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

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

Big Wave Trading Portfolio Update And Top Current Holdings

THE COLUMN BELOW WAS A PREMIUM MEMBERSHIP COLUMN PUBLISHED ON FRIDAY FOR BIG WAVE TRADING MEMBERS. ANALYSIS SPECIFIC TO TRADING POSITIONS HAS BEEN REMOVED. Happy anniversary of the October 19, 1987 crash everyone!! Well, well, well. It sure was an interesting day to say the least. Today’s option expiration was nothing short of exciting as stocks sold off on heavy above-average higher-than-the-day-before volume. Stocks and stock indexes didn’t just sell off, they cratered. The weakness in the Nasdaq and Russell 2000 finally spread over today into the SP 500 and DJIA thrusting all four major indexes into a SELL signal on our market trending model. The Nasdaq and Russell 2000 were currently under a NEUTRAL signal and the SP 500 and DJIA were under a BUY signal but today’s sell off was confirmed everyone thus switching everything into a SELL. It doesn’t matter where you look. The indexes, futures, the options chain, ETFs, or inverse ETFs. Wherever you look, volume exploded higher. What didn’t explode higher but finally moved was VIX. VIX has finally begun moving in the direction those of us at Big Wave Trading believed it should have started moving in on 9/25. While the move came on convincing volume, and the CBOE reported the highest weekly trading volume ever in VIX futures, a BUY signal was not triggered in VXX/UVXY/TVIX. [MEMBERS CONTENT ONLY]. [MEMBERS CONTENT ONLY]. Getting back to the overall market, it was the fifth time this year that the Nasdaq has closed lower for the week on above average 50-week volume. As just mentioned, this now makes it five times that this has happened versus 0 times the Nasdaq has closed higher on above average 50-week volume. 5 – 0. For the year, the NYSE is actually up 1 vs. 0 times down. But the NYSE is not where you find your dynamic exciting technology based growth stocks. Those are found on the Nasdaq and Russell 2000. When you consider the volume pattern of the Nasdaq and then take a look at the recent slope of the Relative Strength line of the Nasdaq and Russell 2000 compared to the SP 500 you can see that we have a potential problem brewing here. The Relative Strength line of the Nasdaq is simply imploding here nearing the December 2011 levels. Meanwhile, price is nowhere near those lows. If this trend continues, watch out! The Nasdaq and Russell 2000, in healthy uptrends, lead the market. The Nasdaq and Russell 2000 start to lag the NYSE when a rally is on its last legs. The Nasdaq and Russell 2000 lead the market down when a downtrend is starting in the stock market. What stage are we in now? You are correct. This obviously means that now is the time to be cautious. This is especially the case when you look at the recent action in AAPL, GOOG, AMZN, PCLN, and LULU. After taking a look at those, take a look at the big giant bellweathers like IBM, INTC, MSFT, SBUX, MCD, and GE. Notice the same bearish action? Then take a look at your leading biotech stocks like ALXN, BIIB, VRTX, and PCYC. Is there anything surviving? Of course. The bank stocks like GS, BAC, and JPM are acting like there is nothing wrong and of course for the master criminals that run these banks and the USA there is not. On top of that, they need to make sure real estate prices go up so that all their real estate holdings continue to make them wealthier and wealthier (If these sociopaths CREATED their own businesses this would not be a problem. They didn’t.) on the backs of the middle class. On that note the XHB is fine. HOV, TOL, PHM, BZH, MTH, MHO, LEN, KBH, etc. all look like they were completely oblivious to the carnage gripping the market today. If you see the big banks (KBE) and home builders (XHB) start to roll over, then you can be sure this uptrend is finished. To me, it already is, as I follow the Nasdaq/Russell 2000 as market leaders. However, if these stocks continue to rally, show no damage, and we begin to find a floor to this selling, I would expect that the uptrend could definitely continue. I mean, it is a Fed based QE driven stock market. When stocks sell off, they step up to make sure their jobs are safe for now. I am sure one day this will stop working. Until then, the theme don’t fight the fed still rings loud and true. No one can predict the future in the stock market. I will not try to either. While it looks like we are about to crack wide open, we could easily find support and rally higher on no volume. Hell, we did it in 2009, we did it in 2010, we did it in 2011, and we did it earlier this year in 2012. Why not a fifth time? [MEMBERS CONTENT ONLY]. [MEMBERS CONTENT ONLY]. It looks ugly but it has looked ugly before. Let’s see what happens next week. Have a great weekend everyone. Aloha. [MEMBERS CONTENT ONLY]. Top Current Holdings – Percent Gain – Date of Signal AVD long – 139% – 1/10/12 NTE long – 62% – 8/17/12 CAMP long – 59% – 4/26/12 CLGX long – 52% – 6/19/12 SVNT long – 44% – 9/10/12 VRNM short – 39% – 4/10/12 CSU long – 32% – 9/4/12 MAGS short – 31% – 4/18/12 SHF long – 28% – 8/1/12 ASTM short – 26% – 7/17/12 HEB short – 25% – 9/24/12

S&P 500 Adds to Gains as Volume Rises Across The Board

IBM weighed heavily on the Dow Jones Industrial Average today helping keep the index in negative territory while the S&P 500 and NASDAQ close in the green. Volume on the exchanges was heavier across the board thanks to earnings trading from INTC and IBM. Both stocks were able to find buyers, but failed to get back into positive territory. More trouble for leading growth stocks in the after-hours session with MLNX and ALGN disappointing the street. Banks and homebuilders continue to be the leading sectors of this market in our new uptrend. We have mentioned before with the Federal Reserve propping up the mortgage market thru its mortgage backed QE forever program it is going to help the banks and homebuilders. While this may be good for banks and homebuilders leading growth stocks continue to get hurt. MLNX and ALGN are just two examples where growth stocks are simply not in favor in this market. AAPL a bellwether growth stock remains below its 50 day moving average. A new iPad Mini may help sales, but for now buyers aren’t jumping head over heels for the stock. QE trading is supposed to lift all boats, but for now just the banks are benefiting from the program. Today marked day 3 of an attempted rally. BWT Model is back in buy mode after Monday and Tuesday’s action, but for those who follow IBD methods we have yet to confirm a new uptrend. Thursday will mark Day 4 when we would see the market confirm a new rally. We’ll need to see volume swell above the previous day and strong price action. Despite the lack of IBD confirmation we are paying close attention to the stocks that are leading. Leading growth stocks are having their trouble here and it is a sign slower growth is upon us. Stick with stocks that are leading.

NASDAQ Closes Positive for the Second Straight Day as Big Tech Disappoints in After-Hours Trading

Back-to-back Accumulation Days has the Big Wave Trading model switch back to BUY mode. The NASDAQ still remains below the 50 day moving average, but the S&P 500 continues to act strong on the back of bank earnings. Technology earnings are now in focus and during the after-hours session INTC and IBM reported earnings disappointing the street. Both stocks will be putting pressure on the market during tomorrow’s action and it will be important to see how both stocks respond tomorrow. Given the past few days price action is strong and what we needed to see this market to move back higher. Tomorrow can bring on a different market and it is why we have a stop loss strategy. We cannot blindly go long or short without knowing our exits. Risk control is a must as tomorrow may bring on intense selling, but there is no way for anyone to know what tomorrow will bring. Of course there are many opinions, but are these opinions always right? What happens when your opinions are wrong? A disciplined mechanical approach to the market is far better than forming an opinion and trading by the seat of your pants. Earnings season continues to benefit banks and with support from the Federal Reserve it shouldn’t surprise those many banks are reporting good earnings. INTC and IBM were hit hard today along with APOL and ISRG. INTC had previously warned and it couldn’t impress the street with the previous warning. As we move forward with earnings expect a bit more volatility as companies report. Be aware of when your stocks are set to report. Know where your exits are and make sure you are using proper position sizing. Cut your losses short and we’ll see if this market can build upon Monday and Tuesday’s action.

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

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

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio is currently under a NEUTRAL condition. The model switched from BUY to NEUTRAL on Tuesday due to the Nasdaq closing below the 50 day moving average on average volume. Our model expected this switch to occur after Apple (AAPL) closed below the 50 day moving average on strong volume on Friday October 5th. On September 24th Apple began to sell off on above average volume and continued to do so for another four sessions before finally breaking down on October 5th. Another problem we started to also notice was the overall lagging of the Nasdaq’s Relative Strength line compared to the SP-500′s Relative Strength line. While the Nasdaq was breaking out to new highs in September, its RS line was severely lagging no where near its previous March highs. In recent weeks we have seen the Nasdaq’s RS line simply implode compared to the overall market. This RS lag is even more severe in the Russell 2000 full of vibrant young growth stocks. This RS lag is overall problematic for a variety of reasons. You normally want to see new exciting growth companies and revolutionary technology companies lead a market. Not stodgy old safe dividend producing large capitalization stocks. While a trend is a trend, the strength of a trend is directly correlated to what type of stocks are leading a market. Another problem we have witnessed during this switch to NEUTRAL is that we have not seen a rotation from the leading growth stocks that have come under some intense recent selling into new leading growth stocks. On top of that, we noticed that WFC and JPM are putting in low-volume breakout high-volume fakeout reversal moves. GS and BAC appear to want to do this too. As the rulers of the world go, so will go the stock market. If the Lords of Finance sell off, the market is going to sell off. So we have a market under heavy distribution, leading stocks like AAPL and PCLN possibly rolling over, banks (KBE KRE) putting in breakout fakeout moves, and an extremely low VIX on top of all of this. What does all this point to? A high probability that we will enter into a SELL signal at some point and will begin to rework the short side/long put side of the market. However! However. There is always the Fed and Ben Bernanke. They have already intervened during every single one of the last market pullbacks. What is to say this will not be any different? They have already screwed the poor and middle class over with their “zero-percent-CDs-forever-policy,” allowing the folks that do not have time to invest in the markets no chance what-so-ever to get ahead. They have already bailed out failing corporations effectively killing free markets. They have continued to print worthless dollar bills at the push of a button for years now, effectively destroying its purchasing power thus causing massive inflation that hurts the folks that can’t save money in the first place due to the low interest rates. So do we think that an actual prolonged downtrend will start thus allowing a new fresh crisp batch of leaders to rise from the ashes when the market is ready to move higher again? Nope. We sure don’t. We can only hope that one day the Fed decides to let the market do what the market needs to do but we are not going to hold our breaths. The first area of support we are looking at is the 200 day moving averages on all leading market indexes. The bottom line, for right now, and I mean right now, is that we are NEUTRAL. We will take long and short signals as they arise. We are extremely picky here and if it is not perfect or near perfect for the reason we want to conduct the trade, we will not take the trade. On a final note, speaking of perfect, we did not have one technical/fundamental or even technical alone “perfect” chart setup during the entire uptrend from June to September. This was the first time since the 2009 uptrend which only produced CANSLIM quality long signals and zero “perfect” CANSLIM/”perfect” chart signals. To me that tells me all I need to know about the quality of the uptrend itself. Aloha everyone and have a wonderful and profitable week. Top Current Holdings – Percent Return- Date of Signal AVD long – 136% – 1/10/12 CAMP long – 61% – 4/26/12 NTE long – 57% – 8/17/12 SVNT long – 53% – 9/10/12 CLGX long – 53% – 6/19/12 VRNM short – 39% – 4/10/12 PRXI short – 37% – 3/30/12 SHF long – 35% – 8/1/12 MAGS short – 31% – 4/18/12 CSU long – 30% – 9/4/12 ASTM short – 25% – 7/17/12

Morning Gains are Erased as Buyers Continue to Stay Away

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

Big Wave Trading Portfolio Update And Top Current Holdings

There will not be a weekend update this week. We apologize for the inconvenience. Top Current Holdings – Percent Return – Date of Signal AVD long – 145% – 1/10/12 CAMP long – 72% – 4/26/12 SVNT long – 61% – 9/10/12 NTE long – 60% – 8/17/12 CLGX long – 58% – 6/19/12 VRNM short – 36% – 4/10/12 PRXI short – 36% – 3/30/12 SHF long – 35% – 8/1/12 CSU long – 30% – 9/4/12 MAGS short – 28% – 4/18/12

A Lackluster Final Hour as Stocks Settle in Prior to Friday’s Non-Farm Payrolls

Stocks got a positive boost off the first Presidential debate, but for technology stocks it wouldn’t’ be enough. Financials continue to be leading stocks in this market and today once again the group leads the market. But, once again the market is looking ahead to Friday’s job market. In the final hour buyers stepped up and began to push the market above the morning lows. Unfortunately for longs it wouldn’t last as stocks pulled back into the close. Tomorrow’s Non-Farm Payrolls will be the talk of the town and how the market reacts will be what we’ll be focused on. Volume ended the day mixed with volume on the NASDAQ coming in lower. Technology stocks continue to lag the broader market despite GOOG hitting another fresh new high. Banks have been the leading stocks as they will be the greatest beneficiary from the Federal Reserve’s mortgage-backed security purchase program. The Federal Reserve will be purchasing less than high quality securities from Banks improving the quality of assets on balance sheets. It is almost a no-brainer these stocks will benefit from the program. While we would love for the NASDAQ to lead this market given the situation we’ll more than likely to see the S&P 500 as our leader. Stick on leadership and leave the laggards for the birds. Tomorrow will likely be a big day for the markets. Let the fireworks begin at 8:30am EST! Have a great weekend.

AAPL leads the NASDAQ Higher as Volume Expands; Crude Sinks

Heading into the first debate of the 2012 Presidential Campaign was led by the NASDAQ despite a faltering Semi-Conductor sector. Small cap stocks struggled as well with the Russell 2000 closing down 20 basis points. Volume expanded on the day, but with back to back days of subpar volume on Monday and Tuesday it was inevitable volume was going to increase. This morning’s ADP Employment change report showed 162,000 jobs were add in the month of September coming in slightly above expectations. In addition to the ADP report, a better than expected ISM Non-Manufacturing reading showed the service sector expanding in September. Not terrible news from the economy, but focusing on the price action we saw the market notch a day of accumulation. We still have not broken out from our recent trading range, but price action continues to be favorable to bulls in this uptrend. It appears the market is waiting on the debate tonight and Friday’s job report. Friday’s jobs report will more than likely disappoint not because of we don’t like the current administration, but the past few reports have been disappointing. In any instance other than the unemployment rate falling below 7% the Federal Reserve stock market put will more than likely dampen any bearishness related to the report. Anything is possible in QE trading. Look at crude falling more than four points today. Commodities are perceived as a good investment with the Federal Reserve printing presses running at full tilt. So while conventional thinking is a fun cocktail party discussion only price matters in the market. Whatever the market will bring we are going to be prepared. Tomorrow at 2 pm we’ll get the minutes from the latest FOMC meeting where Ben Bernanke announced QE3. It will be interesting to see how the market reacts to what the FOMC discussed during the meeting. Tomorrow should be a fun day with the market reacting to the first debate as well as the FOMC meeting minutes. Who knows we may even get a Spain bailout rumor. There is always something the chew on when it comes down to this market. Actions however, are governed by the price movement of our stocks. Enjoy the debates, but remember to cut your losses and there are other candidates then just Obama and Romney.

Late Day Rally lifts Stocks off the Lows of the Session

The markets experienced a low volume session ahead of tomorrow’s economic data. ADP Employment and ISM Non-Manufacturing index are set to hit the wires tomorrow morning. For much of the day’s session sellers had control over the market as AAPL touched its 50 day moving average. While the market as not heading for a day of distribution price action was not looking too kind. A close at the lows would have been on the bearish side of things, but the late surge by buyers helped take the bearish tint off the market. This uptrend continues to remain intact and our current consolidation continues. Aside from tomorrow’s economic reports is the first of a few presidential debates. At the moment, according to InTrade Obama will be the next President of the United States. We can debate polls, but money speaks and it is saying Obama wins in November. Tomorrow night’s debate may very well solidify Obama’s lead or swing the vote to Romney and it will be interesting to see how the market trades off the debate. For those who believe a Romney victory will lead to a rally do not count your chickens before they hatch. Anything is possible and opinions are often wrong. Capping the week off will be Friday’s job report. Given the weak PMI figures and uninspiring economic data it is hard to believe the economy has grown enough jobs to make a difference. On the surface we’ll get a peak at what the government calls unemployment. Real unemployment is much too scary of a number to report so we get an adjusted figure from our government. The Federal Reserve has now pegged Quantitative Easing infinity to the jobless rate and now this figure has become even more watched. Is it important, perhaps, but to for our purposes it always boils down to price and leading stocks. The Federal Reserve is here to stay and print, but it all comes back to whether or not we are in an uptrend or downtrend. After a quiet two days to start the week perhaps we’ll get a bit more action tomorrow. Keep those losses small.

The 4th Quarter Starts in Lackluster Fashion

NASDAQ 100 stocks lagged the broader market lead by MSFT and AAPL as the Dow Jones Industrial Average and Russell 2000 were able to close in the green. Volume ended the day lower than Friday’s inflated figures from end-of-the-month rebalancing. Overall the session wasn’t that inspiring, but it wasn’t entirely awful. Early on in the session optimism ran high with positive news from the ISM Manufacturing Index report showing the sector expanded when expectations were for it to slow. Price paid were a bit higher, but weren’t alarmingly higher. The close was decent with buyers stepping up and lifting the markets avoiding closing on the lows. Our uptrend remains with very little distribution piling up despite the bearish opinions of the market. Today’s reversal is not what you want to see from the market. Last year, however, the first day of October was not that great either. Even the second day, 10/4/2011 at 3pm looked dire until we got a rumor of a new bailout for Europe. While things may look dire now you just never know what the market will hand you the next day. Guessing where the market will be next is not a recipe for success and continues to keep traders from maximizing potential gains. Stick to a disciplined approach and play the odds rather than simply guessing. The election is not far a way at all! It will be nice to get away from the constant stream of political ads and banter. However, for this market it does appear we are looking like an Obama victory. We can debate polling tactics and have yet to have a debate, but there is one thing that is certain: no one knows where the market is going. Will Obama help the US avoid the mandatory spending cuts and tax hikes? Will Romney? Will either candidate get our fiscal house in order? It is very doubtful either candidate will resist the urge to spend and inflate the deficit higher. Then again, the Federal Reserve is pumping $40 billion a month into mortgage backed securities and it won’t matter. In the end, focusing on leading stocks and their price action is the way to go. Leave the guess work to others. We aren’t off to the best start to the quarter, but it could be far worse. Cut those losses.

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio remains under a BUY signal from August 3rd, following the past week’s market pullback. The pullback was overall orderly with only Tuesday being a session of concern. The fact that there were many stocks that made big moves following that session and that the market did not follow through immediately with the selling shows that the uptrend remains intact and in solid shape. Despite the low VIX and high % of bulls to bears in the Investors Intelligence survey, the atmosphere remains overall toxic. Individual investors based on the AAII survey and the real-time Finviz survey continue to point to a public that is overall skeptic to bearish. The crowd is definitely not overall bullish. At best, it can be said that sentiment data points remain mixed. What doesn’t remain mixed is price. Price is still trending higher on all time frames except the most short-term. If we get another distribution day or two, we might have some more short-term problems. However, the action in individual stocks in regards to long-term base structures, along with stocks already hitting new highs, indicates that the market might want to trend higher for a bit. I just would not expect any kind of explosive gains. Especially when the macro picture is at best not bad. 1% to 2% GDP growth is never going to light the fire underneath a country’s stock market. For now, we will stick with this slow uptrend that is still not offering any what we would classify as “perfect” or even “near perfect” long signals. Trend following big priced stocks that trade a ton of volume by buying in the money options with low implied volatility as they cross above and below whatever moving average one uses continues to be a superior methodology compared to the once extremely profitable tried and true combination CANSLIM/momentum methodology. Aloha everyone and I hope everyone is having a wonderful weekend! Top Current Holdings – Percent Return – Date of Signal AVD long – 141% – 1/10/12 SVNT long – 70% – 9/10/12 NTE long – 61% – 8/17/12 CLGX long – 52% – 6/19/12 CAMP long – 46% – 4/26/12 VRNM short – 35% – 4/10/12 SHF long – 34% – 8/1/12 PRXI short – 33% – 3/30/12 MAGS short – 28% – 4/18/12 STX long – 25% – 6/29/12

Stocks Finish of the Lows of the Day as Volume ends Mixed

Stocks continue to struggle with the Fed’s Quantitative Easing hangover as the S&P 500 and NYSE Composite get hit with a day of distribution. Sellers got to work again pushing stocks lower in the morning session. Riots in Europe certainly did not help ease any fears traders have over the economic conditions in Europe. At today’s lows the market returned to the same levels the market was at prior to the Fed’s announcement of Quantitative Easing infinity. While we closed off the lows of the session there wasn’t much to cheer about. A few leading stocks were able to hold their gains, but we’ll need to see buyers step up. Our uptrend is still intact and under pressure. We do not have a pile up of distribution where we’d normally see during a topping market. Today’s distribution on the NYSE and S&P 500 weren’t MAJOR distribution days. In fact, volume just snuck higher. In addition, now with the market at these levels we are quite oversold. McClellan oscillator is not sitting at -200 (T2106 ticker on TeleChart). Conditions can always worsen, but we are at a level where we normally see the market bounce. Add in we only have two days left in the month there is always the possibility of the market window dressing its gains. It will be interesting to see how sentiment has shifted post Fed easing. AAII sentiment has favored the bulls, but last week’s reading pinned the bulls at 38% and bears at 34%. Not overly bullish or bearish. However the II survey had been quite bullish. Sentiment is a tricky indicator, but at extreme points it becomes an excellent talking point. A few stocks like FTNT, SWI, and GNC who were setting up as leaders continued to see sellers today. ELLI has been a tremendous winner and at one point was down more than 7%. This type of action in leaders normally is a bad thing for the overall market. However, we are in QE land where normal is anything but. Given the lack of distribution and oversold conditions this uptrend may still have something left. Great news, the NFL referees may be back! Perhaps the NFL should have listen to one of the golden rules, cut your losses short!!!

Riots Breakout in Spain as Distribution Hits Stocks

Heavy volume selling struck the market down marking a day of distribution. One day of a heavy volume selling does not break an uptrend, but this one grabbed our attention. The day started off well with the market pushing to the highs of the session prior to noon time. Just as it appeared we were ready to take off to new highs sellers jumped on the opportunity to push stocks lower. Just as the sellers got going riots broke out in Spain over their economic issues. Fear continued to grow and sellers continued their operations right until the close. Volume ended the day nearly 20% higher than Monday’s level and with the price declines notched a day of distribution. Our uptrend is under pressure, but one day doesn’t change a trend. Since the announcement of QE infinity or QEn the market has been consolidating the gains. The consolidation was going very well up until today’s action. A day of distribution here or there is okay, but when it comes with this type of price decline we must be on alert. Even a quick 5% correction can see leading stocks getting blown out of the water. It is important we take our signals and when sells are triggered we execute. Hanging on to hope is no way to be in the market. Yes, we have QE, but will it overcome the economic troubles? Can this market continue to push higher? The $64,000 question only price will answer. One day does not make a trend, but a collection of distribution days will not be a good signal for the market. Leading stocks have already begun to move lower and today was no exceptions. Stocks setting up in bases like GNC have suffered some nasty selling. The market will need to stabilize and move higher otherwise we can expect this market to correct deeper than 3-5%. It is anyone’s guess if today was a fluke or not, but this uptrend is under a bit of pressure. Stick to your signals and always cut your losses short.

Monday’s Continue to be Tough on Stocks as the Market Close in the Red

The story of this uptrend has been Mondays closing lower. Volume was lower today, but even with Friday’s volume today’s trade was quite light. On the face of it we do have a market continuing to consolidate its Fed induced rally. Friday’s session saw sellers knock down the early rally and they were able to continue their operations today. Growth stocks as well as technology stocks saw the brunt of the sellers operation. GOOG escaped their wrath, but on the whole growth stocks were the ones under quite a bit of pressure. We continue to escape distribution, but we haven’t seen the push from growth stocks we normally see here. Many are close to breakouts, but as time progresses we’ll need to see them lead the market higher. There is still quite a bit of talk over the fiscal cliff and continued European worries. Europe’s woes will not be solved here any time soon. Deleveraging takes time if the masses are not able to withstand the pain needed for a quick recovery. The same goes for the United States. With Obama in the lead and the Democrats looking like they’ll take the senate it appears we won’t see any resolutions to our debt woes in the near future. Democrats if they continue with control will undoubtedly raise taxes and cancel and reduction in spending. While raising taxes may or may not raise revenues not cutting spending is what will add to the deficit. Now the real question will be how will stocks react? It is anyone’s guess, but if you stick with leading stocks and price you will not lose. The last week of September and it is hard to believe Fall is here. All of the gains in the month have come on only central banking days! It would be nice if the market could get some gains without the help from central bankers. In addition, it would be nice if High Frequency Trading was outlawed and stopped from distorting price and volume on our stocks. Mark Cuban said it best: “High Frequency Trading simply adds volume not liquidity.” Even with High Frequency Trading we still have an advantage and that being price and focusing on a leading stocks. Another week in this uptrend starts lower and with very little distribution we can’t help to think this uptrend will continue to march on. Cut those losses short.

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio continues to be under a BUY signal that was generated on August 3rd. The past week was another overall solid week with solid intraday price action outside of Friday. Another positive was the Nasdaq having two up sessions on volume well above average, continuing the trend from the previous week. We continue to believe that this uptrend can last longer based on the overall public (AAII Survey bulls: 37.5%) still not showing that bullish fever and the NYSE short interest ratio sitting around 5-year highs at 21.03. As long as the trend is up, the public is not overly bullish, and the short interest ratio remains high, the trend should continue to be our friend. We know what to look for if that changes but so far we have absolutely no signs of a change in trend coming. In fact the last distribution day on the Nasdaq was on August 21st (according to Telechart’s data). That is one month without a distribution day. Clearly, for now, there is nothing to worry about. We will cross that bridge when we get there. As for stocks, we continue to find a ton of attractive long positions and continue to see many others setting up. If this continues, it bodes well for the continuation of the rally. Despite some trading sessions the past week being quite boring, there were plenty of stocks that made exciting dynamic price moves higher. Seeing these stocks move like they are on quiet days is a clear sign of real accumulation. The only bad news, so far, in this rally is that we have not had a single stock set up in a “perfect” setup. However, that isn’t surprising as beautiful green filled chart patterns have been in decline since the 2008 crash. Trend following is definitely where it is at. Playing hot charts is not. I am sure one day that will change but as of right now it has not. We’ll keep hunting. Have a lovely rest of your weekend and aloha. Top Current Holdings – Percent Return – Date of Signal AVD long – 141% – 1/10/12 SVNT long – 70% – 9/10/12 NTE long – 65% – 8/17/12 CLGX long – 58% – 6/19/12 SHF long – 36% – 8/1/12 CAMP long – 33% – 4/26/12 PRXI short – 32% – 3/30/12 MAGS short – 30% – 4/18/12 VRNM short – 30% – 4/10/12 STX long – 25% – 6/29/12

Volume Ends Lower as Stocks Close off the Lows

The week of consolidation continues as debate over whether or not this market can go higher rages on. Overnight China’s flash PMI disappointed showing the country continues to slow significantly. China’s disappointment sent futures lower across the board. US economic data continues to be uninspiring as jobless claims remain high. Buyers did step up at the end of the day putting a bullish tint on the day. Volume ended the day lower across the board as the NASDAQ escaped a day of distribution. Week’s like this one will certainly shake the confidence of those who are long the market. Our uptrend remains and we’ll remain long this market until price tells us otherwise. For those who simply follow price do not concern themselves with whether or not a trend is over. At the moment we have plenty of folks including Elliot Wavers citing extreme bullishness as a reason the market is about to head lower. Hey, they could be right. No one knows the future and the way the market is acting says the uptrend remains intact. Tomorrow may change and those calling for a correction may be right, but what if they are not? What happens then? We follow price action of our stocks and the market. Everything else is noise. The one sentiment survey I do talk about here is the AAII survey. At the moment the split between bulls and bears is 38% to 34%. Both figures remain at extremes and this survey was done earlier in the week. As the market heads sideways are those who are bullish going to remain so? We can come up with an infinite about of scenarios and guesswork on what may or may not happen. Guess what, it doesn’t matter! Football season is in full swing and we’ll have another fun filled weekend after tomorrow’s option expiry. After a long week of consolidation tomorrow will be interesting to watch. Have a great weekend!

Small Caps Lag the General Market as Stocks Close off the Highs of the Day

Small cap stocks lagged the general market by closing in the red with the major market averages close just barely in the green. Buyers stepped up their operations just after 10:30 am EST showing this market has support. However, buyers weren’t able to keep the market at its high of day closing off the best levels of the day. Volume rose across the board, but we failed to make significant gains. At this time, it appears the market continues to move sideways digesting last week’s gains. Our uptrend remains intact and we continue to expect this to continue. Housing data hit this morning was mixed, but existing home sales saw some promise. Homebuilders continue to be stellar as they come off their beaten down levels. Regardless of your opinion of the housing market homebuilders have had a heck of a run. Stocks like PHM and LEN continue to look like they want to move higher here. Of course anything and everything can happen, just look at QCOR today. What we know now is homebuilders continue to look like they are going to continue to move higher. We are still waiting for this market to push higher. We have plenty of leading stocks on the verge of running higher and it may take this market pushing higher to kick these in high gear. This week has been a good week for the market and very tight despite options expiry on Friday. Usually the week of expiry tends to be volatile and in high volume. So far so good in terms of volume and how tight this market is trading. Of course, we need the market to move higher at some point before we get too bored with it. In any event, this uptrend remains healthy. Keep pushing forward!

New Seeking Alpha Post (HMY, PPP, SLW, GFI)

In A QE World, Silver And Gold Make Sense

The Dow Edges Higher as Broader Market Consolidates Again

Turnaround Tuesday didn’t quite work out, but for the second straight day the market puts in an excellent day of consolidation. The past two days have certainly done enough to work off overbought conditions in the near-term. Volume inched higher on the NYSE and roughly 15% higher according to preliminary stats from IBD. Monday’s volume was so light that it didn’t take much for volume to creep higher. All in all another solid day for the overall market as our uptrend continues to stay intact. A few retail stocks took it on the chin today, but all in all leading stocks held up relatively well. KORS and ROST look weak and with KORS secondary pricing soon it appears the stock wants to continue to head lower. ROST on the other hand remains below its 50 day as traders sold the stock today. The stock has been on quite a run since last August and is now looking tired. A quick observation here is QE3 will not help out retail stocks. Why? Who cares, price action in leading retail stocks shows investors are looking elsewhere. Given the back to back consolidation days we need this market to resume moving higher. At the very least leading stocks need to get going with or without the market. We have escaped distribution, but we can’t consolidate gains forever! It is important not to get impatient with the market and allow your stocks to work. But, at some point we need to keep our money moving and stocks that are not moving do not belong in our portfolio. Keep in the game! We have plenty of opportunities with this market and if you give up or “take a break” you may miss a golden opportunity. I don’t like missing out on gains and if you do it makes it infinitely more difficult to capture superior gains. Cut those losses short.

Red Monday’s Continue as AAPL hits the $700 Mark

The market stages a very nice day of consolidation as volume dropped well below Friday’s level. For most of the day’s session stocks traded in negative territory as last week’s gains were being digested by the market. Nearing the close it appeared stocks were set to close near the lows on the day, but buyers stepped up and pushed stocks well off the lows at the close. Buyers are lurking and the end of the day action certainly highlighted the case. A great day for an uptrend as days like these help work off overbought conditions the market may be in. We continue to operate in an uptrend and continue to look for this market to push higher. It is clear stocks love further monetary easing by the Federal Reserve. The unintended and intended consequences are pretty significant, but the unintended consequences will only hurt those who cannot keep up with inflation. Just to think in four years after gas prices plunged to well below $2 a gallon they have risen back to near $4 again. In many places, gas is well above the $4 mark and this hurts those whose income levels do not keep up with this type of inflation. I just do not see how buying more mortgage securities is going to help the poor rise up or create more jobs. As for our trading it appears it will be a positive, but then again we just follow price. A big positive was the fact that volume was running well below Friday’s level throughout the session. Running mostly 30% behind Friday’s level and remained that way at the close. NYSE volume ran 34% below Friday’s level and the NASDAQ 26%. Expect volume to move higher tomorrow and we’ll see if buyers step up and avoid distribution. We have not seen too many bad distribution days and at this point we only have two distribution days on the books. The key is to pay attention to see if we have a clump of distribution days together and leading stocks falling hard. Your stocks will tell the tale of the market if you are in the right ones. A good start to the week and now we’ll need to build upon it. Remember, it is very important you need to have a game plan and execute!

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading portfolio remains under a BUY signal, generated on August 3rd, as the market continues to move higher on well above average volume. On Thursday, for the first time during this rally, we saw the indexes, ETFs, leveraged ETFs, inverse ETFs, and leveraged inverse ETFs all move in the right direction on well above average volume. This is the confirmation we need to start to increase positions in new longs and to look to buy the dips when the dips do come in leading stocks that are short term too extended from their 50 or 200 day moving averages. The increase in volume during the past seven trading sessions and the improvement in the breadth of the advance/decline line and the upside to downside volume is excellent to see, if you are long and/or are expecting further price gains. September and October have historically been months when the stock market stages strong rallies. March is another month where powerful rallies begin. This rally started before Labor Day and the current action is definite confirmation that the trend for now must be respected. Now, I know a lot of individuals are upset at why the market is rallying (backed by Quantitative Easing). I share your concern and agree that it is the wrong policy for wiping the slate clean and starting a real economic rebound. Putting a band aid on a femur shaft fracture isn’t going to fix what is really wrong. However, maybe they don’t want to fix what is really wrong. And this is my point. Price is all that matters to us. These individuals that are in charge around the world, that make horrible decisions against the voice and concerns of the tax payers, are going to do what is in there best interest. Not in what is our best interest. What is in your best interest, knowing this, is to take control of your future by learning how to invest in a solid time tested proven trend following methodology. That is the only way those in the bottom will ever be able to save any money. With inflation the way it is and with bank CDs rates so low, what other choice do you have? That is what we are here for. Aloha and enjoy your weekend! Top Current Holdings – Percent Gain – Date of Purchase AVD long – 115% – 1/10/12 BVSN short – 82% – 3/19/12 NTE long – 54% – 8/17/12 CLGX long – 54% – 6/19/12 CAMP long – 32% – 4/26/12 PRXI short – 30% – 3/30/12 VRNM short – 29% – 4/10/12 PXD long – 28% – 7/17/12 MAGS short – 28% – 4/18/12 SVNT long – 25% – 9/10/12

INTC AAPL Weigh Down Stocks in Light Volume Session

Big cap technology stocks and financials struggle as the market gives back more than half of last Thursday’s breakout. The good news on the session was the fact volume was lower and institutions were not big sellers. INTC was an excuse for the broad market sell off as the company took down 3rd quarter estimates. AAPL stock hit an all time high before sellers ransacked the stock ahead of its September 12th new product launch. Sellers pushed hard at the end of the day as VIX rose more than 1.85 points. The fear index is still sub-20 mark, but the move at the end of day showed fear crept back into the market. While we didn’t hit a day of distribution this not exactly the type of consolidate we were looking for, but we remain in an uptrend. The lone bit of economic news the market received today was consumer credit. In the month of July consumers reduced credit by 3.28 billion dollars. Economists expected the figure to be at 9.6 billion. It is nice to see consumers reducing their credit and not further their issues with even more debt. Tuesday will be a bit more active, but nothing that will make headlines on the day. Besides, everyone’s attention will be on AAPL’s even on Wednesday and the FOMC rate decision on Thursday. Leading stocks did not fare too well today either. One notable leader TDC was hit hard on the news of INTC. Volume across many names were low, but the price action among them were not kind in the slightest and does create a heighten level of doubt in the market. One day does not make the market, but we cannot see this type of action continue. We’ll need to see the market gain some traction with volume support. It is one thing to be defensive it is another to act on fear. Stay focused on price and where your exits are. Many traders fear they may lose gains and take profits too early finding out later their stock is higher. Know your exits prior to entry and you will not need to worry about anything in between. We aren’t off to the best start to the week, but there is plenty of time for the market to turn around. Ignore the noise and cut your losses

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading portfolio remains under a BUY condition with strong confirmation of the original signal coming on Thursday when every single important stock market index we track broke out convincingly on enough volume to qualify the breakout as strong. The tight intraday action on Friday with a HOD close in the NYSE and SP500 confirm the move on Thursday. This strong move is coming on the back of the NYSE short interest ratio hanging out at 5-year highs around 21.27. This breakout is also coming with bulls, bears, and those on the sidelines coming in at exactly 33% across the board. That means that NYSE short interest is very high, the crowd is not particularly bullish, and stocks are breaking out everywhere with some big names making clearly bullish moves. GS, BAC, CS, JPM, DB, GM, and many other corporate global behemoths are making very bullish moves. If the crowd continues to stay bearish we could see a very powerful short covering rally released. The only odd thing about this move is that it is coming with bulls at 52% and bears at 24% on the Institutional Investor survey. However, bears crossed above the bulls way back in October where the market actually bottomed and it is still nowhere the 5-year bulls high of 62% and the bears low of 15%. Our advice is to follow the price action. While it has been pretty shady for the past couple of years, in terms of trusting this price action, there have been times trends have developed. Let’s hope this time it is for more than one or two months. The potential good news that this rally could last is that we received a lot of strong buy signals in high quality individual stocks last week and this week before the Thursday breakouts in all major important market averages. We shall see what the upcoming weeks and months leading into the election give us. Remember, one or two distribution days is not reason to sell the market short. The key is to watch for 4 to 6 of these days showing up over a two or three week time frame. If you see that, then we can start to worry. However, if that happens I am sure buying unlimited bonds in the USA is not out of the question for the ugly monsters that are Congress and the Federal Reserve. Aloha and have a wonderful and fun weekend! Top Current Holdings – Percent Gain – Date of Signal AVD long – 114% – 1/10/12 BVSN short – 82% – 3/19/12 NTE long – 46% – 8/17/12 CLGX long – 46% – 6/19/12 VRNM short – 37% – 4/10/12 CAMP long – 35% – 4/26/12 PRXI short – 31% – 3/30/12 MAGS short – 29% – 4/18/12

Stocks Stage Powerful Rally as Volume Swells

Mario Draghi and the ECB took center stage this morning announcing a new bond buying program. The ECB delivered on its rhetoric it would do all within its power to save the EURO. Stocks cheered the move and futures rallied. ADP employment figures came in better than expected as well as jobless claims. However, neither the ECB nor these economic reports got the market moving like the ISM non-Manufacturing index. Institutions stepped in a big way scooping up shares after the service sector expanded. Buying continued and the gains of the day were locked up with the market closing at its high of the day! A very bullish day and today is precisely the day we were looking for as a continuation of the summer uptrend. There are plenty of stories out there with all the hedge funds and other institutional players that are massively under invested. Headwinds like the fiscal cliff and European debt crisis have kept many market players from investing in this market. Missing out on today’s move is certainly going to set back many, but the problem really is having an opinion on the direction of the market. If you simply followed where price was telling you wouldn’t have missed out on the rally today. Ignore the headlines you read and follow the price action in the market. Sentiment has been mixed with neither side reaching an extreme level. This week’s reading from the AAII sentiment survey showed bulls and bears equal. The market has been consolidating its gains from the June lows and it is no surprise there was neither a bullish or bearish tint. However, it does showcase how many people missed the rally today. Now, will we see immediate follow-through from today’s action or do we see this rally fade? Until price tells us otherwise we are are going to push forward on the long side! We witnessed a very bullish day ahead of tomorrow’s job report. Unemployment is expected to hold steady at 8.3% and roughly 130,000 jobs added in the month of August. It would be nice to see the labor participation rate to expand and the unemployment rate to drop. That would be very nice. When all is said and done it is about price and we’ll act accordingly. Have a great weekend.

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio remains under a BUY signal from 8/3/12, following the past week in the stock market. There was not much that went on this week that changed anything from the previous BWT Portfolio update. The only significant event this week occurred on Friday with Gold, Silver, and Platinum ripping higher following Ben Bernanke’s speech. A long position in GLD 150 calls two days ago paid off with a 32% gain today alone. We expect much further prices ahead for Gold, Silver, and Platinum and will use subsequent buy signals to increase our exposure to this area of the market. As for stocks, everything remains under a steady albeit slow uptrend. Unfortunately, there continues to be below average volume on this move higher but NYSE turnover did come in above average on Friday and that is encouraging sign if we are to see continued higher prices. We do realize that historically low below average volume rallies can lead to severe and quick pullbacks as market participants return to the market. While this scenario is plausible, the technical action, along with the high level of shorts on the NYSE (NYSE short interest ratio is at 20.97), indicates that further price appreciation should occur. There is not much else add to this report that was not already stated last week. Our focus will continue to be on commodities and precious metals, until higher overall volume on the general market indexes returns. Have a wonderful long Labor Day weekend everyone. Aloha! Top Current Holdings – Percent Return – Date of Signal AVD long – 104% – 1/10/12 BVSN short – 82% – 3/19/12 NTE long – 55% – 8/17/12 CLGX long – 41% – 6/19/12 VRNM short – 37% – 4/10/12 PRXI short – 35% – 3/30/12 CAMP long – 35% – 4/26/12 MAGS short – 29% – 4/18/12 STX long – 29% – 6/29/12 PHMD short – 27% – 5/11/12

Stocks Notch Another Low Volume Summer Session; GDP Growth In line with Estimates

No surprise GDP growth was in-line with estimates as pending home sales jumped more than expected. Both figures failed to ignite buying as the market hit the day’s low just before 11am. Once again buyers stepped up to the plate supporting the market. Support wasn’t ferocious as volume registered lower than yesterday’s pathetic levels. Volume just isn’t there during the final week of the summer. Institutions are not stepping up and putting their money to work in front of Ben Bernanke’s speech in Jackson Hole. While the price support is positive it is very difficult to have much conviction in the market in either direction. According to MarketSmith’s shorting data we continue to see the NYSE Short Interest hitting 5 year highs. Are we simply seeing a massive short squeeze? Or is the SMART money right and a pending collapse is about to occur? It is anyone’s best guess here which way the market goes. Quite frankly it is much easier to doubt the market with all the potential headwinds the market faces. China, Europe, and the Fiscal Cliff can easily be used to make a bearish case. Despite the argument and from a trading perspective when do you exit your losing position? How much do you risk? Trend following is powerful because it cuts through the fundamental non-sense and positions you to what matters most: PRICE. With very little happening in the market there have been bright spots and opportunities for BWT to exploit. The last thing we want to do is miss a signal. Missing signals decreases your opportunity to capture upside and why it is so important not to argue with your system. Follow it and do not let your opinion get in the way of your trading. You’ll be surprised how much more success you’ll have by not ignoring trading signals. Remember always know your position sizing, entries, and exits! Cutting losses is your insurance policy and your number one rule!

Stocks and Volume End Mixed as Consumer Confidence Dips

A positive Case-Shiller housing report was over-shadowed by a disappointing drop in consumer confidence. Volume ended mixed on the day, but did not trigger any distribution. The market appears to be waiting word from the Federal Reserve head Ben Bernanke on Friday. We did see support coming into the market just after the consumer confidence debacle, but we didn’t see the market follow-through on the buying. The final hour did see a push, but was quickly met with sellers. Summer trading continues and it will conclude with Bernanke’s presentation Friday. Tomorrow we’ll get another read on GDP and the market is expecting the economy grew at a 1.7% pace. My best guess is GDP figure comes in line with estimates and it won’t really matter to the market. Bernanke’s speech at this point is probably overshadowing any economic release including GDP. In the end it boils down to price and we’ll keep our attention to what matters most. It is a shame the United States can’t generate growth beyond 1.7%. We are a double digit trillion dollar economy and growing at a solid 4 or 5% clip would be difficult. The law of large numbers comes into play here, but it would be nice to get more growth out of this country. Remember Iceland and Estonia? Iceland didn’t bailout its banks, it prosecuted its bankers. Estonia cut spending and took its medicine, but is growing at a great clip. Perhaps we should take some notes on what works and implement that. There isn’t much else going on in this market until the big boys come back after Labor Day. NTE running again today and we’ll take a few more profits on this bad boy. A few other stocks continue to move higher, but we aren’t seeing any explosive moves. They will come back and we’ll be ready. The question is are you ready?

NASDAQ Stalls as the Market Ends Mixed

Friday’s early evening news regarding AAPL’s patent fight with Samsung helped boost the stock today sending the NASDAQ higher at the open. The initial pop in the NASDAQ was certainly attributed to AAPL’s move, but stock would stall out before the lunch hour. A steady decline into the end of the day with the exception of a last two minute rally had stocks near lows of the session. Volume ran higher on the NASDAQ, but with volume so far below average it is very hard to label today as a “stall day” adding to our distribution count. The current rally is hanging in there and with the final week of summer upon us trading should stay light until after Labor Day. Today’s price action wasn’t ideal for an uptrend. A gap reversal like we saw today is normally a bad sign for the market. However, with AAPL providing the majority of the boost for the NASDAQ and very light volume anything is possible here. We are essentially discounting the move in price due to the obscenely low volume. The real players will all return after Labor Day and we’ll certainly see volume pick back up. The lone bit of economic news came from the Dallas Federal Reserve Manufacturing activity index. Economists polled expected a drop of 6.5 while the reading came in better at -1.6. Essentially the Dallas Fed saw a slowing, slowing manufacturing pace. Later in the week we’ll get another GDP reading which will likely show tepid growth. Second quarter growth is slated to come in at a wonderful pace of 1.7%. If you did not detect sarcasm there was plenty of it in that last sentence! Where are our 4% GDP days? Perhaps at some point we’ll get there, but when is the biggest question no one can answer. It is nice to see some of our stocks soar. A prime example of one we’ll be taking some profits on is NTE. We’ll continue to take advantage of this market as opportunities present themselves. Headlines will start rolling with Bernanke at Jackson Hole this week and you never know with the ECB’s Draghi providing headlines. We’ll stick with our disciplined approach and follow price. We’ll let the guess work to others. Make it a great week.

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio remains under a weak BUY signal, following a week of constructive price action in the overall market. We continue to keep positions relatively small as volume continues to be completely absent in the stock market right now. Traders are still on vacation and there has not been a single what we deem “perfect” or “near perfect” signal since the BUY signal has been triggered. We will continue to operate on a small level until volume returns to above average daily or weekly levels in the overall market or a strong “perfect or near perfect” signal is generated. As for our opinions on the future direction of the market. We do not have any. However, in analyzing the current situation we find similar parallels to the price action in the summer of 2000. Obviously, this time it is much different as it is not coming from a post-bubble pop. However, as someone that follows history, this must be taken into consideration. A low volume rally is always suspect to heavier volume selling and with another week of August still left it is possible that the low volume rally will continue until Labor Day. If that is the case, that is when/where it then gets interesting. Will wall street come back post-Labor Day and see the gains on small volume and begin dumping shares? Or will wall street come back post-Labor Day, see the melt up on low volume, then see the 5-year high of the NYSE short interest ratio at 19.92 (MarketSmith numbers), and then squeeze the shorts to death? There is not one person out there that can answer that question. We must let price be our guide. If volume was heavier on this leg up and NYSE short interest was increasing, then I would lean to a powerful possible rally coming into election season. However, with the volume being so low, a pullback can easily materialize here. We will continue to go with the flow of price and use options to allow us to generate outsized returns that was once attainable via stock purchases alone with margin before 2011. The one extremely bright spot for us lately has been the earnings winners. Stocks gapping up on volume following earnings announcements have done brilliantly and those around in the morning taking the advice given from BWT traders have benefited greatly. Sadly, earning season is wrapping up and that means that we will have to wait 3 more months for these explosive moves that have given us an extremely high reward/risk right/wrong gain/pain ratio to come around again. There are a lot of so-called bulls out there in the II and AAII survey. There are a lot of shorts out there according to the NYSE short interest ratio. Which one is right? It doesn’t matter. Right now, all that matters is price. Follow the price. It is the only thing that doesn’t lie. Top Current Holdings – Percent Return – Date of Signal AVD long – 97% – 1/10/12 BVSN short – 82% – 3/19/12 CLGX long – 39% – 6/19/12 STX long – 37% – 6/29/12 PRXI short – 36% – 3/30/12 PHMD short – 31% – 5/11/12 VRNM short – 30% – 4/10/12 MAGS short – 27% – 4/18/12

Stocks Slide as Volume Slips

Jobless claims and New Home sales disappointed setting a negative tone for the entire trading day. Federal Reserve President Bullard did not confirm a new quantitative easing program, but gold and silver still jumped higher. The two precious metals are certainly trading like there will be another easing program. Buyers did try to get the market higher before the lunch hour, but they did not have enough ammo to push the market back into positive territory. Tuesday’s high remains a road block for this market we have moved lower on lighter volume. Today was a consolidation day, but it is time for institutions to step up and support this market. The continued move in the precious metals has been quite impressive. What it all means is really anyone’s guess. An educated guess would be the metals are moving because of a new easing program. What about a lack of confidence in the US Dollar? ECB bond buying? We can certainly make up plenty of different reasons for the move. However, are you busy worried about the why rather than just getting aboard and taking advantage of the run? The “why” always comes, but we aren’t about to wait and waste an opportunity for gains. Sentiment has shifted to be in the bulls camp. AAII survey showed the amount of bulls jump to 42% the highest for this recent uptrend. Bears slipped to 26%, but many remain on the sidelines. 42% is not at an extreme level and anything above 48% would be considered extreme. 26% is low, but for bears anything around 20% would be too considered extreme. Current sentiment really only highlights the neutral nature of the survey respondents. This weekend will be the last weekend before the office end of the summer season. Make sure you get out there and enjoy the last of summer. Remember, know your entries, position size, and your exits.

Bill Gross Handicaps QE3 at 80% as the Fed Hints at a new Money Printing Operation

All eyes were on the FOMC meeting minutes today! Our attention was on the price action, but market pundits were looking for the FOMC to hint at further stimulus from the central bank. Bill Gross tweeted shortly after the release of the minutes there is now an 80% chance we get a new money printing program. In the minutes, the FOMC noted the economy would need to improve for them NOT to act. More importantly the market reacted to the news initially moving higher. While the market did close off the lows of the session the market didn’t explode higher. We remain in an uptrend, but we still want to be aware of further distribution and act accordingly. Gold and silver moved higher on the news of the FOMC acting once again. Both precious metals have been relatively quiet for most of the summer despite stocks moving higher on FOMC hopes. At the moment GLD and SLV are in uptrends and look to be moving higher. All we care about is that they are moving higher and we have plotted our exit. We are still going to keep an eye for this market to take out yesterday’s high. Tuesday’s distribution day also is acting as a stall day. Stall days are high volume reversals when an uptrend hits a new high. In order to negate the stall day like we saw last week the market will need to take out the high on volume. Last Thursday we did see the market overcome a stall day and is a bullish signal. It will be important to this uptrend if we are able to repeat last week’s success. Any pile up of distribution here will not be a good sign for the uptrend. Know your exits and when the market signals your exit GET OUT. An unfortunate side effect of money printing operations is inflation. The way the government calculates CPI is a unique way of hiding true inflation. Gasoline and food prices are the most important to every American. Rising gas and food costs are a HUGE tax on the poor and lower/middle class families. It’ll be interesting to see the fall out if QE3 does come along. Remember to always cut your losses!

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading model switched to a BUY signal on Thursday. This signal was generated thanks basically to the performance of earnings winners, the Relative Strength of the Russell 2000, and a volume surge on the Nasdaq. There was no confirmation with volume in any other index or ETF. Sadly, overall, there continues to be a lack of any momentum in the market following a stock price breakout. The good news is that there is a lot of momentum in earnings winners gapping up on very strong volume. Almost every single stock recommended at Big Wave Trading, in the pre-market, for the past two weeks, has worked and continues to work. This is a very encouraging sign for the possibilities of higher stock prices and a sustained trend. The argument against a sustained uptrend include the low below-average volume on this rally and lack of leadership by the big high priced stocks. The argument for a sustained uptrend include the recent outperformance of earnings winners to earnings losers and the extremely high short-interest ratio on the NYSE. The NYSE is ending the week at or near 5-year highs (can I please have one day where the data corresponds to other data providers across the board. Sheesh.) according to MarketSmith. This ratio is currently around the 19.50 area which is kindle for a huge possible stock market fire. If algorithms continue to lift this market on low volume, it is possible that this will cause a painful short covering rally for those that are simply too bearish here. If a short covering rally does start soon and money continues to come out of bonds possibly finding a home in the stock market, it could be quite a move. On top of this high level of short interest, we are almost out of summer time and that means a possible September and October stock market rally. The stock market usually likes to start strong moves in one direction or the other in October. Crashes happen in this month a lot and a lot of sustained rallies start in this month. If we rally here, pullback in September, and start moving on strong volume in October it could lead to a very exciting moment where we finally produce some big winners. However, all of this is speculation so no conviction will be put into this. Overall, the market remains healthy, despite the absolute lack of volume, and as long as this continues there is nothing to do but go with the trend. There are a couple of weeks left in August so we will probably have to deal with the low volume for a little while longer. After Labor Day we should see some volume return to this market. Or not. I can’t predict the future. I only know the now. Right now, we are melting up slowly on no volume. It is what it is. Have a great weekend everyone. Aloha from everyone at Big Wave Trading. Top Current Holdings – Percent Gain – Date of Signal AVD long – 104% – 1/10/12 BVSN short – 82% – 3/19/12 STX long – 44% – 6/29/12 CLGX long – 40% – 6/19/12 PHMD short – 39% – 5/11/12 PRXI short – 35% – 3/30/12 MAGS short – 26% – 4/18/12 VRNM short – 26% – 4/10/12

CSCO Leading the Way Stocks Advance in Higher Trade

THURSDAY POST Stocks break out on above average volume lead by the CSCO after hiking its dividend and an upbeat earnings report. A strong move by the NASDAQ with above average volume certainly a big sign of strength and a clue Institutions were behind the move. CSCO certainly had a hand in the surge in volume, but it wasn’t the sole reason for the move and this is a clue Institutions had a hand in the move. Despite an awkward move higher off the lows we have an uptrend and now with volume to boot. Today’s move above Tuesday’s high on volume has rendered the stall day useless. The trend up and we’ll continue to act accordingly. Today was a certainly a nice breakout day for the market. This is what we have been looking for and with today’s move above Tuesday’s high on volume certainly is an encouraging sign. Leading stocks are doing well, but this is an earnings game and index game. AMZN is a stock who carries a very high price to earnings ratio, but broke out nearing an all-time high. We like to see this action from stocks and is an important piece of the puzzle to keep this market moving higher. Where will this rally end is anyone’s guess, but for now we need to be long and ride the wave higher. Sentiment did not change much week over week as bears came in at 28% and bulls at 37%. Not much movement from either camp despite the most recent move. Again, this is not a conventional market rally with all the economic headwinds we face. This rally simply points out your opinions do not mean much and price action will always rule the day. Tomorrow morning we’ll get to watch the nonsense induced by options expiry. I am sure many traders will be looking towards the weekend and leave early. Summer is almost over and everyone should be taking full advantage! Get out there and enjoy life.

Volume Slips Despite the Market Finding Support at Session Lows; CSCO Soars in After-Hours Trade

Led by a solid rally from the Russell 2000, stocks found support more than once throughout the day. New home builder confidence was better than expected again as consumer prices were below expectations according to government figures. Unfortunately, the economic figures didn’t spark any sort of excitement among institutions. Volume was lower on the day and certainly a black mark on the day, but it was the fact the market was unable to eclipse yesterday’s high that is somewhat concerning. We’ll need to see the market build off today’s gains and have volume flood the market. Not a terrible day by any stretch, it simply just left us wanting a bit more from the market. In the after-hours session CSCO provided the market with some good news as the stock beat earnings and boosted its dividend. John Chambers is notorious for speaking what he sees (despite seeing a great economy at the end of 2007) and this time his comments weren’t as bad as they were in March. If you remember back in March CSCO’s earnings provided a downside catalyst with its negative view of the economy. This time around it doesn’t appear to be all that bad according to CSCO. The stock is trading more than 80 cents higher in after-hours session. Friday we’ll get the dreaded monthly options expiry. Volatility did pick up yesterday, but still remains relatively tame. Option expiry weeks are notorious for increasing intraday swings and volume in the market. Thus far, we have not seen either. Perhaps tomorrow will be a different day, but nothing is guaranteed. Earnings plays like KORS, FLT, and others have provided some good solid profits for those taking advantage of the morning gaps. Tomorrow we’ll get PRGO and ROST reporting earnings and tonight NTES will report. We’ll be paying close attention to these stocks as they open tomorrow and will take advantage if the opportunity presents itself. Another interesting point to continue to look at is the sell-off in bonds. TLT and TBT are two ETFs to watch but the 10 year has gone from 1.4% to 1.8% in a short time. That is one big move in bonds recently and it will be interesting to see how mutual fund flows react to rising yields. Remember, rising yields are well correlated with stock market returns. Keep an eye on yields. Now that hump day is over we’ll be looking forward to another fun summer weekend.

Stocks Stall Mid-Day as VIX Jumps off the Most Recent Lows

Just after noon, stocks took a dive, after rallying from the morning lows. The final hour of the trading session ushered in sellers pushing the major stock indexes to their final lows of the day. Only the last 5 minutes did we see buyers step up and save the market from broad distribution. Perhaps the robots are going crazy, but today’s action does constitute as a stall day. This most recent uptrend does have two distribution days across the board and now one stall day. Yesterday’s bullish intraday action was done so on light volume and therefore not as significant as today’s action. While not an end all be all day it is important how the market reacts over the remainder of the week. Today’s action is a red flag for the most recent rally and we’ll need to be aware of the market movements for the rest of the week. Still, overall, we remain in a slight uptrend and will invest accordingly. The VIX finally woke up on a day where intraday volatility was not relatively large. Fear has been absent since June when the market hit its most recent low. Perhaps the Federal Reserve put has driven away sellers, but today they did come back. Interestingly enough on March 16th the VIX hit a low of 13.66 and yesterday the index hit a low of 13.67. While it did not pin point an exact high the NASDAQ would hit its intraday high a little over a week later on the 27th of March. Perhaps this market can rally further and why it is important to see the action over the next couple of days. In order to continue to move higher we’ll need to see bullish price action. Keep an eye on distribution and stalling the rest of this week as it will be a hint where this market is heading. It took to the 3rd paragraph to talk about economic data! Retail sales jumped more than expected, but PPI came in hotter than expected. The market cheered the retail sales figures, but largely ignored the economic reports on the day. In the end, it really doesn’t matter and all that matters is how we concluded the day. Leave the economic talk for the water cooler discussion and not your trading. Tomorrow we’ll have more fun with economic data in the morning with CPI figures. If the CPI comes in higher than expected, it will certainly be viewed as a negative. Ben Bernanke knows further easing will bring on higher commodity prices and with the drought in the mid-west it presents a very delicate situation for the Fed Chairman. It is all about executing your trading plan. Know your position sizing, entries, and exits.

4 Stocks Moving Higher Post Earnings

4 Stocks Moving Higher Post Earnings

NASDAQ Closes in the Green as Stocks Find Support at Friday’s Lows

It was another quiet Monday trading session, as AAPL and GOOG lead the NASDAQ higher closing just off the highs of the session. Volume was once again lower on the day, as we proceed through the dog days of summer. Commodities traded lower on the day, as gas at the pumps has rebounded higher putting pressure on consumers. When the market hit its lows, after the 11 o’clock hour, buyers began to show up supporting the market. While volume wasn’t highe–showing institutions piling back into the market–the price action was considerably bullish. There is quite a bit of economic news set to hit the market the rest of the week and we’ll certainly see the market move. PPI data out tomorrow and CPI data out Wednesday will certainly spark debate regarding Federal Reserve policy. The more we see deflation the more folks will make a case for another round of quantitative easing. To us it is noise in regards to our trading, but for a cocktail party (a boring one) it makes for good banter. Price matters most and although debating Fed policy is fun for some it is not useful for our trading. Today was overall is a bullish day, but boy was it a boring day. Europe was mostly lower and we failed to get any rumors from central banks. Boring days are good when you do not get epic failures from leaders. Leadership remains thin here and cash is king, but we have seen stranger things from this market. The next big thing from the US Central Bank is the Jackson Hole summit at the end of this month. All eyes will be on Ben Bernanke to see if he hints at or lays out the plans for another easing program. Up until then, I’d expect very little from the Fed. Rumors will always be present, but price always gives the clue. Remember the most important part of trading is knowing entries and exits. Cutting losses is most important piece to your trading!

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio remains under a NEUTRAL signal, despite the gains this past week. While the gains were decent, volume was completely absent. If the data from Telechart is correct, weekly volume for the NYSE was the lowest total for the year. My main three data providers always have different volume totals for the indexes so I average them out, usually. Even though volume is so low and there has not been a confirmation rally following the strong rally on 7/27, we were given one new long signal each day last week. Following, the recent action, our portfolio has hit a protective stop and trading has been reduced to the most minimal position possible per trade. This will last the entire month, until there is strong follow-through to these recent gains or a “perfect” signal is generated in an individual stock. These have been few are far between the past two years. The mere fact that our new long signals are still not blasting higher immediately and are instead just holding their breakout levels tells me that there still is not enough pent up momentum to blast stocks higher. With the VIX now below 15 and with the bulls increasing last week while bears decreased in the Investors Intelligence survey, I wouldn’t expect much fire if we do continue to rally. In saying this, it must be noted that the NYSE short interest ratio continuously hits new 5-year highs almost daily. This index now sits at 18.63 at fresh new 5-year highs. Even if volume remains low–never short a dull market–and institutions do not return, the mere fact that a little bit of HFT/algorithm buying can lift stocks up due to the lack of supply on the market, thus creating a painful short covering rally, means that this low volume rally can continue for some time. If these shorts start to cover and sideline money returns to the market, we will be more than happy to get long some ETFs for a rally. However, if volume continues to be below average, we are not going to bite. There are simply too many uncertainties. The only thing we are certain about at Big Wave Trading right now is stocks that gap following earnings. We highlighted many stocks the past week that we issued buy signals (and some short signals) on in the AM based on earnings. Those that followed the recommendations in the AM, profited. It was a great week for playing earnings winners and losers. For the past six months, this has been the only play that has been consistently profitable more so than not. Every other methodology employed this year has more losses than gains. Next quarter, we will increase the capital we normally place in these gap plays as they are just very profitable and continue to trend after their earnings dates. Breakouts and moving average bounces still can not be trusted as algorithms are figuring out how to pick us off in this low volume environment. For the upcoming week, we will continue to maintain an extremely extraordinary high level of cash until volume returns to the overall market. We will also continue to focus on stocks that gap up due to earnings and stocks that gap down due to earnings. For the stocks that gap down we require a major previous uptrend like MNST and PCLN. A stock like YHOO would not be considered. Aloha, have a great weekend, and don’t forget to go outside at night and check out the Perseid meteor shower tonight and tomorrow night. Top Current Holdings – Percent Return – Date of Signal AVD long – 98% – 1/10/12 BVSN short – 81% – 3/19/12 STX long – 38% – 6/29/12 CLGX long – 38% – 6/19/12 PRXI short – 35% – 3/30/12 PHMD short – 33% – 5/11/12 CAMP long – 28% – 4/26/12 MAGS short – 25% – 4/18/12

Stocks End Mixed as Volume Slips

Volume continues to back down from Tuesday’s level and stocks continue to hang in a holding pattern digesting the recent gains. We did get a bit more economic news showing Jobless Claims were less than expected and wholesale inventories fell. It will be nice when claims figures show job creation rather than continued job losses. Most economic news is for cocktail parties and not for trading or at least not for our style. After the Europe close EURUSD took a dive sending our markets to the lows of the session. Buyers were able to step up and support the market pushing prices back to near the highs of the session. Volume dropped more than 10% across the board, a clear sign institutions backed away from the market. We continue to see this market move sideways consolidating its most recent move. There just something not right about this market despite our continued rally. We are not about to argue with the market and fight it. Something just doesn’t feel right out there, but this is precisely the reason we have a cut loss strategy. Just because we may feel one way or another we could be dead wrong! We will not compromise our strategy because our feelings. Opinions are very dangerous and most often they keep you from squeezing every last bit from the market. We’ll stay with cash and a few long positions. Price will dictate our next move in either direction. Sentiment continues to be dominated by those who are neutral. The number of bears did slip to 27.35% according to the AAII sentiment survey. However, only 36.47% of respondents were bullish! How can this be? There are lots of reasons, but when the market appears to want to crack wide open rumors of Fed or ECB action always brings in short covering. It is what it is and fighting the tape is a futile effort. There are lots of reasons to be bearish and very few to be bullish, but when you boil it down all that matters is where price is moving. Tomorrow morning we’ll get a reading from Import prices and the release of the monthly budget statement. Like others, we are looking forward to the weekend. Make sure you get out there and enjoy the weekend.

4 New Issues Every Growth Investor Should Own

4 New Issues Every Growth Investor Should Own

PCLN Slides in Heavy Trade as VIX Continues to Slide

Today’s market action was not a bad day of consolidation for the overall market itself. However, we continue to see earnings disasters like PCLN and fear continuing to flee the market. Volume on the NASDAQ was above average, but below Tuesday’s session level. All in all, the NASDAQ put in an inside day on lower volume. This is precisely what you want to see the market react during an uptrend. However, how far can this market lift when you have the “fear” index sitting at just 15? There is a lack of fear in the market as sellers have completely rendered useless. Just concentrating on the market itself it does appear this rally can continue higher. We are in a new brave world where algo trading and HFT dominate the day’s trading. Without the public money pouring into the market how can this market uptrend survive? The VIX is at 15.32 at the close of the session and at these levels (in the past) the market tends to stall out and correct. Perhaps the computers have rendered the VIX useless and broken the back of the seller. Anything is possible, but it is no way to make trading decisions. Using price as your number one guide you can successfully navigate the market. In a computer dominated market the Federal Reserve continues to play a significant role in the psyche of traders. Hope is a dangerous emotion as it misplaces confidence. At this point, the only reason for optimism is the Federal Reserve conducting another round of easing. Ask Japan how constant easing has helped out their equity markets. Over the summer the Nikkei hit decade lows how is that success? Perhaps defined by a permabear multi-decade lows would be considered success. We will remain disciplined in our trading approach and we will not deviate from it. We’ll continue to take advantage of our opportunities and we are not about to gamble.

Russell 2000 and NASDAQ Lead the Way as Volume Jumps

A weak close once again dampens the day’s rally, but volume rises suggesting institutions have crept back into the market. Economic news will be light throughout the week and today wasn’t any different. By Mid-day the market had racked up good gains and volume was heavy suggesting the big players were active buying up shares of stock. While not overwhelming it is a good sign to finally see volume kick up showing institutions are somewhat willing to accumulate shares. We continue to see stocks move off of earnings releases and have been profitable. A good sign today and while we remain defensive we’ll need to see volume continue to flood the market. Summer time is not known for volume, but on solid price gains we’d like to see volume come in at least above the prior day. If we are lucky, we’d even take near the 50 day volume average. So far, we have yet to see such occurrence and more than likely due to HFT and Indexing. Many mutual funds manage to an index or better known as a benchmark. “Just buy the index” means just that and therefore you are seeing money chase after stocks how are in their benchmarks. The key is finding the stocks under accumulation and using proper entries and exits. Remember, you must stick with it to capitalize on the opportunity out there! Europe continues to be headline materials as Spain and Italy at some point will ask for a bailout. Economic news out of the Eurozone continues to be dismal. There isn’t any growth in the continent and now are relying on the ECB to bail them out. Same goes for the United States as many are expecting another round of Quantitative Easing. We may be rallying on hope, but it simply doesn’t matter. The mere fact we are rallying is all we care about. Reasons are pointless and by the time you have it all figured out the move will have passed you buy. Whether its bailouts from the ECB or the Federal Reserve printing more money at the end of the day it all boils down to price. Always have a plan! Know your entries, exits, and position sizing. All are vital to your trading success. Remember, always cut your losses!

Melt-up Monday Ends on a Sour Note as Summer Volume Continues

After coming off of an Economic news invasion last week the market gets a reprieve this week. Monday’s have been tough over the last 9 weeks closing in the red all 9 times. This Monday would be different closing in the green, but well off the highs of the session. The NASDAQ backed off the 3000 level while the S&P 500 reversed from 1400. While these are just psychological levels the sell off at the end of the day was not ideal. We’d like to see the market close strong on heavier volume. At the moment this market appears to be hyper focused on index securities and driven by high frequency trading. Our uptrend continues, but remains very weak with the lack of volume coming into the market. Friday’s market action was solid when you take a look at price action, but falls down when you take into account volume. We can continue to move higher, but there isn’t ANY accumulation in the market. Institutions are not accumulating stock at this time and it is very apparent when you look at volume. Without conviction we remain cash heavy in this market environment as it is difficult to have confidence to get size in any position. Trading with small positions here is key until the market says otherwise. It is quite amazing Mondays have been so dismal, but the market has been able to avoid taking out the lows. Since the last positive close on Monday the market was coming off the June lows, not highs. While it would be fun to speculate the market is about to change its behavior and move lower we will need price to confirm our stance. We have seen this market melt-up on pathetic volume and saved by possible central bank action and it would not surprise me to see another shock come into the system. How can the market rally in a sustained meaningful way when the VIX is sitting around 16? Anything can happen but logic says otherwise. It is very important to keep focused on being disciplined and sticking with your strategy. We are sticking to ours and look forward to when we have better market to operate in. The most important rule remains cut your losses, when you are wrong.

Big Wave Trading Portfolio Update And Top Current Holdings

This week marked a moment our model has not seen during a running six month period of time (this occurred in only four months, making it even more interesting), during the past 130 years. With the weak BUY signal in the Nasdaq switching to a SELL signal in the Russell 2000 on Thursday to a NEUTRAL signal on Friday, it marked 11 model switches to BUY or SELL in a row without a 5% gain. This has never happened before in 130 years and indicates that we are definitely in a market environment similar to 1937-1941 on the DJIA and 1976-1979 on the SP 500. The price pattern is more similar to 1976-1979 but the volume is more similar to 1930-1933 and 1940-1942 on the DJIA. This, therefore, automatically shuts down our model on the next signal and now prevents any new position to be of any size what so ever until a trend develops. I have stated before and I will state it again, there is no other time period ever in the history of the stock market where you can find the stock market rally on below average weekly and monthly volume (50 day volume average) for a prolonged period of time. All lower volume rallies before this one have ended in one or two ways. They either reverse and give back all gains or they lead up to a higher volume rally. Normally, those low volume monthly rallies only last one or two months before the real volume enters. The current rally has been on below average volume since 2009 (the entire way–not one above average volume UP month) on the DJIA and SP 500 and 2010 on the Nasdaq. So this low volume rally is too far into the trend to have that happen based on history. However, this being something completely different than ever before, could lead to it happening. This market is doing things it has simply never done before so why not. This situation, along with a high unemployment rate and a 1.5% GDP, is preventing any upward momentum from being generated. At the same time, without any more threats of QE or Operation Twist, we believe the market would be 50% lower from the current levels (based on removing all market rallies that either came before an FOMC day or on a day where easing was announced). The market is lifting higher due to inflation of hard assets. This is not good for trend followers on the long side or the short side. The real profitable trend lower will not be allowed to materialize with the Central Banks interference. And the long side trend will be small and choppy thanks to low interest rates and the aforementioned items above. Another thing that bothers me are the low VIX and sideline activity by AAII and Investors Intelligence survey members. The VIX is already at low levels so its hard to believe any real new uptrend will start here. However, the fact the VIX fell on Thursday when the market fell indicates that it could be temporarily broken. Also, there are more people on the sidelines than there are bulls or bears. This prevents extreme pessimism or optimism from forming thus preventing a major move in the opposite direction. Overall, it is a market where intermediate term trend following methodologies continue to be hindered and we find it safest for our assets that we just be on the side playing extremely small until we can get volume confirmation across the board. What will that confirmation look like? A significant move one way or the other on well above average volume on the indexes, ETFs, leveraged ETFs, inverse ETFs, and individual leading stocks. As long as confirmation is not across the board, Big Wave Trading will stay small until a “perfect” setup comes along. We have not seen a perfect setup that worked since February (one perfect and two near-perfects on the long side failed since) on the long side and we have not seen one at all since March on the short side. Until these show up, we are going to take it easy and wait for the right moment to begin operating at a higher capacity. Protecting our capital remains goal one in this trendless tape. The only play that is consistently working is our earnings gap plays. Up or down, it doesn’t matter as long as it is due to some earnings surprise and volume is at least 50% of average daily volume in the pre-market session. Besides that, buying every single dip hoping that the Fed will save you has worked also. That is not exactly my personal style. I am patient and will only risk the capital when the money is sitting in the corner waiting to be taken. Aloha and have a great weekend! Top Current Holdings – Percent Return – Date of Signal AVD long – 88% – 1/10/12 BVSN short – 82% – 3/19/12 PRXI short – 35% – 3/30/12 MAGS short – 33% – 4/18/12 CLGX long – 32% – 6/19/12 CAMP long – 31% – 4/26/12 AXTI short – 26% – 7/19/12 PHMD short – 26% – 5/11/12 STX long – 25% – 6/29/12

ECB’s Draghi Fails to Impress Sends Europe Lower along with US Stocks

All eyes were on the ECB rate announcement and following press conference. Unfortunately for European stocks and yields the ECB did not deliver what the market expected. First, it was Ben Bernanke and the US Federal Reserve not announcing QE3 and now the ECB failing to deliver buying bonds outright. Initially, the NASDAQ received a ton of support in the morning session and appeared to be on its way higher. However, as the European markets dove to new lows prior to the close US stocks simply couldn’t hang on to the move off the lows. The final hour we did see support, but buyers simply could not push the market back above the unchanged level. Now the market awaits the July jobs report and it too will be a market mover. Last week’s rally into the end of the week has yet to see any follow-through at all. In fact, we are down four straight days. Not typical of a new uptrend and just another sign of the chop and slop summer trading has been this year. Who knows what tomorrow’s jobs number will bring but the most important piece will be how it reacts to it. CNBC will have its pundits rolled out ready to bring as much noise to the table as possible. We’ll pay attention to how price reacts to the news and follow our disciplined approach. We’ll leave the guess work to the amateurs. This week’s AAII sentiment survey was released showing the number of bears coming down from the low 40s to 35%. Bulls moved back above the 30 level, but those who are neutral in the market continue to dominate this sentiment reading. It is easy to why the VIX is so low showing a lack of fear. We can just point to how many of those who are neutral. If you are in cash how can you be fearful? We now have the Fed and ECB out of the way and the jobs report tomorrow it will be nice to enjoy a summer weekend! We remain cash heavy at this point in the game with the level of chop in the market it has made it really difficult to hang onto positions. Keep it small until you see gains pile up. Always cut your losses short and enjoy the weekend!

Fed Chief Says No to QE and Stocks Respond by Closing Lower

Leading up to the Federal Reserve rate annoucement was the big story was the software glitch hit by Knight Capital. Gigantic volume struck the NYSE causing very erratic trading in nearly 150 stocks. Just when confidence in the stock market is grim we get another flash crash incident. At least the news story distracted the majority prior to the Fed Announcement. Disappointing the market the Federal Reserve failed to deliver a new quantitative easing program. NASDAQ and Small Cap stocks lead the market lower with the Russell 200 finishing down more than 2%. It certainly doesn’t help when Knight Capital is down more than 33%, but small cap weakness continues. Preliminary volume indicates the NASDAQ was able to avoid a distribution day despite the losses on the session. Not a great day for bulls as the market will be hyper-focused on the ECB tomorrow before the opening bell. While the markets closed up lower the VIX failed to rally to show fear amongst sellers. The VIX has not been signalling any fear in this market. Today was no different despite the market not getting another round of QE. The lack of fear in the system can mean many things, but one thing it tells us upside will be limited and any large gains are a ways away. In addition to VIX, bond yields lept and closed higher after the Fed announcement. Rising bond yields and falling stock prices aren’t usually a norm. Sure, rising bond yields are a negative for the government and its financing activities. For stocks, from a historical view rising bond yields have been a big positive for the markets. While today may be an anomaly, it will be something to pay attention to going forward. Now it is onto the ECB tomorrow and then the July jobs report on Friday. More fireworks are set to hit the market and we’ll be ready. Remember, rule number one of cutting your losses!