of bulls dropped considerably across the board to lows not seen for quite some time. It appears the crowd bought into the bearish talk out of Europe. Bears jumped on the AAII survey to the most since this uptrend began last year. Sentiment is not a perfect indicator, but it does appear sentiment got a bit overzealous to the downside. There were plenty of breakouts today and some by solid growth companies. Everyone knows AAPL story, but a few other big names had some really nice gains. We love to see this when a market is about to rebound or start a new uptrend. A real positive is the NASDAQ getting big time support above its 50 day moving average. The combination of leaders and support above the 50 day could be setting this market to hit new highs. Nothing is for certain, but the odds are beginning to stack up in the favor of the bulls. We aren’t going to sit here and argue with the market. It would not be a prudent move to let this market go ahead without us. Don’t argue with the market, because it doesn’t care what you have to say. Stick with the trend. Have a great weekend!

AAPL Boosts the Market as the Federal Reserve Announces Rate Policy

The story of the day was none other than AAPL producing fabulous earnings. On the negative side durable goods orders was much lower than expected, but failed to derail the euphoria surrounding AAPL’s earnings. The stock comprises 17% of the NASDAQ 100 and a nearly 9% move helped the NASDAQ finish higher by more than 2%. Volume was higher on the day and above average an encouraging sign. Ben Bernanke and the rest of the Open Market Committee held rates steady (continuing ZIRP), boosted their economic forecast, and said they would remain ready to step in when needed. A positive day for the markets and day one of an attempted rally pushed the Big Wave Trading market model to neutral. We’ll be looking for a big volume up day of more sometime between days four and seven. Day four will occur next Monday on month end. IBD uses 1.7% on the NASDAQ, but we’d take 1.5% on very strong volume to confirm a new market rally. Any new buys here would be very small for us, we want confirmation of a new rally before stepping into the waters. AAPL is very likely to digest the current move and will hold down the NASDAQ. Of course, the stock could power higher from here. However, we have seen stocks like UA pull back after earnings and AAPL probably will not be any different. Remember, we saw quite the price destruction from the end of March and it will take some time to repair the damage. It is wise to stay patient and strike when the odds are in our favor. This market continues to be a difficult one to manage! We have repeated this sentiment since this uptrend began. It would not surprise us to see this market push higher from hear testing the 50 day moving average. And with the Federal Reserve continuing its ZIRP anything is possible here. Like it or not, the Fed will continue to print money when needed to save this market. Stay disciplined and you’ll come out of this all right! Cut those losses!

AAPL Blows Away Earnings as Stocks end Mixed on Light Volume

Disappointing housing market numbers kicked started the morning economic news, but a better than expected Richmond Fed Manufacturing index was a nice surprise. While the rebound outside of the NASDAQ was nice to see the lack of volume was quite unimpressive. The real story would come out in the after-hours session with AAPL reporting its earnings. Blowing out another quarter of earnings AAPL was able to surprise the street again with fabulous numbers. Closing out the after-hours session, the stock closed off its highs, but above the key $600 psychological level since last week. Today’s session was really lackluster with not much to hang your hat on besides AAPL. AAPL will take a back seat to Big Ben and the Federal Open Market Committee’s policy statement and rate announcement. The Fed isn’t about to raise interest rates any time soon, but the market would like to hear the Fed go beyond 2014 and state rates will remain low until 2015. May I remind you that is a full 6 years from the bottom. In 1920, the economy suffered a terrible recession (the last great recession before this one) and by 1921 the economy bottomed out and pushed higher. While there was considerable pain the rest of the 20s roared. Is the economy so bad the Fed needs to keep rates this low? ZIRP is not working and neither is pumping in further liquidity. This debate will not matter, only the direction of the market matters and it continues to be down. A key indicator is the 50 day moving average and the S&P 500 and NASDAQ remain below this key moving average. I am sure we could see the prices jump back above this moving average, but with the current damage waged by sellers it would take a miracle to manage a new rally. Let’s also not forget we are close to May and very few uptrends have EVER started in after May. August would be the next probable month a new rally may actually begin. We’ll most likely see a lot of chop and lower prices over the next few months. Be prudent. Volume will likely get a boost tomorrow as everyone in the world will try and position themselves after the Fed announces its decision. Perhaps we’ll get the NASDAQ to produce Day one of an attempted rally, but the odds are not in favor of a new uptrend forming here. Its all about price! Stay focused on it.

Stocks Finish off the Lows but Can’t Shake European Jitters

French elections and a debacle in the Netherlands helped spook investors sending European stock markets lower on Monday. Fears spread across the pond to the US as premarket futures were down close to one percent. There wasn’t any economic news to rattle the markets, nor help them. AAPL was able to close above its 50 day moving average, but that wasn’t before a volatile session. Buyers stepped up and supported the market at the day’s low showing a bit of strength. Volume was lower on the session as institutions weren’t too active in today’s market. We are still searching for day one of an attempted rally and a follow-through day before we get thinking about getting long this market. Last Thursday’s market was a big tell with a lot of stocks reversing very nice gains. Not to mention the market appeared to head towards confirming a new market rally. Friday’s market was more of the same where the market was unable to sustain any resemblance of a rally. Today it was the first sign of some support, but without big volume it is hard to get behind today’s move. If volume had been huge and the market been able to climb too even we’d be signing a different tune. The market remains in a correction and we have yet to see any signs of stabilization. To make this even more fun for the next few days will be the Federal Reserve Open Market Committee meeting kicks off and AAPL earnings after the bell Tuesday. Wednesday the Federal Reserve will announce its rate policy and the market will be dealing with AAPL’s earnings. AAPL has killed earnings! Last quarter the stock BLEW away estimates, but can it continue? Price action at the moment is very nice and given volume accompanying the action there have been big sellers dumping the stock. The stock is hanging by a thread. While the market digests AAPL’s earnings release it will have then digest the Federal Reserve’s policy statement upon its release. Will the Fed move the first rate hike to 2015? This market continues to be difficult to tame and will continue to be until we can have a real correction without government intervention.

The Current Rally Is Coming To An End

I decided to post this as an instablog on Seeking Alpha’s site since they do not accept TA pieces without some fundamental proof. The Current Rally Is Coming To An End

Big Wave Trading Portfolio Update And Top Current Holdings

“Profits always take care of themselves but losses never do. ” The speculator has to insure himself against considerable losses by taking the first small loss. In so doing, he keeps his account in order so that at some future time, when he has a constructive idea, he will be in a position to go into another deal, taking on the same amount of stock as he had when he was wrong.” –Jesse Livermore “Trading is a waiting game. You sit, you wait, and you make a lot of money all at once. Profits come in bunches. The trick when going sideways between home runs is not to lose too much in between.” — Michael Covel The Big Wave Trading Portfolio is under a SELL signal and is taking action on a day by day basis. Big Wave Trading is currently going short stocks that have had speculative run ups in the recent months that have reversed on very heavy volume. Big Wave Trading is also using inverse ETFs to take a short position in the retirement accounts. Big Wave Trading still sits on a high level of cash and is ready to put it to work as signals generate from what appears to be a coming market sell off. While we reserve no bias as to the market at any time, our models are extremely bearish with internals and externals that make up this model giving us very clear “warning” signals. This warning signal is a potential large market pullback. This is based off of several time, price, and volume indicators and actual action of leading, speculative, and defensive stocks. The big surprise about this is that the signals are so bearish yet we remain near recent highs in the stock market. We do not see this as strength and instead see this as a last ditch effort by bulls to hold up the tape via a very few select stocks. The leaders are clear: CMG PCLN and AAPL. Their extended to parabolic runs from 2009 to now are very clear on an arithmetic long-term weekly or monthly chart. The recent price and volume action is showing distribution. The action on these leading stocks on top of the accumulation in inverse ETFs, the distribution in the indexes and ETFs, the breakdowns on large volume in CANSLIM quality stocks, and the void of new longs showing up in my scans make it very clear where the next big move is going to be. When will it happen? There is not one individual on the planet Earth that can answer that question. The sad thing is many people still believe there are people that can do this. They can not. No human, robot, or other entity can predict the future. It can’t be done period. Our portfolio recently was forced to go from SELL to NEUTRAL to SELL to NEUTRAL back to SELL over the past two weeks due to our cut losses being hit off the SELL signal. There is always a safety net. For the first time in real time, since using this methodology following 50+ years of backtesting, we had a BUY or SELL signal not change despite our cut loss being hit. Our second SELL signal was hit with a cut loss via our cut loss/safety strategy. However, the model did not switch from SELL. It was a discretionary decision based on my part to cut our losses to protect against a further melt up on low volume. The fact we are back into a SELL signal proves that the model knows more than I know. That is always comforting to know. In past studies, having three signals generated like this in a row has not happened (the market is always doing something knew!). However, when backtesting BUY to NEUTRAL to BUY or SELL to NEUTRAL to SELL signals over a one to two week time frame, the second signal was true over 85% of the time. Our speculative guess (and that is all that it is at this current point) is that having three in a row like we just went through is an even higher odd event. We will know soon enough. Bottom line, the most important attribute of our model is that it keeps us on the correct side of the market. If the market continues to breakdown, we will press our position on the short side. If the market does not break down, it is going to be a few weeks to months before these very broken charts are going to be able to fix themselves and thus even if we re-enter a BUY signal chances of being able to put funds to work in any significant way appear thin (unless we have a HUGE volume 5% up day–that would obviously change the models mind). However, if we do enter a new BUY signal you can be 100% sure our operations on the short side will end. Another note on the current market, the DJIA is now leading the Nasdaq RS wise and Utilities, Consumer Staples, Tobacco, and Aerospace/Defense stocks and groups are showing up in my stock and ETF scans. We have almost total confirmation that the old saying “sell in May and go away” will be of more value than “buy the Facebook (FB) IPO on opening day.” One last reminder, Big Wave Trading never holds on to a losing position. If we go short or long any position and it does not move in our direction immediately, we begin selling. No questions ask. We don’t care about being wrong or right. That is for losers. We just want to win. To win big you are going to lose a lot. Those are the hard cold facts. Get used to it or find another passion. If this isn’t your passion, find someone whose it is. Top Current Shorts – Percent Gain – Date of Signal SWHC – 80% – 1/3/12 AVD – 69% – 1/10/12 LQDT – 46% – 2/1/12 CPWM – 32% – 3/13/12 EPAM – 31% – 3/8/12 ULTA – 29% – 1/13/12 MNST – 26% – 1/13/12 SUNH – 25% – 3/9/12 Top Current Shorts – Percent Gain – Date of Signal PRXI – 35% – 3/30/12 BVSN – 34% – 3/16/12 WZE – 30% – 4/10/12 SINO – 25% – 4/12/12

Stocks Reverse Morning Gains on Increased Volume

Disappointing jobless claim and existing home sales put a damper on the market at the open. Buyers did show up pushing the market higher with volume on the rise. However, buyers were exhausted and it was sellers who took over and dominated for the remainder of the session. AAPL dropped below the $600 mark a key psychology area ahead of OPEX. There were plenty of stocks like RAX who had a great morning only to see sellers take over reversing gains. Volume rose on the day and given the close there isn’t much question institutions continue to dump stock on the market. Big Wave Trading market model is once again in SELL mode.

Removing the second half of the session and this market would have been sitting pretty to push higher. Strong reversals like we saw today are indicative of a very weak market. Of course when AAPL takes a dive on big volume is never helpful for the entire market. Sure, you have outliers like MLNX on the day and certainly saw great gains. On balance, unfortunately, majority of the market saw weakness and is foreshadowing things ahead.

There isn’t any economic news ahead of tomorrow’s OPEX session. Volume should pick up due to the options expiry, but it isn’t a guarantee. We have joked in the chat room we’ll more than likely see a positive day just to confuse the masses. This is not something we would trade off of, but it would be quite entertaining to see the market push higher despite today’s sell-off.

Sentiment isn’t really telling us much here as the two sentiment survey’s we track is a bit mixed. AAII survey has bulls and bears about dead even. 31% of survey respondents are bullish while 34% are bearish. It appears neutral is where many want to be right now. II survey remains tilted towards the bulls, but with only 21% of bears being recorded it doesn’t feel like we have had a big enough correction. Bottom line it appears we aren’t near a turning point according to sentiment. If anything sentiment shows confusion.

Get out and enjoy the weekend!

Stocks Settle Lower after a Whipsaw Like Day

The market had a void to fill with the lack of economic data and turned its attention to the current European situation. Unfortunately for us the European Debt Crisis will stay with us as long as Euro Politicians kick the proverbial can down the road. Volume rose slightly on the day as the market adjusts for OPEX. Volume wasn’t overly exciting to give the indication institutions were dumping stock left and right like they were on Monday. Using the NASDAQ today was Day two of another rally attempt. While today wasn’t overly bullish at least we held within Tuesday’s range.

Today was technically a day of distribution in the markets. It isn’t until after confirmation where we worry about a day of distribution. If on day one following a follow-through day is distribution the odds are well over 90% the rally will fail. While we really don’t want to see a distribution day tucked in prior to a follow-through day the correlation to failure isn’t as tremendous if it occurred after confirmation. Keep on your toes as this market may decide to go one way or another here.

The intraday action today was quite volatile, but the action is to be expected in front of OPEX. Continue to keep an eye on AAPL as the stock trades around $600 a key psychological level for traders. If there is a battle to wage, it will be done here as market makers and option holders will adjust heading into Friday. Price is everything to us, but we do need some sort of entertainment. Unless there is a signal from price everything else is just noise.

Looking at the McClellan Oscillator we are slightly oversold, but no where near the levels we reached last week. It is quite possible we revisit them in the near future. There hasn’t been much of a recovery of stocks pushing above their 20 day this week after today’s action. We remain in limbo and the next big volume break will be foreshadowing where the market will head for the next few weeks. Keep a disciplined approach and always cut your losses short.

Stocks Rebound in a Big Way as Volume Slides

AAPL reversed its course pushing higher bringing the rest of the technology sector and NASDAQ higher. Volume was lower on the day suggesting the appetite to get back into stocks was not a top priority for institutional traders. It is true High Frequency Trading (HFT), Federal Reserve, and the lack of retail investors has skewed volume. We simply look at relative volume and ignore the noise. At the end of the trading session sellers took to INTC who was reporting after the close. The selling took some nice gains off the table. It would have been bullish if the market would have been able to close at the highs with volume surging. We’ll need to see the market confirm a new rally here shortly if we have any chance of notching new highs.

Economic news was somewhat mixed this morning. Housing starts dropped disappointing the market, but building permits jumped. Economic figures do make for good discussion points during cocktail parties or at the office water cooler. They should not be used for trading. Price is the ultimate indicator followed by volume. If you want to have an argument about the current state of the economy, go right ahead and pull the most recent jobless claims figure. However, it should be left aside when you are trading.

This week happens to be options ex (OPEX) and always lends itself to crazy moves during the week. One interesting area to watch for is AAPL and how it reacts around its $600 dollar market. Round numbers have always fascinated the financial media and during OPEX it will quite fun to see how the stock reacts. This is not to trade off of, but merely an observation of what is going on. Keep an eye on AAPL along with GOOG, PCLN, INTC, and AMZN this week. They make up a great portion of the NASDAQ and will have a heavy influence on how it trades.

This week has started off with a lot of fireworks and it should continue throughout the week. Sit back and enjoy! Cut your losses and remain disciplined!

Big Wave Trading Portfolio Update And Top Current Holdings

“Don’t spend your time and energy chasing mediocre trades and investment opportunities. Only move when the odds are overwhelmingly in your favor.” -Brian Hunt

“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the man of inferior emotional balance, nor for the get-rich-quick adventurer. They will die poor.” – Jesse Livermore

The Big Wave Trading Portfolio remains under a NEUTRAL condition but is near switching to a SELL signal. Had volume come in above average on Friday or had price dropped 2% on the SP, Russell, or Nasdaq, it would have switched. Our internal indicators that measure price, volume, and time on many different levels are all in confirmation of the short-term downtrends that are starting to appear on the indexes. At the same time, every single ETF is in full confirmation with their short-term downtrends and every single inverse index ETF is in full confirmation with their short-term uptrends. This action along with the constant non-stop poor action in individual stocks outside of the biotech and monster leading stocks (AAPL PCLN CMG SBUX) universe does not bode well for current bulls. Everything points to our model switching to SELL next week. However, there is one caveat that our model can not price in and has no way of knowing when or where it will come from. That is Ben Bernanke. As long as the government interferes with free markets price and volume is going to generate more false signals than we ever would have seen pre-2008. Since they can simply inject liquidity to a market that has no buyers, we have to respect that many high volume breakdowns are simply not going to work like they used to. If you are a big seller and you know the Fed is going to magically lift stocks higher why would you keep selling? You wouldn’t. You let them lift it higher then unload more and wash, rinse, repeat. The good news is, just like in July to August, you get a real break where sellers simply overwhelm whatever in the hell the Fed is doing. Looking at any long-term arithmetic daily, weekly, or monthly chart it is clear to see the big-cap monster leading stocks are going from extended to parabolic territory. Google finally announced a split. It staged a late-stage-base-failure breakdown on heavy volume. Now all we need is for Apple and Priceline to split and we can start to get a sense of what 2000 felt like before it ended. I will make it very very very clear that this is in no way like 1999. Trust me! However, the fact that so many CANSLIM high-quality stocks are acting so strange, volatile, and some with no rhyme or reason towards price and volume, can not overall be healthy for the market. If these leading stocks continue to hold up relatively well to the overall market, it is always possible that following a correction we could blast off higher. As of now, whether this is just a correction or the start of a new downtrend, it is pure speculation. All we need to know now is that stocks look extremely vulnerable here, the indexes carry a lot of distribution days in them, the internal momentum price, volume, and time indicators are all very bearish, recent longs failed, and new shorts are working. Those are the facts. It does not bode well, short-term, for the market. However, these facts do not matter in a world of quantitative easing. Anything can and will happen. In this stock market you are either patient and wait till all the ducks line up before you move or you must be very quick to change. If you are not quick to change in this market environment you will be dead.

Top Current Holdings – Percent Return – Date of Signal

SWHC – 74% – 1/3/12
AVD – 71% – 1/10/12
EPAM – 48% – 3/7/12
LNKD – 44% – 1/19/12
LQDT – 42% – 2/1/12
BVSN short – 34% – 3/19/12
PRXI short – 34% – 3/30/12
MNST – 28% – 1/17/12
ULTA – 28% – 1/13/12
DANG – 25% – 3/30/12

Volume Slips but Stocks Jump as European Fears Calm

Disappointing economic news did not help the market in the early going, but sellers weren’t around to mount a defense. Steadily throughout the morning buyers pushed the market higher. European fears calmed as CDS spreads tightened. Volume slid on the day as institutions simply weren’t putting any money to work. Well below average volume has been quite pathetic on this rebound despite the extreme oversold conditions. The past two days do not instill confidence this market can go higher from here.

There were a few stocks pushing higher today like LNKD that can give you some hope this market can push higher. FIO is another, but the stock is real loosey goosey. It is quite possible that volume comes in later like we have seen in the past fooling market participants. Volume has been real pathetic and today’s volume highlighted the lack of involvement by institutions. Is there something wrong, perhaps but price will be our guide.

Sentiment figures have come down a bit week over week showing the recent decline has pushed out some weak bulls. AAII Bulls and Bears did a flip flop with Bulls finishing this week at 28% while the bears jumped to 41%. II survey remained in the bull camp, but this doesn’t come as a surprise. Perhaps this recent bounce has bulls jumping back aboard, but it is quite difficult to be overly excited over the recent rally.

The recent rally did take the extreme oversold conditions off the table, but we are still a wee bit oversold. It won’t take much for us to get back down to extremes. Today’s move marked day two of an attempted rally for this market. At this point, I can see it is quite pathetic. Sideways action would do this market some good and setup for a day 4-7 follow through day. Personally, the odds of a follow-through day feel quite slim. Anything is possible and we’ll be ready to go with whatever the market gives us!

Get out there and enjoy the weekend! Make it a great one.

Stocks Fall Hard on European Fears; AA Jumps in After-Hours

European fears helped send stocks lower as Spain and Italy fears continue to gain traction. The big deal with Spain and Italy is simply the size of their economies and it is the size striking fear in the market. Sellers dominated the entire session as volume sky rocketed in panic like fashion. VIX jumped to its highest level since early March. Not a good day for those who were long the market as there isn’t much to point to as a positive. The lone positive was in after-hours as Alcoa posts better than expected earnings and the stock jumping more than 5%. A very bearish day for the markets as the Big Wave Trading model goes into Sell Mode.

The difficulty here will be whether or not the market will continue to sell off here. If it does look out below as it could get really nasty. However, there is enough evidence we’ll see a bounce we can short into. As of today’s close the McClellan Oscillator was sitting at -377 a very extreme level. We can certainly see the market get even more oversold, but with today’s reading it is hard to believe we’ll fall much further.

Leading stocks didn’t have much support today either, but given the size of the selling no one escaped. There are many reasons for the market to sell-off, but we know it is better to act rather than trying to figure out the reasoning. Sure, Europe is a great reason for the sell-off and Spain and/or Italy’s failure would bring on some pain. But, this market has gone straight up on the back of AAPL, CMG, and PCLN. A correction here is not out of the question it is unfortunate volume kicked into hyper gear today.

Earnings season was kicked off by Alcoa during the after-hours session. The stock posted better than expected earnings and the market responded by sending the stock higher by 5%. Many will view Alcoa as the unofficial barometer for the first quarter earnings season. It will be fun to watch the entire earnings season unfold.

Cut your losses short.

Markets Close in the Red After a Disappointing March Jobs Report

The March jobs report released on Friday was quite disappointing as just over 100,000 jobs were created. A record number of people leaving the labor force helped unemployment drop to 8.2%. Futures indicated the market wasn’t about to respond well to a poor jobs report and today’s market certainly indicated weakness. The lone positive on the day was a few leading stocks finished in the green and in the short-term we are oversold. Big Wave Trading’s market model remains in neutral mode while this market is in correction.

Only 23% of stocks remain above their 20 day moving average and 40% above their 50 day moving average. These numbers are showing the market is quite oversold at these levels and the market is due for a bounce. The last time the market saw these figures was back in early March as well as the week of Thanksgiving. While there is no guarantee we will see this market rebound to new highs we can be certain some sort of bounce may occur. Piling onto the oversold bandwagon the McClellan Oscillator now stands at -287. An extreme oversold reading giving credence to a possible market rebound ahead of earnings season.

Earnings season is upon us and AA is set to report earnings after tomorrow’s bell. Every quarter we get to experience the blow-ups and melt-ups. This earnings season should be no different! If you are carrying a sizeable position in a stock it is wise to lighten up ahead of earnings. While you may miss out on some gains you’ll miss out on some big time blow ups. Pre-announcements are unavoidable like PMTC even though it failed a pocket pivot. You can avoid stocks blowing up by simply reducing the size of your position ahead of earnings.

Trend followers do not need to worry about earnings season, simply following the trend and a sell discipline will reap huge rewards. Forget opinions, they are simply guesses and do not give you an edge in the market. Enjoy earnings season and remember to cut your losses short.

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading market model went through a serious of changes this week turning from a full BUY signal to a cautious BUY signal to a NEUTRAL signal by Thursday. This NEUTRAL signal means that there is no statistical edge one way or the other as measured by all of our internal indicators. While under a NEUTRAL signal, BWT will only go long the highest quality leading stocks with the strongest chart patterns, will operate from the short side on the best topping patterns, and will eliminate all losers immediately. This means that if we go long or short a stock and it does not move in our favor on day one we are out some of it to all of it. Even if that loss is only $1. No questions asked. It is still not a stock pickers market. That is, of course, you are long PCLN CMG or AAPL. If that is the case then it is a stock pickers market. If the action in these leading stocks doesn’t confirm the mantra “focus on the leaders” I do not know what does. One particularly scary aspect of this recent rally is the drawdown in the BWT accounts from mid-February to Friday. BWT was working on some solid gains when all of a sudden March hit. March has given quite a few long signals in high quality leading stocks that have led to consistently cutting losses. This isn’t happening every once in a while. It is happening on virtually every trade since mid-February. This pattern is following the same pattern of January 2011-May 2011 where the methodology we use diverged very negatively from the overall market. For the bulls sake, we can only hope this is not going to end up in a repeat of that year. The truth of the matter is that March was brutal for Big Wave Trading. In fact, it was a shocker. Watching large gains slip away (just like the gains from September 2010 to January 2011 being destroyed from Jan 11 to May 11) is always a humbling experience. Yet it is also a chance to learn and grow. And that is what we have done. It is clear the market model timing methodology is far superior to stock picking currently. Due to this, more capital will be put to work on the model signals than before. Also, playing speculative stocks with unsustainable run-ups and criminal pump-and-dumps on the short side will become a bigger player in our portfolios. Stock picking using the chart patterns that helped create vast wealth from 1996-2000, 2003-2007, somewhat in 2009, and in late-2010 for me will come back in fashion. However, right now, clearly, it is not in style. during any other rally in the past the top percent gainers below would be nearly doubled. Outside of three stocks, the returns have been paltry. As long as this methodology remains out of style, our portfolios will adjust accordingly. I hope everyone is enjoying their long weekend. Aloha.

Top Current Holdings – Percent Return (non-margin) – Date of Signal

SWHC – 84% – 1/3/12
KORS – 69% – 1/17/12
AVD – 65% – 1/10/12
RF – 42% – 1/5/12
BVSN short – 40% – 3/16/12
EPAM – 39% – 3/1/12
LQDT – 36% – 2/1/12
LNKD – 34% – 1/19/12
PRXI short – 31% – 3/30/12

Despite Late Day Rally Stocks Fall Hard as Volume Rises

Today’s market session sends the market into correction mode switching the Big Wave Trading market model to neutral. Selling dominated the session as gold and silver prices fell hard on the news the Fed would not immediately step in with QE3. Volume jumped on the day as the money printing thesis being struck down and longs exited. The late day push was a bit weak, but was able to get this market well off the lows of the session. Despite the rally the damage was done and we’ll adjust to the market.

Following the FOMC meeting minutes yesterday it is quite clear the market as a whole is a junky hooked on the monetary “juice.” If the central bank will stay true to its word we’ll get a sense of how strong this market really is. During the most recent bank stress test the central bank used a 50% equity decline as a scenario, but would it step in prior to a 50% equity decline? If the market falls from here it will prove this market has been a sham propped up by the Federal Reserve. Whatever the case may be we’ll be on top of the market.

As it stands now the market is in correction mode, but we aren’t in a full sell mode. The McClellan Oscillator now sits at -193 at an extreme oversold level. While not perfect it has been an area where stocks have been able to rebound from. Just a few weeks ago the oscillator was in a similar position. It may be a bit obvious to sell here, but make sure you stay disciplined in your strategy. If you have sell signals take them! It still would not surprise me to see the market gets a lift in the next few days to clear some oversold levels.

Tomorrow’s action will certainly be interesting as I wouldn’t be surprised if this market moves lower ahead of Friday’s job figure. Stick with your game plan!

Late day surge lifts stocks off the lows after Fed downplays QE3

The market will have to go it alone without the Fed as the FOMC meeting minutes revealed the central bank is sitting on its hands. What was the impressive part of the day was not the move off the lows of the session, but leading stocks kicked ass and took names. While the move off the lows was quite bullish for stocks it was leading stocks stealing the thunder. Volume increased across the day giving a day of distribution across the board. All in all not a bad day considering where the indexes stood after the release of the FOMC meeting minutes.

What an impressive move put on by leading stocks. AAPL and PCLN continue to dominate the market pushing into new high territories again. AAPL continues to get press about hitting the trillion dollar mark while PCLN quietly pushes higher. It does make us wonder all this trillion dollar market cap for AAPL may just be a sign a top is near. No one knows the future, it is best we leave our actions to the price and volume movements and not opinions. For now, enjoy the ride higher!

Now with the FOMC out of the way and signaling they will not intervene with QE3 we’ll get to see what this market is made of. Now, of course any pullback in the equity markets will be met with cries for further quantitative easing. You can bet just like a junky, Keynesian economists will be screaming for the Federal Reserve to pump more dollars into the system. At some point you get diminishing returns and the expected outcomes sour and become toxic to the system. At least for us we’ll be merely following the trend and prepared for whatever the market may throw at us. Ignore the hype and stick with the trend.

This uptrend has been somewhat difficult to handle and has yet to produce large moves in stocks. Sure AAPL and PCLN have been nice, but we haven’t seen too many 100, 200, 300% winners we have seen in the past. Be that as it may, this uptrend still is intact and continues to push forward.

New Seeking Alpha Article (PCLN CTRP TZOO EXPE MMYT)

Taking A Look At The Leisure-Travel Booking Sector's Top Stocks

Stocks Kick the Quarter off in the Green but Volume Slips

The second quarter of 2012 got off on a good foot with Small Caps leading the market higher. Volume slipped off of Friday’s levels indicating traders and investors alike were not overly eager to buy up stocks. Positive news from ISM readings where the ISM Manufacturing index ticked higher than expected and prices paid came in lower than expected. Buyers stepped up and pushed the market higher where stocks finished up. Leading stocks enjoyed a boost today outperforming the broader market a positive sign for the market overall. If we ignore volume today was a solid day for the market.

This week is a holiday shortened week due to Good Friday’s market close. Banks are open! Holiday trading always tends to be light in volume and you can forget about weekly volume surpassing last week’s volume. If the market can avoid major distribution and reward leading stocks we’ll be sitting pretty for this uptrend to continue.

Small caps have been struggling to break out as of late and continue to lag behind the NASDAQ and S&P 500. The group led the entire market today and is looking to breakout once again. It would be a great sign for the market if this group can start to move again and lead the market. Big cap stocks in the NASDAQ and S&P 500 have been leading the way and while we won’t argue with the market we would rather see small caps lead. A healthy market needs small caps to lead the way and they just might be on their way.

The conclusion of March Madness is here and we’d be silly to go with Kansas to win. Our apologies to Kansas fans, but Kentucky has one heck of a team. Kentucky’s best 7 players all averaged 25 points or more in High School! Kansas needs a miracle. Enjoy the game!

As for this market, we continue to operate in an uptrend and without any distribution piling up on the NASDAQ it is hard to bet against this market here. Until we see reason to get super defensive we’ll operate on the long side.

Big Wave Trading Portfolio Update And Top Current Holdings

The biggest cause of trouble in the world today is that the stupid people are so sure about things and the intelligent folks are so full of doubts. — Bertrand Russell

It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change. — Charles Darwin

The Big Wave Trading portfolio remains under a BUY signal.

There are concerns with the current condition of the rally but nothing internally is moving our model away from the BUY signal. The most problematic issue is that new longs are simply not performing well. New longs continue to give us small cut losses or small gains. The only two areas not doing this are our IPO and Medical/Biomed/Drug stocks. They remain a high reward/risk win/loss ratio play. This has been one of the strangest uptrends we have seen at Big Wave Trading since my career started in 1996.

For the first time ever, during an uptrend longer than three months, the Big Wave Trading portfolio is lagging the overall stock market. This is more than likely due to the slow steady nature of this uptrend, the lack of volatility, and the lack of explosive moves on explosive volume. Big Wave Trading normally will purchase 5-20% of the strongest CANSLIM quality stocks with the best chart patterns in the stock market, when an uptrend is strong. When we make these purchases and they show low reward/risk win/loss ratios we reduce position size and spread out into more speculative names with higher quality chart patterns to reduce risk. These stocks are not performing like they have in the past. Past rallies from 1996-2000, 2003-2007, 2009, and late 2010 were extremely profitable using this methodology (see Past Big Winners on this website). During this current uptrend, that is not the case.

Our market model methodology using the TQQQ long and short is crushing our current returns with a YTD gain of 33% (without the March shakeout gains would be 60%). This methodology continues to be superior to our stock picking ability ever since the 2011 top. Eventually, our stock picking methodology will come back into favor. For now, however, it is clear that using the 3x ETFs is where the majority of our capital should be deployed.

If the market refuses to selloff this year, we expect that a potential large rally may be around the corner. If that rally comes, just like in most longer-term uptrends, the large gains in individual stocks should follow. Following the 1998, 2002, and 2009 lows, this was the case. We do not expect an explosive uptrend to begin here, though we realize it could, due to the Nasdaq price being so far extended from the 200 day moving average. It would be very beneficial to the market for the price to continue to work its way lower and consolidate so that the 50 and 200 day moving average can tighten up to the price. As long as we remain extended, a risk of a pullback remains very high.

We continue to hedge our long side positions with shorts in speculative stocks with no earnings/sales growth or paid promotional manipulation pump-and-dump stocks that have made extended/parabolic moves in short periods of time. When these stocks reverse hard off their extended runs on huge volume, we take short positions. So while Big Wave Trading remains under a BUY signal we clearly recognize the fact the VIX is low, sentiment is too bullish on the Investors Intelligence survey, and the price and 200 DMA of the Nasdaq are too wide for a significant move up here.

As always, we are ready for anything and everything that the stock market can and will produce. It is the only way to play the game. The most important rule remains to always cut losses immediately when we are wrong. Big Wave Trading never holds a losing position. If Big Wave Trading purchases a stock or ETF and it does not move in our direction immediately we begin to scale out or get out immediately. No questions asked. It either works or it is removed.

Top Current Holdings – Percent Gain (non-margin) – Date of Signal

SWHC – 72% – 1/3/12
KORS – 66% – 1/17/12
AVD – 50% – 1/10/12
RF – 45% – 1/5/12
LNKD – 37% – 1/19/12
BVSN (short) – 36% – 3/16/12
EPAM – 36% – 3/1/12
LHCG – 32% – 1/19/12
CIS – 29% – 3/12/12
CCU – 28% – 12/21/11
SUNH – 26% – 3/9/12
CERS – 25% – 2/10/12