Big Wave Trading Portfolio Update And Top Current Holdings

Due to the distribution this week in all of the major market indexes, the breakdowns in leading stocks, and constant lagging in the Russell 2000, the market direction model has switched to NEUTRAL on all major market indexes. The short-term current market environment has gotten choppy over the past few weeks and this action is definitely weighing on the model. The lagging Relative Strength of the Nasdaq and Russell 2000 has made this rally all year long suspect but our individual long signals continued to work relatively well despite this. This is more of a byproduct of our long signals coming from big-cap big-board indexes. However, the overall lagging action of the Nasdaq and Russell 2000 was always a cause for concern. It should not be assumed that since we are now under a NEUTRAL condition that the very next signal is going to be a switch to a SELL mode. While it does appear the market is finally ready for a correction based on the way stocks are acting post-earnings, there are still plenty of leading stocks that are clearly forming decent consolidation patterns. A market reversal back to new highs would have many of these stocks easily breaking out of their current consolidation pattern. Therefore, it is best to remain very neutral here and wait to see which way the market breaks out of this consolidation zone the Nasdaq, Russell 2000, and SP 500 are in before convicting oneself to one side or the other of this market. We will continue to play individual stocks as they produce signals in either direction, keeping capital very limited in our selections during this bifurcated US economy and stock market. As long as the market rallies overall on low volume, it is going to be very hard to go 5%, 10%, and science forbid 20% long on a new long or short signal. We will just have to keep taking what the market gives us, either concentrating heavily into the best leading stocks in leading industry groups like Biotechs or keeping individual plays at a minimum with tight stops. The most important play for us right now is to continue to have a lot of cash on hand in case we get a screaming signal to the short side signaling that this market is done on the upside. The other scenario is having a lot of cash on hand in case the market breaks out higher and we get our once-reliable extremely strong price/volume signal to get heavily long a handful of leading stocks. While the latter scenario seems quite implausible it is still a possibility. However, truth be told, we are really waiting to hammer this market on the short side once it becomes apparent the QE low volume stock market manipulation rally is coming to an end. We might still be three years away from that though. Until then, we will ride the bucking bronco. Have a wonderful and profitable upcoming week everyone. Try not to psychoanalyze everything out there too much. Aloha! Top Current Holdings – Percent Gain – Date of Signal EAC long – 154% – 12/17/12 HIMX long – 130% – 12/19/12 CSU long – 96% – 9/4/12 POWR long – 87% – 12/11/12 CAMP long – 69% – 4/26/12 GNMK long – 69% – 11/16/12 FLT long – 65% – 9/6/12 ASTM short – 64% – 7/17/12 HEES long – 58% – 9/4/12 SBGI long – 41% – 3/22/13 WAGE long – 38% – 1/8/13 CPSS long – 35% – 1/31/13 BBSI long – 34% – 2/13/13 PFBI long – 29% – 11/19/12 AXLL long – 28% – 1/4/13 GLL long – 28% – 2/14/13 V long – 27% – 8/31/12 CHUY long – 25% – 1/10/13

Volume Jumps and Stocks Fall Ending the Market’s Uptrend

The NASDAQ Composite loses its 50 day moving average on heavy volume. AAPL and GOOG lead the NASDAQ 100 lower as the big cap technology closed down 1.99%. Commodities followed stocks lower with copper and other metals leading the charge lower. The Federal Reserve’s Beige book showed moderate growth due to autos and housing but did very little to lift the market further off its lows. Blue chips continued their outperformance with help from JNJ and HD. The action as of late is certainly along with volume has thrown our uptrend out the window. We will act accordingly to our rules. Economic news has not been good across the globe and up until this week the market has ignored them. This morning BAC released disappointing results and CSX CEO stated this economy would only grow 1-2%. Two percent growth is simply not good enough and anything less than 2% would cause big impacts. Many estimates from the public to private sector are counting on growth to solve our problems. If growth doesn’t show up it will cause significant impacts to bottom lines. Earnings will continue to pour in and while there was quite a bit of optimism heading into this earnings season it is how the market reacts is what is important to us. We do not pretend to even think we could predict the future like many pundits on CNBC and Bloomberg. Our focus is on our trend following process to set ourselves apart and obtain superior performance. Focus on price action and using our rules to know when to get in and out is how we drive superior results. Tomorrow we’ll get our weekly look at Jobless claims. It is anyone’s guess how the number will turn out, but it is sure to get a good rant out of Rick Santelli! Who doesn’t love a good rant every once in a while. Perhaps we have our correction that every bear has been calling for at our doorstep. We simply won’t know until it is over. Stick with Big Wave Trading and we’ll get you to a higher level of trading. Cut those losses and ride your winners.

Volume Disappears as Stocks Recoup Majority of Monday Losses

In fine QE fashion stocks rebound in very light trade. Positive housing data did help the market even though growth came from multi-family homes. Industrial production grew at a faster pace than expected. Today was the first time we had economic data come in better than expected. Sellers disappeared paving the way for the market to float higher throughout the day. Volume disappeared falling more than 20% on the NYSE and 15% on the NASDAQ falling right in line with QE trading. Our uptrend remains in place for now and we remain ever confident in our systematic approach. Gold and silver rebounded as well as many other commodities after Monday’s big decline. The decline in gold was a 7 sigma move! Either metal was unable to capture majority of losses like the Dow Jones, S&P 500, and NASDAQ. I for one would love to see commodities in general move lower. Lower prices of things we need like food and energy can only help those who don’t own assets benefiting from the Fed’s ZIRP and QE. Lower prices for commodities continue to be highly probable and who can’t smile at lower prices at the pump? Earnings after the bell failed to inspire buyers. INTC closed the after-hours session higher by .71%. However, INTC was up more than 3% after reporting earnings. YHOO pushed higher initially after reporting earnings but the stock fell 4% by the end of the after-hours session. CRUS released earnings disappointing the street finishing lower by almost 11%. We’ll see what tomorrow brings for these stocks and the rest of the market. Tomorrow we’ll get the release of the Federal Reserve’s Beige book. There are few speeches tomorrow by Fed members and likely get a few headlines. Outside of the Beige book it is a relatively quiet day in terms of economic news. Before the market open we’ll get earnings from BAC and we’ll see if the stock follows C or GS. BAC has been a leader in this rally and has been an important piece to this rally. If this market can build upon today’s gains it will bode well to recoup all of Monday’s losses. Of course, we’ll follow our strategy and follow price. Cut those losses.

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading portfolio remains under a BUY signal which was regenerated on March 5th. The Russell 2000 was the only index under a NEUTRAL condition heading into the most recent week but has now re-switched back to a BUY mode as well. Overall, following this week’s action, the uptrend remains in tact and there are no current pressures on the BUY signal. The only problem remains the same problem we have had for four years. There is still a lack of volume conviction in the overall stock market indexes on days when we rally. If there was broad volume across the board, Big Wave Trading would be heavily on margin during an uptrend like we are witnessing. However, without total confirmation across the board BWT continues to operate from a side of caution on new signals as severe sharp corrections are normal in low volume rally market environments. That being said, there continues to be a plethora of actionable buy signals across various investing methodologies and as long as signals are triggered on an individual stock by stock basis we will continue to go long our signals as they are generated. The only difference from this rally and all other previous rallies pre-2009 is the size of new long commitments. We continue to invest below what we would consider normal size per each new long signal. Going forward, we will continue to hunt and take action on our long signals and will constantly be vigilant and prepared for a significant correction. As long as the world is printing and commodities are falling, we do not have to worry about inflation or hyper-inflation influencing our dollar’s purchasing power. As long as world-wide QE and ZIRP is in effect, we will continue to focus on price only. Price is all that matter right now and we will continue to keep it simple. Have a great and profitable upcoming week in the stock market, everyone. Aloha from a very beautiful and warm Maui. Top Current Holdings – Percent Gain – Date of Signal HIMX long – 145% – 12/19/12 EAC long – 139% – 12/17/12 CSU long – 106% – 9/4/12 POWR long – 93% – 12/11/12 FLT long – 73% – 9/6/12 CAMP long – 73% – 4/26/12 HEES long – 67% – 9/4/12 ASTM short – 63% – 7/17/12 GNMK long – 60% – 11/16/12 SBGI long – 51% – 3/22/13 CPSS long – 43% – 1/31/13 WAGE long – 36% – 1/8/13 AXLL long – 35% – 1/4/13 BBSI long – 32% – 2/13/13

Stocks Extend Gains Closing Higher for the 4th Straight Session

This week has favored the bulls as the market closed higher with gains for the fourth straight session. Volume ended mixed falling on the NYSE while running higher on the NASDAQ. A report on PC sales sent the likes of $MSFT, $INTC, and $HPQ lower putting pressure on the NASDAQ. Jobless claims were better than expected a far cry from last week’s big disappointment. Import prices fell more than expected showing inflation has yet to show up despite the Federal Reserve’s 80+ billion a month easing program. Our uptrend remains intact and it will take quite a bit to knock this market off its uptrend. Sentiment has made a big jump this week. II survey continues to favor more bulls with more than 50% of its respondents are bullish with just 20% in the bear camp. The big jump came from the AAII survey with almost 55% responded as bearish. A big jump week over week with last week’s Non-Farm Payrolls likely to be blamed for the overly bearish reading. AAII are individual investors and are more likely to flip flop on their views of the market much more than the II survey. I can’t remember ever a time where AAII bears were more than II bulls, but yet we have it here. We don’t care if this is good news or not for our uptrend, it is quite amusing to see the disparity between the two camps. Tomorrow we’ll get a read on Advance Retail sales and for some reason I get the feeling they’ll be better than expected. $XRT certainly says it will be better! However, $JPM and $WFC release earnings prior to the retail figures. Many banks have been lagging the overall market and we are about to get a heavy dose of earnings releases from the group. We have noted before the banks have provided the S&P 500 with the lion share of earnings growth last year and analysts are expecting the same for this year. Tomorrow we’ll get the first view of how bank earnings could be shaping up for the first quarter of 2013. We are in an uptrend and we’ll favor the long side of the market. Until we get heavy distribution and leaders falling we’ll get neutral. Until then, we are full steam ahead on the long side.

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

$MSFT and $FSLR Lead the Market Higher

Unable to hang to the highs of the session stocks finish higher as volume jumps over Monday’s depressed levels. Wholesale inventories jumped more than expected in the month of February throwing a kink into first quarter GDP. Breadth on the NASDAQ ended in favor of the decliners despite the gains on the day. NYSE breadth ended in favor of advancers, but overall breadth has not been up to par with a rising market. Volume was below average, but above yesterday’s level showing interest in stocks picked up. However, the late day pullback from the highs did not leave us with a pleasant taste in our mouth. Regardless of how we feel about the market we are still in an uptrend and continue to operate as such. The two big movers on the day were $FSLR and $MSFT. $FSLR raised its guidance and the stock soared. It happens to be the third most shorted stock on the S&P 500. Then we have Mister Softy $MSFT jumping more than a point nearing $30. Volume was nearly twice its 50 day average. Both stocks were a big reason for the NASDAQ and S&P 500 finished in the green. Hard to say $MSFT is a growth name capable of moving substantially, but when it is a large component of the NASDAQ you have to sit up and take notice. Today’s economic data was essentially ignored with increasing inventories and the NFIB showing small business plan to hire is at 0%. Tomorrow’s release of the latest FOMC meeting minutes will be slobbered all over. When will the Fed begin to end or taper QErever? The fed has pledged to continue to provide stimulus until unemployment hits 6.5%. However, with Friday’s job report and the number of people leaving the labor force throws a monkey wrench into the Fed’s plan. Not to mention the QE plan has never been tested and risks can not be quantified. Time will tell and so will prices. Have a game plan and execute. Our uptrend remains in place and until we get a signal otherwise we’ll stick with our plan. Cut your losses short.

Another Late Day surge pushes Stocks higher as Volume disappears

Small caps lead the market higher today rebounding from last week’s losses just ahead of the first quarter earnings season. The market has been finding buyers after 3:30 pm EST and today was no different. Buyers helped push the market to the highs of the session. Volume continues to be extremely light on positive days. A show there isn’t much institutional support, but enough to push the market in positive territory. Our uptrend remains intact despite the lack of volume and we’ll continue to look for higher prices. We did not get any economic releases today and tomorrow will get a read on wholesale inventories. Not exactly exciting and nothing historically has moved the market very much. Wednesday we’ll get the FOMC meeting minutes at 2pm. A few Federal Reserve members have noted curbing asset purchases may help reducing the risks associated with printing to oblivion. It’ll be important to see how the market reacts and closes on Wednesday. Tuesday’s action isn’t likely to have any catalyst to change trend as Wednesday does. However, anything is possible and as long as you have a plan you’ll be in the driver’s seat. The big mover has been the USDJPY and the Nikkei. Central bankers in Japan have jumped the shark and have gone all-in on purchasing Japanese debt. For three straight quarters Japan has seen negative GDP growth and prospects remaining bleak. Again, the world is expecting a central banking cartel to manage using decentralized data. Bond purchases have not worked in decades and it is likely this round of unlimited purchases will have very little long term success. Will we get another Zimbabwe? Time will tell. Stick to your game plan and remain disciplined.

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

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

Big Wave Trading Portfolio Update and Top Current Holdings

The Big Wave Trading Portfolio remains under a BUY signal re-triggered on 3/5/13 following the original signal on 1/2/13. There are currently zero conditions weighing on the model, despite the below average volume. Any assumptions and presumptions we have towards the current volume on the rally have been eliminated due to the QE and ZIRP policy being initiated by the Federal Reserve. We continue to go long signals as they arise and will not try to guess when the market will “top” or “pull back.” At this point the only signal that we are paying attention to is price. Price is the only thing that matters, as we have been saying all year long. Volume has not mattered on rallies in four years and there is no reason to believe it will matter any time soon. While it would be nice to see the market pullback for more than a couple of weeks on below average volume and then rally on higher volume it should not be expected. What seems most plausible given the situation that is occurring world wide is that we will end up in another asset bubble where higher valuation multiples are placed on stocks. Despite the lower earnings growth expectations investors are still paying higher prices for stocks believing that the Federal Reserve has eliminated the tail ends of the curve. As all experienced traders know this will eventually end badly. However, that is not happening yet and the only thing we can do is ride the trend until the end when it will bend. If another asset bubble is to occur we are in great position to profit handsomely and then will be in a better position to sell our winners as they break below key trailing moving averages on heavy volume. If the market can get parabolic that will allow us better entries on the short side (puts). For now, there is nothing to do but continue to follow price. As you can see below, following a very choppy 2011 and 2012, it is finally paying off like it normally has for us at Big Wave Trading. Someone asked recently that if the stocks below are our top holdings (top 50%) what are our our worst holdings. We currently have two. Both are automobile related equities and both are showing less than a 1% loss apiece. We do not hold losing positions at Big Wave Trading. Before any order is given to our brokers we know where we will exit if we are wrong. We religiously obey our final exits. We never let a loss run and are quick to leave if we are not proven correct immediately. As we go through equity/derivative drawdowns like we did in 2011 and 2012 we reduce the size of our positions and are quicker to cut losses. As our equity/derivative profit/loss line trends higher we will subsequently increase size and allow more “wiggle” room in our trades. The bottom line is that losses are never tolerated. They are always eliminated. No excuses. Have a great rest of your long holiday weekend everyone. Aloha from a very, yet again, windy and overcast Maui. Top Current Holdings – Percent Gain – Signal Date HIMX long – 127% gain – 12/19/13 CSU long – 113% gain – 9/4/12 EAC long – 98% – 12/17/12 POWR long – 96% – 12/11/12 CAMP long – 95% – 4/26/12 FLT long – 72% – 9/6/12 CPSS long – 70% – 1/31/13 HEES long – 70% – 9/4/12 ASTM short – 64% – 7/17/12 GNMK long – 48% – 11/16/12 AXLL long – 46% – 1/4/13 MNTX long – 43% – 1/17/13 WAGE long – 38% – 1/8/13 V long – 32% – 8/31/12 CHUY long – 30% – 1/10/13

Stocks Close the Quarter Higher Despite Disappointing Economic Data

The market was hit with disappointing GDP and Jobless claims figures prior to the market open. Then again just after the open with a very disappointing reading from the Chicago PMI. Despite the disappointing economic reports the market as able to find enough buyers to keep stocks in green territory. Small caps lagged the broader market as the S&P 500 led the way. VIX slipped again as buyers continue to remain complacent as fears over a correction are simply non-existent. Our current uptrend remains intact and although we do have a bit of distribution we aren’t going to throw in the towel on this rally just yet. GDP growth was revised up from .1% to .4%, but still below the expectations of .5%. At this rate, .5% is not going to cut it for the US. Even 2% GDP growth will not improve our situation greatly. Perhaps the size of the US economy is a hindrance, but we need growth in order to pay for all the services we want the government to provide us. It is anyone’s best guess if this translates to higher or lower stock prices. If we were growing like Chile with 5% GDP growth we’d be creating jobs like gangbusters! The economic pie needs to grow and we need policies that aid the growth. Enough of the economic talk and get back to price action. Gold and silver continue to trade in downtrends while Oil has resumed an uptrend. One commodity in particular, Copper continues to trade in a downtrend. Copper is a decent indicator of economic growth and right now it is not singing the praises of the economy. JJC is an ETF to track Copper and it shows quite clear the commodity is in a downtrend. Natural gas continues to remain in an uptrend even with some high volume down days. It wouldn’t surprise us if the October high is breached. Outside of Crude Oil it doesn’t appear the freshly minted cash from the Federal Reserve is finding its way into commodities. Enjoy the long weekend. Next week we’ll get a bombardment of Economic data from across the world. It should be a fun time. Cut those losses.

Stocks Claw Back after European Stocks Fall Hard

European stocks fell hard on Cyprus fears and continued economic slump the Southern Europe states are in. Cyprus, Italy, Spain, and now Slovenia are in the midst of falling stock markets and higher cost to insure debt. Pending home sales were slightly disappointing, but the market rallied off the disappointing figure and continued for the rest of the afternoon. The NASDAQ was able to close in positive territory while the Dow failed to notch another all-time high. Volume rose on the day, but remained well below average. The past two trading days has seen NASDAQ volume the lowest for this year. Volume continues to be non-existent despite this market continuing its uptrend. Institutions are either continuing to stay on the sidelines with cash or they are all-in. We can make all sorts of guesses, but we do know activity in the stock market continues to slide lower. Short-interest ratio continues to be high because volume is low. Actual short exposure measured by total shares outstanding is at a five year low. Things are not as they appear and we can certainly blame Quantitative Easing for the state of the markets. However, if you employ a trend following system based on price these matters simply fade away. It is important to stick to price and ignore the noise. The prevailing theme from market pundits is QE will continue to push stocks higher. While this may be true do we know this to be fact? Can we say QE is a tail wind or a wind at all? We do know the Federal Reserve’s balance sheet is highly correlated to the S&P 500 and why would this change? What if it does change? Do you have a plan of attack? Do you know when to head for the exits? Often times assumptions are made, but a plan of attack is never hatched. We do not know the future, but we can identify potential trend using price as our guide. Tomorrow we’ll get another read on GDP and the market is looking for .5% just like last month. To add some flavor to the day it is also the last day of trading for the month of March. Enjoy the last trading of the month! Cut those losses.

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

Early morning economic news did help the market at the open. However a disappointing consumer confidence, Richmond Fed, and New Home sales figures did halt the enthusiasm. Europe continued to remain in no man’s land with Spain leading the market lower. If I had to make a guess the IBEX 35 would be the next stock index to see a major break lower. The FTSE MIB may not be that far behind. Back here in the States the story of the day is the extreme light volume as the Dow hits all-time highs. There simply isn’t the institutional interest in the market here despite the bulls CNBC parades out on their sets. A last minute push from the buyers pushed the markets to the highs of the session. The Dow once again led the way with Small caps lagging behind. We can debate the validity of this market rally because of QE or we can simply just take the gains. It is up to you. I’d rather take the gains and have an exit strategy. SPLK gave up majority if its breakout gains from yesterday. Volume was well above average and this type of action has become the norm as of late with breakouts. LNKD has tried to continue to hit new highs, but has struggled as of late. FLT has been able to escape the reversal fate and continues to act like a true big wave trading stock. The market is not making it easy hanging onto these stocks, but if you stick to a rules based trend following system you’ll avoid pitfalls. Volume was once again lower on a day where the markets close in positive territory. At this point you could simply ask if volume is higher or lower and you’d know whether or not the market was up or down. QE has certainly thrown a wrench into the markets, but it has certainly pushed away volume. Sure option volume has jumped, but it has not replaced the volume lost since the Fed’s printing began. Price is number one in our books, but it does beg the question will volume ever return? We remain in an uptrend and will continue to stick to the long side.

Cypress Bailout Dominates Headlines as the Market Cools

This uptrend is hanging by a thread, but continues to find just enough support to halt any correction. It is very easy to blame the Dutch Finance Minister even after clarifying his statement. However, even after clarifying his statement the market still couldn’t find its way back to positive territory. LNKD wiped out Friday’s gains while V broke through a buy point. SPLK, V, AMBA, and LL broke out of bases on strong volume. The fear is will they end up like LNKD wiping out Monday’s gains? Questions only tomorrow will bring and we’ll continue to plug along in this uptrend until we get a signal of a possible change. There was quite a bit of noise over the Cyprus bailout and it being the new template for future bailouts. From a trading perspective we do not care one way or another. Our rules will guide us with the help of prices. However, it begs the question why would you ever have a deposit account balance above the insured amount? It’ll be interesting when they do open the banks what depositors with balances greater than 100,000 Euros will do. It is a side show now and we’ll draw great comic relief from it. Our two leading stock indexes continue to show weak relative strength to the general market. For the past two years both of these indexes have shown weak relative strength. The search for yield has not come from the growth side of the house, but the value side. Dividend paying stocks yielding higher than the 10 year treasury yield have been very popular. However, focusing in the top performing stocks like FLT and cutting laggards like AAPL will reap you great rewards. Tomorrow we’ll get a reading on durable goods orders. Alongside durable goods more Cyprus bailout talk will likely continue. Focus on price and ignore the opinions. We remain in an uptrend and there are stocks breaking out like AMBA, LL, V, and SPLK. Distribution count stands at 4 days on the NASDAQ and S&P 500. Any further distribution will likely tip the scales in favor of a correction. Time and price will tell. Cut those losses.

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio remains under a BUY signal, as the market consolidated recent gains the past week. Volume was lower overall for the week and that is always bullish for a continuation of a trend. Unfortunately, when the market rallies it rallies on below average volume. The good news the past week was the selling volume was also below average. This action the past week has helped form a lot of solid consolidation patterns out there and two stocks that are on watch from the 3D printing arena include DDD and SSYS. If the market decides to move higher those two stocks will definitely be closely followed. On top of that, there are plenty of other stocks forming constructive weekly consolidation patterns. If the market breaks out to new highs here, expect these stocks to follow. Another positive for the market was the inability to really sell off following the Cyprus and Eurozone news all week long. The fact the market held up so well, despite this development, is a testament to the power of worldwide QE. When the market does not sell off on bad news, that is always a short-term bullish development. The other side, of course, is that a market that sells off on good news is a market flashing that it is in trouble. So, so far, so good. As long as leading stocks continue to do well and trend higher there is nothing to do but to follow the trend until it ends. While we are long a lot of stocks doing very well, we have our trailing moving averages to tell us when to get out partially or completely. To think that any emotion is involved in our current long positions is a grave mistake. We do not have emotions in regards to the stock market at BWT. We only have quantitative signals. Nothing more and nothing less. When we are wrong we cut our losses immediately like in a recent long signal generated in WNC on 3/15 that we had to reverse on 3/19. The good news about that loss is that the stock is now setting up in an even more constructive consolidation pattern thus making the next long signal a higher reward to risk ratio setup. On that same note, however, a further follow-through on the recent breakdown below the 50 day moving average will have WNC completely wiped off our watchlist for now. OK everyone. Try not to get caught up in all the Euro news dramafest this upcoming week, let your winners run and cut your losses short, and most importantly have a great rest of your weekend and upcoming week. Aloha. Current Top Holdings – Percent Return – Date of Signal CSU long – 104% – 9/4/12 EAC long – 92% – 12/17/12 CAMP long – 90% – 4/26/12 POWR long – 80% – 12/11/12 HIMX long – 76% – 12/19/12 FLT long – 70% – 9/6/12 HEES long – 69% – 9/4/12 CPSS long – 56% – 1/31/13 AXLL long – 46% – 1/4/13 WAGE long – 42% – 1/8/13 ASTM short – 41% – 7/17/12 GNMK long – 38% – 11/16/12 MNTX long – 36% – 1/17/13

Stocks Pull back as Volume Rises on the NASDAQ

European markets were dealt with poor flash PMI data with France flashing a very weak PMI figure. Futures were set to open lower ahead of the 830 data release. Despite a better than expected Jobless claims figure and inline housing price index futures simply couldn’t muster the buying power. Sellers took hold of the market just after the release of the better than expected Philly Fed survey pushing the market to the lows of the session. Like a broken record as the Feds POMO began the market found its footing and rallied until the close of POMO. It is quite uncanny how POMO keeps this market afloat. Sellers had one more shot to send the market lower and did so just before 2pm rolled around. However, the support at the 2pm lows wasn’t able to keep the market from closing above the mid point of the day. The NASDAQ did notch a distribution day bumping its count up to 4 days. We remain in an uptrend, but the caution flag has been raised. Cyprus continues to be a thorn in the side of the market here. It may just be an excuse for pundits to use as this rally has gotten long in the tooth. However, we are seeing disappointing earnings from the likes of FDX and ORCL suggesting the economy may not be what people think. Both these stocks were acting well up until their most recent earnings report. Coupled with distribution piling up is something we are keeping an eye on. Mind you, we aren’t trying to anticipate a turn, but preparing to take the signals in whatever direction. Sentiment remains tilted towards the bulls, but we aren’t at extreme levels we saw back in February. AAII bulls came in at 39% and bears at 33%. AAII is a volatile survey and a stiff breeze will shift sentiment. II survey saw bears drop to 18.6% from 18.8% and Bulls drop to 47%. Again, bulls aren’t at extreme levels while bears are nearing an extreme. Sentiment is by far a perfect science, but an interesting talking point. Sentiment like overbought/sold conditions can remain for long periods of time. The market does feel like it is heavy and will correct here. Unfortunately for those who try to predict these moves were wrong last month when the market looked like it was about to correct. Anything is possible and sticking with trend following will reap the greatest returns over the long term. Have a great weekend and best of luck on your March Madness bracket!

Bernanke Presses on with QE, but Volume Drops as Stocks Close Higher

Another Federal Reserve meeting and the central bank vows to continue to print billions of dollars a month until the Unemployment rate drops to acceptable rates. Cyprus fears seem to die down as it appears Russia will protect its own and give a bailout to the small island nation. Banks will not reopen to next Tuesday, but the situation begs the question will the next EU country who needs a bailout and is not involved with Russian Oligarchs will be required to confiscate bank deposits? Philosophical question, but we digress. Price action continues to indicate this uptrend will continue higher. Volume was lower on the day despite the Fed’s Chief promise to keep the printing presses pumping liquidity. How high and how far we’ll go is anyone’s guess, but we’ll continue to operate in an uptrend. Two blemishes on the day were HPQ and FDX. These two stocks have been leading this market higher, but both today turned lower. HPQ appears to have run out of steam after doubling since its November lows. FDX earnings release disappointed the market. Falling more than 7 points on the highest volume since 2010 it blew through its 50 day moving average. FDX had been leading the Transports to new heights, but after today it places a blemish on the current uptrend. Perhaps a bigger earnings story is what happened to ORCL in after-hours trading. When all was said in down in the after-hours session the stock fell more than 7% from today’s close. The stock missed its earnings expectations and was punished. ORCL has been pushing higher and leading the NASDAQ higher along with GOOG. We’ll see how the stock reacts in tomorrow’s session, but the drop in after-hours is quite telling. Now with the Federal Reserve out of the way it will be interesting to see if the market can continue to remain elevated. Time will tell and price will guide our trading.

Volatility Jumps as the Dow closes Green while Small Caps Lag

Positive housing data kicked off the trading day with Building permits jumping higher than expected. However, it was just after the 10 am hour the market dove as CNBC blame worries over the Cyprus bailout. Volume started the day off light despite the positive housing data. Institutions were jumping in the market buying up shares as volume suggested. It wasn’t until the hysteria over Cyprus did volume kick into another gear. The S&P 500 and NASDAQ did notch a distribution day, but they weren’t as bad as they could have been if the market closed at its lows. Volatility measured by the VIX jumped more than 8% as it appears traders and PMs alike are beginning to buy protection. We remain in an uptrend and with the Federal Reserve tomorrow we’d expect activity to pick up after the Fed releases its policy statement. The Dow continues to be the leader among the major indexes. Today KO led the way for the index, but with the Dow leading it does give us pause if we’ll see this rally continue. At this point we do not have enough to say this rally is over as distribution simply isn’t piling up (YET). Leading stocks aren’t screaming higher suggesting we can continue. However, on the flip side they aren’t breaking down in droves saying we are about to crater. Stay disciplined here and do not rush in to be a hero. Wednesday’s Federal Reserve meeting will certainly be something the financial media will savior. I am sure Ben Bernanke will try to calm any fears the Federal Reserve will withdraw “support” of the financial markets. We’ll kindly remind everyone the Fed has more than tripled its balance sheet since 2008 and provided Trillions in guarantees to the market. I suppose a few trillion more won’t hurt. We are in an uptrend and while this could change tomorrow there is no telling if it will. Those who tell you they know where it is heading are full of crap. No one can predict the future. Know your exits and let your winners ride!

Global Markets Header Lower as Cyprus Mulls Bailout Terms

Over the weekend the biggest news story was the Cyprus Bailout news. The terms of the bailout had depositors losing roughly 10% of their deposits. World markets reacted negatively from Asia to the US, but unlike Asian markets Europe and the US markets were able to rebound from the lows. A bit of a blow to the housing market was a dip in NAHB survey registering at 44 down from 46 in the prior month. This did little to hold back dip buyers from pushing the markets back into positive territory by the afternoon. However, the last hour saw sellers hit back and send the indexes off their highs. Volume ran lower than Friday’s level inflated by quadruple witching. We remain in an uptrend despite today’s open and we’ll remain operating in an uptrend. Why the media is making a big deal over Cyprus is the theft of depositor cash. Cyprus is a safe haven for many Russian Oligarchs and their cash. While it is easy to say the rich should pay, but to steal deposits to increase private cash in bailouts is a tough pill to swallow. The real fear is if this will be the norm in future bailouts in Spain and Italy. At some point these two countries will likely need a bailout unless their economies miraculously begin to grow again. How safe do you feel your cash is in the bank now? Could you imagine if the Federal Reserve and the US government had taken 10% of deposits in 2009? The EU is in unchartered territory and this will be something to watch from a non-trading perspective. At the open the market opened in quite the oversold territory according to the McClellan Oscillator. The indicator has not been keeping up with the market highs suggesting the strength in the move is not sustainable. Anything is possible, but at extremes this oscillator does offer some value. Let’s not forget the Federal Reserve kicks off a two day meeting tomorrow and releasing their policy statement on Wednesday at 2pm. I do expect to see the market to at least drift higher into the Fed meeting where we’ll hear how accommodating the Fed will continue to be. When you boil it down it comes to price. Know your exits.

Big Wave Trading Portfolio And Top Current Holdings

The Big Wave Trading Portfolio remains under a BUY signal that was reinitiated on 3/5/13 following a quick, yet ugly, pullback. However, while we are under a BUY signal we are very cautious up in these stratospheric levels in relation to the major market indexes respective 200 day moving averages. That being said, as we know, the trend is your friend until the end when it isn’t. Overall, the low volume new highs is problematic on a technical level and at the same time is getting problematic on a bullishness level. Before 2008 there is no time in the history of the United States stock market you could find the stock market rally on low volume to new highs, sell off on heavy volume, and then make new highs on lower volume. Yet, that has been the same pattern since 2010. Over and over. Eventually, it is going to end and when it does it will be ugly. While there could easily be more new highs and further upside, the fact that we are getting such an extreme level of bullishness in the Investors Intelligent survey is worrisome. With bulls now at 50% and bears at 18% we have some very extreme reading seen before market pull backs. Like I said while more upside is possible, and would be welcome as per our current holdings below, we are aware of how frothy stocks look up here. On top of the extreme level of bullishness and bearishness in the II Survey, we have seen Richard Russell go long and have seen Mila Kunis finally enter the stock market as it is clear stocks do nothing but move higher. Right? Well, we will see. Going into this holiday-short week, we will remain cautious bulls and position any new long trend following signals accordingly. However, holding current longs and looking for exit signals is going to be the priority. Have a great week everyone. Mahalo for reading and aloha from a Kona-wind blown-out west side of Maui. Top Current Holdings – Percent Return – Date of Signal CSU long – 115% – 9/4/12 CAMP long – 90% – 4/26/12 HIMX long – 76% – 12/19/12 EAC long – 72% – 12/17/12 POWR long – 71% – 12/11/12 HEES long – 71% – 9/4/12 FLT long – 56% – 9/6/12 CPSS long – 44% – 1/31/13 AXLL long – 44% – 1/4/13 WAGE long – 41% – 1/8/13 GNMK long – 37% – 11/16/12 ASTM short – 35% – 7/17/12

Dow Winning Streak Continues as Volume Expands

Once again the Dow was able to close higher as volume jumped on the day. It was nice to see volume expand above Wednesday’s level. However, volume remained well below its 50 day volume average. We can’t have everything. Jobless claims fell less than expected a sign perhaps the labor market is improving or there just aren’t that many people working to sustain a high level of job losses. Producers prices came in as expected. It appears we have carbon copies of intraday action with this market. We near lows of the session around 2pm EST only to find buyers pushing us back to the highs of the session. Sellers simply cannot find any footing to sustain any pressure. Thus, we have a lack of fear as seen with the VIX hitting another 6 year low. More gains in our uptrend and we aren’t about to argue with the market. Sentiment has swung back in the favor of the bulls with every sentiment survey showing a healthy amount of bullishness. While we do have quite a bit of bullishness we aren’t at extremes. One extreme we are at is with the II survey showing bears at 52 weeks lows. The reading of 18.8% hasn’t been seen in quite some time. AAII bears register at 32%, but the individuals in this survey typically flip flop and is difficult to get a solid reading of sentiment. On the other hand, the II survey of professionals tends to be a bit more smooth and reliable. NAAIM survey showed the positioning of its members fell a bit, but still well in the bull camp. We aren’t in extreme territory for the bulls, but with II bears in an extreme territory may at the very least signal a short-term top is nearing. We simply cannot know whether or not today was the high of the year. There are plenty of signs this market can still go higher despite the risks involved with endless QE. Inflation, so far remains tame and we’ll get a reading of CPI tomorrow prior to the market open. If you have gone to the gas station and/or grocery store you know prices have been steadily rising. However, I doubt these price increases make their way into the figure tomorrow. The government uses techniques to distort the truth in the inflation figures. Any hints at a possible early end to the Federal Reserve’s QErever plan may scare the markets. Anything is possible and if you follow price and leading stocks your trading results will be just fine! Make it a great weekend and as always cut your losses short.

Volume Drops to the Lowest Level on the Week with the Dow extending its Win Streak to 9 Days

A surprise uptick in consumer spending helped boost the market in the early going. Advanced retails sales jumped in the month of February by 1.1% (seasonally adjusted) much more than the expected .5%. Import prices rose 1.1% more than the expectations, but retail sales overshadowed the higher prices. Another early morning dip was once again found support as buyers stepped up to push the market to the highs of the session. Volume was lower than Tuesday’s level and it was even lower than Monday. Monday’s are notorious for light volume days and to see such a light volume day on Wednesday is not normal. We aren’t going to argue with the market and if it wants to reach these heights we are okay with it. To quote Buzz Light Year: “To Infinity and Beyond!” What was interesting about the retail sales figures is in order to get the jump in the number the government had to “seasonally adjust” the number. Actual sales fell on the month! Gas stations were the biggest benefactor of consumer spending in the month of February. With gasoline prices as high as they are it isn’t that hard to figure out this is where the consumer’s cash is going. Tomorrow we’ll get to see more Jobless Claim figures as well as PPI figures and endless squawking over the state of the economy. Volume has been low and we have certainly pointed this out to you. Options expiry weeks tend to have inflated volume capped off with Friday’s seeing tremendous volume. We do find it odd during an option expiry week we simply do not have the volume. Sure some of the stock trading volume has moved to options, but can it explain all of the volume loss? It is an interesting question and one that will not help your trading. However, it is still interesting to ponder where the heck everyone went! This market is in an uptrend and the small gains we have experienced since e last week’s follow through has frustrated many. We may have turned a new leaf and these types of gains are the ones we should expect moving forward for uptrends. No one knows, but the important thing here is to remain disciplined and do not try to be a hero. Cut your losses.

The Dow keeps the Streak alive at 8 Days

Another late afternoon lift helps send the Dow into positive territory to end the day’s trading session. Just after 2 pm stocks sat near the lows of the session, but buyers stepped up keeping the market from pushing lower. Volume ended higher on the day, but the early high run rate fell as the market moved higher. At this point volume hasn’t mattered to this market whatsoever. However, it does provide a nice talking point. Not too many standouts on the day, but AAPL resumed its march lower as the stock continues to remain in no man’s land. The S&P 500 and NASDAQ did notch technical distribution days. Despite the distribution the support at the lows we aren’t going to be a lot of weight on the day. We remain in our uptrend and until we see distribution pile up we’ll change our approach. Two leading stocks who had tough days were SLCA and EVER. Both stocks had been moving quite nicely but a secondary offering and downgrade both stocks find themselves under pressure. SLCA issued a secondary offering, but the stock found support. Like SLCA EVER was downgraded and it too found support by the close. This type of action will shake a lot of people out of positions especially without a game plan. If you have defined positions size, entries, and exits you will not be so easily shaken out of positions. Tomorrow’s advance retail sales will be the talk of the financial media tomorrow morning. The question they will try to answer is whether or not the Payroll Tax hike had any effect on consumer spending. I would expect it would not greatly move it one way or another just yet. We can sit here and waste time trying to figure out if the consumer was hurt or not. We are in an uptrend and price is much more important to us rather than guessing. Stay disciplined and always cut those losses short.

Industrials hit more Highs but Volume Drops again

For the 7th straight day the Dow Jones Industrial Average closed higher. Volume fell across the board, but this is normal for this uptrend and Mondays. VIX fell to new lows as buyers continue to show extreme complacency. AAPL reversed off its lows in the afternoon pushing the NASDAQ to new highs on rumors of a “plan” for their cash. The stock is so beaten up any rumor will force shorts to flee for the hills. The Yen and Pound continued their declines as both currencies appear to be racing towards zero. Although it appears the Yen will likely win this race. We aren’t surprised by new highs and we’ll continue to operate on the long side of the market. There weren’t too many negative signs in the market other than the extreme light volume. NYSE volume was extremely low and you have to wonder where the institutions are. Where did they go? KORS a leading stock dropped below its 50 day in high turnover. The stock has continued to struggle after reporting earnings. SLCA issued a secondary after the bell and this leading stock will need to prove it can absorb the excess supply. The Fed’s money printing has seemingly put a floor in the stock market and any downside will be limited. However, we know better and we will continue to work our process. Wednesday is a big day for the markets as we get a reading on February advance retail sales. Many have made a big deal over the pay roll tax increases. WMT stock price has ignored the internal memos regarding sales. TGT has broken into new highs despite consumers having to deal with higher taxes. It will be most interesting to see how the market reacts to the release. Friday’s job report was finally a good sign, but we’ll need to continue to see jobs created a large pace. Unfortunately with the Federal Reserve printing $85 billion a month and continuing ZIRP. At some point either the Fed or the market will stop QE and ZIRP. We need a healthy economy without endless money printing.

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Model switched back to a BUY mode on 3/5/13 following a switch to a NEUTRAL mode on 2/25/13. The switch to NEUTRAL on 2/25/13 in our analysis of over 130 years of stock market history should have not switched back to BUY mode so quickly. The price breaks on 2/20 and 2/25 have historically led to months of choppy trading or started downtrends outright. The fact that we switched back to BUY mode so soon is historically extremely out of the norm. However, this entire market choppy and slow uptrend from the 2009 lows coming on such below average weekly and monthly volume is also historically extremely out of the norm. Huge volume selloffs are quickly absorbed and new highs, not on higher volume but, on lower volume are soon followed. As we have stated before, nowhere else in the history of the United States stock markets can you ever find this trend. Low volume rallies have always been quickly destroyed by higher volume selloffs or do not last long and are followed by heavier volume accumulation to the upside. The odds times continue. On that note, that means the only logical thing to do is to follow price here and be very careful with the size of long commitments. While Big Wave Trading misses the days when we plunged on margin, today’s market environment does not bode well for that type of investing. A more conservative approach is respected here knowing that a 2010 and 2011 shock experience is always just around the corner with a low volume market rally. Therefore, we will continue to operate on the long side enjoying the paltry gains we see below (paltry in comparison to the gains we produced before the QE and ZIRP world we have been living in since March 2009), until a clear trend change becomes apparent. For now, the trend is up. We will obey our master–Price. Top Current Holdings – Percent Return – Date of Signal CSU long – 115% – 9/4/12 CAMP long – 95% – 4/26/12 HIMX long – 84% – 12/19/12 HEES long – 71% – 9/4/12 EAC long – 65% – 12/17/12 POWR long – 64% – 12/11/12 FLT long – 58% – 9/6/12 AXLL long – 36% – 1/4/13 WAGE long – 34% – 1/8/13 PFBI long – 31% – 11/19/12 CHUY long – 29% – 1/10/13 CPSS long – 26% – 1/31/13 V long – 25% – 8/31/12 GNMK long – 25% – 11/16/12

Stocks continue to hit New Highs but Volume ends Mixed

Better than expected Jobless Claims figures helped start the market off in the green. Around the globe markets lifted on continued hope endless money printing will assist in ushering in economic growth. Volume ended mixed with NYSE volume expanding while the NASDAQ saw volume shrink. There isn’t anything from this market after this week to give us pause our market cannot go even higher. Things weren’t all great with the market moving lower in the early afternoon before buyers stepped back up. Closing near the highs of the session we get another bullish day in our uptrend. We have escaped a critical time frame in an uptrend with the first two days avoiding distribution. The likelihood of the market failing now drops considerably. A distribution day after a follow-through day is never a good sign as the failure rate above 90%. Another good sign for this uptrend is the lack of bullishness in the AAII survey showing Bulls only at 31%. I would expect after this most recent rally the number of bulls rise. However, the NAAIM Sentiment survey shows investment managers are 90% invested on the long side. This reading is quite high, but off the highs set in January. It is clear the Federal Reserve’s QErever has market participants feeling any selling will be brief. Tomorrow’s job report will be a big focus for Bloomberg TV and CNBC. Does Fox Business count? None of them count unless you need to see scrolling quotes. Given the Fed’s stance on unemployment we simply cannot see a scenario where the market will view the report as negative. Perhaps a big decline in unemployment would trigger the market participants to think the Fed will reduce QErever. A positive would be to see job growth outpace growth in food stamp participants. We still are seeing plenty of stocks to get long in this uptrend.

Dow and S&P 500 End Higher for the Fourth Consecutive Day

A positive reading from the ADP employment survey helped fuel stocks early pushing the Dow further into all-time high territory. BAC helped push the Dow as the stock aims to hit new highs on strong volume. By mid-day the markets were off their highs awaiting the Federal Reserve’s Beige book. The Federal Reserve noted growth in the economy due to gains in housing. Initially pushing stocks off their lows it appeared the Beige Book would send the stocks into new highs on the day. The rally would stall out just after 3pm. A late day small push off the lows by the bulls kept the major indexes from closing on their lows. It was good to see the market avoid distribution just after hitting new highs. GOOG and AAPL were drags on the NASDAQ today. AAPL continues to act poorly while GOOG pulls back after two big sessions. Both companies are fighting over the smart phone universe and both stocks are heading in different directions. A key point in both stocks is their relative strength. Focus on stocks with high relative strength and in the case of GOOG and AAPL is demonstrates the importance of relative strength. A few IPOs continue to act well. Our Platinum members were alerted to EOPN Monday morning to its potential. When IPOs act well you can bet the market is healthy. We’d love to see stocks like EOPN and EVER continue their moves higher. There is a lot of chatter about how far this market rally can go. Does it really matter where it ends when you focus on your exits? Sure, we’d love for this uptrend to never end and we go up every day. However, we know this is simply will not occur. No one knows how far or how long this will last. Therefore, we must have exits we know maximize our potential to take the maximum gain possible from the market. Otherwise, we’ll be leaving gains on the table and we strong dislike leaving gains on the table. Stick to your game plan. Let your winners fly and cut those losses.

Stocks Jump to New Highs as Dow Closes at Historic Highs

A better than expected ISM Non-Manufacturing reading on the back of strong new orders helped push the market to the highs of the session. Volume expanded on the day a good sign for the markets as the NASDAQ had a follow-through day. AAPL reversed its downturn heading back to a key pivotal point. GOOG continued to power higher along with YHOO and AMZN. The last 30 minutes of trading certainly helped the NASDAQ as the final hour did not start well. It appeared sellers were going to take over and leave a big blemish on the day. However, buyers stepped up and saved the day. New highs across the spectrum and we are now back in uptrend mode. The recent action was quite volatile and many were calling for a broadening top. Unfortunately, the pattern is not a great indicator of market tops and it was debunked today. Tomorrow may be a different story, but all we know is the market wants to continue to hit new highs. The market will turn to Friday’s job report for hints at an improving economy. At this point if anything points to the Federal Reserve pulling in QE will be bearish. Given the pathetic GDP growth one would conclude the jobs report will not be good and in turn bullish for the market. We are going to follow our process and execute flawlessly. There is plenty of debate on where the market will head from here. We will tell you that we have do not have a clue if this will continue or not. All signs point for this market to continue higher, but there aren’t any guarantees this will be the case. Sure, endless QE should keep this market a float. Will conventional wisdom be right? Remember, to cut your losses and ride your winners.

GOOG and AMZN lead the Market higher Despite Light Volume

Stocks moved higher despite the Shanghai dropping 3.65% as the country tries to solve its real estate issues. Intraday volatility continued, but stocks were able to find their footing after the lunch hour. Lows were set just after noon time and did not look back. Volume throughout the day ran well under Friday’s levels. We aren’t surprised volume was running lower as we have seen Mondays have been low volume days. GOOG and AMZN lead the NASDAQ along with YHOO while AAPL continued to lag. Today’s price action is bullish, but we still remain in Neutral mode and looking for a follow-through day. AAPL continues to remain weak and we are not surprised one bit as the stock has been in a downtrend for quite some time. We can point to many different reasons for the stock’s decline. Does it matter what reason we pick? Not one bit. At this point you will have many trying to pick a bottom in the stock and will fail miserably. The stock does have a pivotal point of 435 and a move above that would be a buy signal. We can’t predict moves and can only react to how the stock moves. GOOG broke out to new highs on big volume today showing the big cap technology stock continues to see accumulation. Perhaps GOOG Glass will be a big product break through adding to GOOG’s bottom line or not. The action in this stock while not ideal is quite bullish. At this point, you are chasing the stock if you are thinking of buying it here. If we get more stocks acting like this we’ll see this market push to new highs. Tomorrow’s economic release will be from the ISM Non-Manufacturing. Later in the week we’ll get the Fed’s beige book. While these will provide an excuse for the market to move and we’ll be ready to react. Short-term Trends TICKER ST TREND TREND CHANGE DATE CLOSE % SPY DOWNTREND NO CHANGE 3/4/2013 152.92 0.53% IWM DOWNTREND NO CHANGE 3/4/2013 91.13 0.26% QQQ DOWNTREND NO CHANGE 3/4/2013 67.68 0.45% USO DOWNTREND NO CHANGE 3/4/2013 32.40 -1.04% UNG UPTREND NO CHANGE 3/4/2013 19.45 1.99% GLD DOWNTREND NO CHANGE 3/4/2013 152.30 -0.09% SLV DOWNTREND NO CHANGE 3/4/2013 27.60 -0.07% DBC DOWNTREND NO CHANGE 3/4/2013 26.84 -0.37% FXY UPTREND NO CHANGE 3/4/2013 104.86 0.10% FXE DOWNTREND NO CHANGE 3/4/2013 129.13 -0.03% TLT UPTREND NO CHANGE 3/4/2013 118.9 -0.53%

February closes on a Sour Note with Stocks Selling off in the Final Hour

Despite a disappointing GDP reading of .1% the market was able to climb near their respective highs. The Dow Jones Industrial average came within 16 points of an all-time high before experiencing a late day sell off. End of the month rebalancing shot volume up by the close, but the damage done by sellers at the end of the day spoke volumes. This week has been something else with extreme realized volatility. The VIX index jumped as the markets sold off in the final hour rebounding after retracing much of Monday’s move. A wild and crazy week for the markets and tomorrow’s economic data should add to the fireworks. We remain stuck in neutral mode and after today’s action it is a good place to be. Sentiment figures came out today showing bullish pulled back slightly from the II survey, but significantly from AAII. AAII bulls dropped below 30% as bears jumped to 36%. Readings from sentiment survey certainly show bulls were shaken from the moves over the last 5 days of trading. Does it signal a bottom or top? More than likely it does not, but just shows you how fast sentiment will change with a small movement from the market. Leading stocks remain mixed as a few continue to move higher, but not in high flying fashion. The past week of trading really has screwed with charts. Volatility is something we embrace and love. High volatility leads to great big gains for our trading patterns. Unfortunately, the past few days were so large it has damaged quite a few stocks. While the Dow was able to recapture Monday’s highs the other major indexes were unable to do so. Now you toss today’s action into the mix it really calls into question whether or not any move is going to be sustainable. It appears more chop is headed our way. Stay disciplined and check your emotions at the door. Short-term trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY DOWNTREND CHANGE 2/28/2013 151.61 -0.20% IWM DOWNTREND CHANGE 2/28/2013 90.48 0.19% QQQ DOWNTREND NO CHANGE 2/28/2013 67.10 -0.21% USO DOWNTREND NO CHANGE 2/25/2013 33.21 -1.16% UNG DOWNTREND NO CHANGE 2/28/2013 19.18 1.91% GLD DOWNTREND NO CHANGE 2/28/2013 153.00 -1.02% SLV DOWNTREND NO CHANGE 2/28/2013 27.54 -1.68% DBC DOWNTREND NO CHANGE 2/28/2013 27.13 -0.44% FXY UPTREND NO CHANGE 2/28/2013 105.76 -0.55% FXE DOWNTREND NO CHANGE 2/28/2013 129.49 -0.64% TLT UPTREND NO CHANGE 2/28/2013 118.29 0.19%

Stocks Rebound but Volume Falls

Positive economic data fails to lift stocks initially as the market focuses on Bernanke’s testimony. Europe continued to succumb to the Italian problem. Volatility dropped after jumping 34% yesterday, but despite the market rebounding volume did not follow. Monday’s have been low volume sessions for much of this year with Tuesday’s showing big volume. Today’s lack of volume shows institutions weren’t too keen on jumping back in the market. Late day buying helped push the market to the highs of the session. We remain in neutral mode and we do have a change in a short-term trend with one of our ETFs. The market now will have to digest more economic news with Durable Goods and GDP coming Wednesday and Thursday. Friday we’ll likely see the US go over the Sequester hurdle. We’ll be focused on the overall market action. At the moment we are seeing a lot of distribution in the market without much accumulation. Looking back to September of last year we didn’t see this level of distribution like we are seeing now. Perhaps there is something more sinister happening, but we’ll wait for our signals before we act. We are still a bit oversold in the near-term so another bounce from the market is not out of the question. Stay ready and execute your game plan. We do have few pockets of strength, but it is so few and far between it is nothing to get excited about. FLT continues to be a big winner, but many leading stocks look bad. BAC has been a leading stock despite its pitiful earnings growth. Remember, BAC has been goosing its earnings using its loan loss reserves. GS remains above its 50 day, but the last few selling days have left a big blemish. Homebuilders certainly got some love today, but remain below a key moving average. These stocks will need to rebound to give this market any chance of rebounding. Stick to your signals and ignore the nonsense spewing from CNBC. Short-term trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/26/2013 150.02 0.68% IWM UPTREND NO CHANGE 2/26/2013 89.37 0.39% QQQ DOWNTREND CHANGE 2/26/2013 66.56 0.38% USO DOWNTREND NO CHANGE 2/26/2013 33.33 0.36% UNG DOWNTREND NO CHANGE 2/26/2013 18.98 -0.52% GLD DOWNTREND NO CHANGE 2/26/2013 156.22 1.22% SLV DOWNTREND NO CHANGE 2/26/2013 28.41 1.21% DBC DOWNTREND NO CHANGE 2/26/2013 27.42 -0.18% FXY UPTREND CHANGE 2/26/2013 106.55 -0.75% FXE DOWNTREND NO CHANGE 2/26/2013 129.57 0.02% TLT UPTREND NO CHANGE 2/26/2013 119.33 -0.58%

Stocks Pop and Drop on High Volume

Today’s start to the day appeared as if the market as about to resume its bullish trend. Economic data was non-existent besides a disappointing Flash PMI out of China. Europe was rallying hard on hopes of an optimal Italian election outcome. By mid-morning it became clear the Italian elections were going to be less than optimal. Sellers just didn’t stop as Europe close, but continued through the end of the session. Volatility soared more than 30% as this uptrend has come to an end. Big Wave Trading’s model has moved to neutral after 3 big distribution days in four days. Today is not what you want to see from the market when you are bullish. We may get a bounce, but this market will need some time to repair itself if we are to get another uptrend. We are in neutral mode as this uptrend has ended. Today’s McClellan Oscillator hit -206.85 an extreme oversold reading. What is funny at the highs of the session the oscillator was neutral. We aren’t that far from the highs and to be in extreme oversold conditions is slightly surprising. It would not surprise us if this market finds some footing and reclaims some of today’s losses. Anything is possible, but after the past 4 days of market action it is clear the trend has changed. It will take quite a bit to turn this ship around. Regardless of what we’ll encounter we’ll be ready. There is quite a bit of economic data that is about to hit the market. Tomorrow we’ll see a lot of home related items, consumer sentiment, and the Richmond Fed. Thursday we’ll get another read on fourth quarter GDP. Last reading we saw a negative reading and expectations are for revisions to put fourth quarter GDP at .5%. While .5% is better than negative growth the mere fact we are only able to grow at .5% is simply unacceptable. Perhaps we need to revisit our economy and the role government has in it. Government has been running trillion dollar deficits since 2009 and we get .5%? It is quite pathetic. It is time to demand better. A bounce would not be unexpected here as we are a tad oversold. However, it is clear from the past four trading sessions this market is on edge. Short-Term Trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/25/2013 149.00 -1.90% IWM UPTREND NO CHANGE 2/25/2013 89.02 -2.21% QQQ UPTREND NO CHANGE 2/25/2013 66.31 -1.24% USO DOWNTREND NO CHANGE 2/25/2013 33.21 -1.16% UNG DOWNTREND NO CHANGE 2/25/2013 19.08 3.92% GLD DOWNTREND NO CHANGE 2/25/2013 154.34 0.90% SLV DOWNTREND NO CHANGE 2/25/2013 28.07 0.86% DBC DOWNTREND NO CHANGE 2/25/2013 27.47 -0.47% FXY DOWNTREND NO CHANGE 2/25/2013 107.35 2.32% FXE DOWNTREND NO CHANGE 2/25/2013 129.55 -0.96% TLT UPTREND CHANGE 2/25/2013 117.03 1.97%

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio Model remains under a BUY signal from 1/2/13. There is added pressure arising on the overall model, thanks to the Wednesday and Thursday distribution days and the overall wedging pattern of the overall uptrend. This, along with the lack of gains above 1.5% on higher volume, following the 1/2/13 signal, keeps us in the cautious bull camp which is where we have basically been following the third week of January. Despite the problems in the overall uptrend, we remain in an uptrend and until we have a series of 5 to 6 clear distribution days over a 2 to 3 week period we find it foolish to fight the Fed and unlimited QE. Some of our current long positions gave heavier volume partial profit taking signals and a few recent new long positions triggered cut loss levels. But overall it was a fairly orderly pullback. So far, at least. On top of that, we had multiple buyable gap up signals that worked very well intraday. It was a 4 for 4 session with 3 big IPO winners. Even though volume was lower overall on Friday, we have learned that price is all that matters. If stocks still have more of an explosive volatile bias to the upside on an individual basis then we will have our models focus on that area of the market. What will change our minds? The same things that always do. Our new longs start failing immediately, our current holdings trigger profit taking signals, and/or the market begins a rapid decline in heavier volume. Right now, we are on watch for further heavy selling. However, calling tops here, as it always has been throughout human history, is a foolish and unwise proposition. I recommend ditching the opinions and using a sound back-tested time proven systematic methodology that completely eliminates emotions. Top Current Holdings – Percent Return – Date of Signal CAMP long – 92% – 4/26/12 CSU long – 79% – 9/4/12 HEES long – 62% – 9/4/12 FLT long – 52% – 9/6/12 EAC long – 44% – 12/17/12 ASTM short – 39% – 7/17/12 POWR long – 37% – 12/11/12 WAGE long – 31% – 1/8/13 AXLL long – 31% – 1/4/13 HIMX long – 26% – 12/19/12

Volume Jumps after the Fed releases its Meeting Minutes

Building permits and housing starts failed to inspire the market, but the selling didn’t start ramping until the FOMC meeting minutes. Volume for much of the day was running lower than Tuesday’s level as traders were waiting on the Federal Reserve’s latest meeting minutes. Upon the release it was clear from the release the Central Bank is at least talking about ending the or at least curbing the latest round of asset buying. The minutes also revealed the Fed is a bit more optimistic about the state of the economy and therefore could reduce the size of their purchases. Sellers didn’t need much more than that to take stocks below last week’s low in heavy trade. One day doesn’t make a trend, but today we finally saw some heavy volume selling. Our uptrend is on shaky ground and it is a prudent move to make sure you have your exit strategy in place. AAPL continues to weigh on the overall market, but today sellers took to the entire market. GOOG dropped back below $800. Crude oil fell more than two points with Gold and Silver falling hard on the day. One day doesn’t make a trend, but it is these types of days where you stand up and take notice. When indexes and leading stocks get hit hard you have to take notice and adjust. Know where your exits are and make sure you stick to your plan. It will be important for this market to find its footing to keep the uptrend alive. Selling in bunches like today are a big red flag for the market. Your stocks will let you know what is going on and if you are noticing your stocks are quickly hitting your exits it is a good sign the broader market is about to head lower. We are in caution mode and will need to see this market shake off today’s selling. Know your exits! Short-term Trends: No changes for today, but any further selling we are likely to see SPY, IWM, and QQQ flip to downtrends. TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/20/2013 151.34 -1.25% IWM UPTREND NO CHANGE 2/20/2013 90.83 -1.86% QQQ UPTREND NO CHANGE 2/20/2013 67.19 -1.54% USO DOWNTREND NO CHANGE 2/20/2013 34.17 -2.26% UNG DOWNTREND NO CHANGE 2/20/2013 18.32 0.11% GLD DOWNTREND NO CHANGE 2/20/2013 151.44 -2.50% SLV DOWNTREND NO CHANGE 2/20/2013 27.59 -2.99% DBC UPTREND NO CHANGE 2/20/2013 27.92 -1.13% FXY DOWNTREND NO CHANGE 2/20/2013 104.82 0.05% FXE DOWNTREND NO CHANGE 2/20/2013 131.68 -0.85% TLT DOWNTREND NO CHANGE 2/20/2013 115.92 0.30%

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

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

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio remains under a strong BUY signal generated at the start of the year. There continues to be absolutely no sign that the market is finished with its steady and unusual move higher. Trying to guess when the move will end is futile and until we see real cracks in the price/volume armor there is nothing to do but to continue to ride the trend higher until it shows signs of reversing. Those signs that we will be looking for include: 3 to 5 distribution days in 2 to 3 week time span on the indexes, climax runs in leading stocks, new highs in leading stocks on higher volume, huge volume reversals below the 50 DMA, a lack of new breakouts in quality names, and/or breakouts in quality names immediately reversing on heavier volume. Until we start to see a variety of the list above, we will continue to hunt for new long positions as they setup and breakout from sound consolidation patterns. However, we will continue to remain cautious on our purchases as the markets uptrend is without a doubt the most strange steady move higher I have ever seen or I believe studied in my career. While I have not backtested the data, the price pattern the past month and a half has been beyond unusual. To rally almost every day without having an up session above 1.25% is just the strangest thing I have seen to a start of a sustained uptrend. If you want to see how a real powerful rally looks that allows us to get 100-200% invested very quickly take the time to study the Nasdaq March 2003 low or the recent Shanghai SE Composite December 2012 low. That is what the start of real lasting powerful bull markets look like. They do not look like what we currently have in our indexes. I continue to refuse to increase the size of any new long position to the normal pre-2009 levels as long as we continue this strange wedging pattern higher. The longer we go without a normal correction or the longer we go without producing another powerful up day (I am looking for at least 1.5% and would really like to see a 2% move) on strong volume the higher our chances become of some sort of flash or quick crash that could easily wipe out our post 1/2/13 gains in a couple to a few trading sessions. The longer we wedge like this, without a powerful up day, the more concerned I will become and the more careful we will be of adding new long positions. This continues to be a pure-QE fueled uptrend and that is evident in the volume patterns on the indexes, ETFs, and leveraged ETFs. Volume is simply not confirming the move as it should if the uptrend was “normal.” So that is what we are “worried” about here. While it is something we are concerned about, we will continue to take signals as they are generated making sure that our opinions have nothing to do with the actual execution of our methodologies. A quick reminder to new investors. Big Wave Trading always and I mean always removes risk when we are wrong on any and all positions. Losses are never held. If we take a position and it violates our clear stop level, the position is liquidated immediately. Losses are never justified or held. Ever. Period. Big Wave Trading also employes historically sound profit taking methodologies created and proven by some of the best traders and managed futures funds since the dawn of time. If you are not familiar with these methodologies, we recommend going to the book section (which has not been updated in a few years–we will be doing that soon) on our website and purchasing these books to understand the methodologies that we incorporate in our portfolios. Aloha from a very cold, windy, and shockingly rainy west side of Maui. Have a great and profitable upcoming week. Once again, aloha. Top Current Holdings – Percent Return – Date of Signal CSU long – 77% – 9/4/12 CAMP long – 72% – 9/4/12 HEES long – 64% – 9/4/12 EAC long – 61% – 12/17/12 FLT long – 54% – 9/6/12 AXLL long – 40% – 1/4/13 ASTM short – 36% – 7/17/12 POWR long – 35% – 12/11/12 CPSS long – 33% – 1/31/13 MNTX long – 31% – 1/17/13

The Market Hits Stall Speed as the market Digests the State of the Union

Stocks enjoyed buying through the early morning session as Europe rebounded from its recent pullback. By 10:30 the market changed behavior as it simply could not maintain its high of the day. Thirty minutes prior to the European close the market took a nose dive and hit the lows of the session. Volume was running higher throughout the session and indicating the market had begun hitting stall speed. A late day push from CSCO and AAPL assisted the market lifting from the lows of the session, but the Dow Jones Industrial Average did not escape a day of distribution. Tough to call a stall day on the NASDAQ, but for back to back days the index has been unable to hold the highs of the day. The market is having a tough time with the highs up here. We remain in an uptrend and while there are subtle signs of cracks we haven’t had an all out sell signal. CSCO reported earnings after the bell and they beat their numbers. However, the initial pop the stock enjoyed was short lived with the stock pulling back. The stock has been on a heck of a run since November contributing to the success of the NASDAQ. Given the action now it appears all is well with the stock, but tomorrow is a new day and anything is possible. If you are long the stock, just know where your exit is. It appears the past few sessions earnings have not been kind to the majority of stocks. PRLB is an exception after earnings. The stock blasted higher with volume to boot. A very good sign for those who are long the stock. PCYC was another earnings winner. CMCSA started the day off right, but like the market was unable to sustain the high. The loss of the day came from a growth stock RAX. RAX clearly disappointed the street as the stock fell hard in massive trade. This is not what you want to see out of a growth name. BWLD was another loser on the day. Earnings season has created quite the volatility in stock movements. INVN and KORS continued their slumps. There are positive and negatives to the current market rally. Everyone and their mother are expecting a pullback. When and how this market correction unfolds is anyone’s guess. It is tough to really say we have hit a market top without major distribution following these stall days. Know your exits and wait for your price signals to hit.

NASDAQ Stalls as Volume Finishes Higher

NASDAQ Composite continues to lag behind the Dow Jones Industrial Average and the S&P 500. Volume rose across the board, but remained below average. The NASDAQ notched a stall day and although it failed to register a day of distribution. Stalling days are nothing new and all it will take is for the NASDAQ to eclipse today’s high. Two star industries on the day were XLF and XHB as both groups appear to be ready to run higher again potentially in a blow off move. End of day action took the market off its highs, but the S&P 500 and Dow were able to escape too much damage. AAPL weighed on the NASDAQ once again as the stock continues to prove it is a laggard. One question would be is the stock the canary in the coal mine? There is no question AAPL’s products are great, but is the action in the stock foreshadowing something in the overall market? Or is it simply a laggard stock and should be completely ignored? Time will tell where this stock will end up. However, we know the stock is in a downtrend and is all we need to know. Wednesday we’ll see the market react to the State of the Union. President Obama’s speech is pretty much known as he will revert to ideas he trumped on the campaign trail. More taxes and more spending (disguised as “investments”) will be proposed. The President has a way of delivering a great speech and this should not be any different. Democrats will praise the president while Republicans will detest it. After the speech all eyes in the political world will pay attention to the Sequester on March 1st. A few disappoints in earnings this morning with KORS and INVN reversing gains. While KORS was a viable gap its inability to hold onto its opening price certainly puts a blemish on the stock. INVN was just terrible. In the after-hours session we had a few leading stocks have a tough time. RAX for one has been a stalwart for this market. Unfortunately, the stock fell 10% in the after-hours session. PCYC a thin name jumped 2% after reporting earnings. A stock to watch for a potential gap move at tomorrow’s open. NTGR and BWLD were on the negative side as well with both stocks falling hard. Not a pretty picture for the majority of earnings with only a few bright spots this afternoon. Regardless of your opinion of the market we remain in an uptrend. This may or may not change tomorrow, but if it does we are prepared.

Stocks Pullback in light Volume as the Market trades in a Tight Range

Today was largely an uneventful day as volume was well below average and well under Friday’s level. Sellers continue to be on vacation as buyers were able to lift the market into the close. AAPL was the talk of CNBC, but the stock remains in no man’s land despite the potential for the company to return cash to its shareholders. The Yen continued its decline as the Bank of Japan is hell bent on destroying its currency. In commodity land crude oil jumped back to 97 and appears the commodity is headed above par. It remains to be seen if these high crude prices will hurt the economy. We remain in our uptrend and at this point we don’t see enough evidence it will end any time soon. Tomorrow we’ll get the President’s view of the state of the union where we’ll l likely hear about new spending measures. FSLR and SCTY moved and while we have high crude oil prices the President will likely renew his call to invest in solar. We simply see two stocks moving and at the moment it appears the industry is improving. Free government money is nice and when you couple it with higher crude prices solar certainly looks like a hot industry. Europe continues to have issues and the DAX closed below its 50 day moving average again. The EURO has gained quite a bit because at the surface the ECB is not set out to destroy it. Our short-term trend model has been long FXE for quite some time. How long will it last? It is anyone’s guess, but for now the currency is in an uptrend. The Yen continues its decline and the dollar remains stuck in the middle. Currency markets have a funny way of making headlines and for now FXY and FXY remain in solid trends. Bulls are looking for a correction to buy and bears are looking for a correction to sell. Sentiment continues to be bullish, but either camp has yet to win. Remember to have a game plan in place! TICKER ST TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/11/2013 151.77 -0.02% IWM UPTREND NO CHANGE 2/11/2013 90.70 -0.11% QQQ UPTREND NO CHANGE 2/11/2013 68.01 0.03% USO UPTREND NO CHANGE 2/11/2013 35.12 1.21% UNG DOWNTREND NO CHANGE 2/11/2013 18.45 0.49% GLD DOWNTREND NO CHANGE 2/11/2013 159.70 -1.16% SLV UPTREND NO CHANGE 2/11/2013 30.00 -1.41% DBC UPTREND NO CHANGE 2/11/2013 28.45 -0.35% FXY DOWNTREND NO CHANGE 2/11/2013 104.42 -1.20% FXE UPTREND NO CHANGE 2/11/2013 132.94 0.26% TLT DOWNTREND NO CHANGE 2/11/2013 117.12 -0.08%

Big Wave Trading Portfolio Update And Top Current Holdings

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

AAPL Drives Stocks Higher at the Close as Volume Slips

The Bank of England and European Central Bank kicked off the day with holding their rates steady. Neither rate announcement spurred much movement the reaction by the EURO certainly kicked off selling in the US markets sending the US markets to their lows of the session. Selling intensified throughout the morning as the EURUSD dove. Buyers were able to step into the market and were able to push the market back to the mid-point of the session. AAPL at the closed pushed the market back to opening prices as the company announced a review of its cash position. Volume ended lower on the session despite the buying at mid-day and AAPLs late day push. We remain in an uptrend and despite what you may see intra-day we’ll remain disciplined. AAPL has been quite the stock since the lows of 2009. It has been blamed for holding back the NASDAQ from hitting new highs. However, today it single handedly lifted the NASDAQ from its lows. Even in the last 15 minutes of the session it appeared the NASDAQ was ready to head back to the lows of the day when news hit regarding AAPL’s review of its cash. The stock did go ex today with its current dividend and with the news today it wouldn’t surprise me if a combination of a buyback and special dividend will be announced. Sentiment continues to run high amongst the bull camp. AAII bull respondents did slip from 48 to 43 with bears jumping to 29%. II Bulls hit the week at 55% (59% 5 year high) and bears coming in the week at 21% (16% 5 year low). NAAIM investment manager survey saw leverage come off the books to 95% long. Sentiment remains high here, but it can remain high for quite some time. Our uptrend remains in place and we have yet to see any major days of distribution. The same cannot be said for a few European indexes. The DAX, FTSE MIB, and IBEX all are below their 50 day moving averages with big time distribution. Europe may be cracking, but the US appears to be holding steady. Until we get signals of a market correction we’ll remain long. TICKER ST TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/7/2013 150.96 -0.13% IWM UPTREND NO CHANGE 2/7/2013 90.16 -0.33% QQQ UPTREND NO CHANGE 2/7/2013 67.30 0.09% USO UPTREND NO CHANGE 2/7/2013 34.68 -1.03% UNG DOWNTREND NO CHANGE 2/7/2013 18.54 -4.24% GLD DOWNTREND NO CHANGE 2/7/2013 161.84 -0.34% SLV DOWNTREND CHANGE 2/7/2013 30.46 -1.14% DBC UPTREND NO CHANGE 2/7/2013 28.44 -0.39% FXY DOWNTREND NO CHANGE 2/7/2013 104.71 -0.13% FXE UPTREND NO CHANGE 2/7/2013 132.92 -0.90% TLT DOWNTREND NO CHANGE 2/7/2013 116.93 -0.22% SLV changed trend today. Yes central banks have their printing presses in hyper drive, but we’ll follow our trend following signals.

NASDAQ Lags as S&P 500 Ends Flat as Volume Slides; European Woes continue

Overnight the Nikkei jumped 3.8% as the country remains hell bent on trashing their currency. Europe resumed moving lower as the DAX fell more than 80 points. On this side of the pond futures were lower on the moves in Europe. Just before lunch time rumors of a special dividend helped send the stock higher dragging the NASDAQ along with it. Just after noon time fortunes for the market reversed and the market headed back to the lows of the session. It appeared as if sellers were going to rule the day. At the close, buyers were able to get the market back to breakeven. Our uptrend remains. Tomorrow we’ll get a rate announcement from the ECB followed by Draghi’s press conference. The EURUSD has been on a tear as of late as the US and Japan intend to print their respective currencies to oblivion. At this point the ECB can only cut rates as it cannot monetize debt. Draghi’s comments has moved the markets before and tomorrow shouldn’t be any different from the past. Which direction shall the market respond is anyone’s guess, but given our current uptrend we are going in long. There is some bright spots out there including DDD and SSYS. Banks continue to act well lead by BAC, GS, JPM, and one of our new longs for tonight. The action in EXPE left a bit to be desired and it appears more and more stocks reacting to earnings aren’t able to hold their breakouts. AMZN is one while having a rich PE has been performing well until the most recent earnings report. Another blemish is the two leading stock indexes we follow remain underperforming the overall market. This can change in a hurry, but we are keeping an eye on our leaders. Tomorrow morning will hold some fireworks and we are looking forward to seeing how our stocks react. Cut those losses short. Short-term trends: TICKER ST TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/6/2013 151.16 0.07% IWM UPTREND NO CHANGE 2/6/2013 90.46 0.42% QQQ UPTREND CHANGE 2/6/2013 67.24 -0.33% USO UPTREND NO CHANGE 2/6/2013 35.04 0.03% UNG DOWNTREND NO CHANGE 2/6/2013 19.36 0.94% GLD DOWNTREND NO CHANGE 2/6/2013 162.39 0.27% SLV UPTREND NO CHANGE 2/6/2013 30.81 0.16% DBC UPTREND NO CHANGE 2/6/2013 28.55 -0.14% FXY DOWNTREND NO CHANGE 2/6/2013 104.85 0.07% FXE UPTREND NO CHANGE 2/6/2013 134.13 -0.41% TLT DOWNTREND NO CHANGE 2/6/2013 115.98 0.82% QQQ changed back to an uptrend. This is due to the short-term nature of signals generating more signals.

Stocks Rebound from Monday’s Losses on Higher Volume

The market quickly erased majority of Monday’s losses in one session. Volume rose across the board from Monday’s level. Monday’s have been for quite some time light volume days and higher volume kicking in today was not a surprise. Banks led the way while Small caps lagged along with the Dow. One day does not make a new trend and why we weren’t quick to jump off the bandwagon yesterday. Volume on the NASDAQ has been above average both days this week and we’ll need to see some price movement with this volume. We remain in an uptrend and will continue to act accordingly. Interestingly enough the QQQs have flashed a new Downtrend in our short-term trend following signal. It could very well be false, but a signal is a signal. IWM and SPY still remain in their uptrends for now. However, the FXY continues to fall as the Yen weakens considerably. It has been quite some time since we have been witness to this type of a collapse of a currency’s value in quite some time. If you have a process born from rigorous testing you follow it religiously. Stick to the plan and execute! Tomorrow we will not have any major economic releases. Today we did get January’s ISM non-manufacturing reading. Expectations were for a reading of 55 and the print was 55.2. The market rallied on the news of beating expectations by .2! December’s reading was revised lower to 55.7. New Orders declined from last month’s pace leading a few to believe the index will be heading lower this month. Bottom line the market liked the number and pushed higher. This week we’ll certainly need to see last week’s high taken out if volume continues to remain above average. Remember, to cut your losses! Short-term Trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/5/2013 151.05 1.01% IWM UPTREND NO CHANGE 2/5/2013 90.08 0.90% QQQ DOWNTREND CHANGE 2/5/2013 67.46 1.47% USO UPTREND NO CHANGE 2/5/2013 35.03 0.72% UNG DOWNTREND NO CHANGE 2/5/2013 19.18 2.73% GLD DOWNTREND NO CHANGE 2/5/2013 161.96 -0.02% SLV UPTREND NO CHANGE 2/5/2013 30.76 0.23% DBC UPTREND NO CHANGE 2/5/2013 28.59 0.39% FXY DOWNTREND NO CHANGE 2/5/2013 104.78 -1.37% FXE UPTREND NO CHANGE 2/5/2013 134.68 0.46% TLT DOWNTREND NO CHANGE 2/5/2013 117.02 -0.89%

European Fears Renew as Stocks Fall; VIX Jumps

Europe kicked off the selling with Spain and Italy taking on the brunt of the selling. The DAX fell 2.5% as the index fell in heavy volume erasing last week’s gains. Volume on the state side fell, but Monday’s have been light in general. Technology stocks led the decline followed by financials as NFLX bucked the trend and pushed higher. The VIX jumped above the 14 level as the fear index jumped to its highest level since the 3rd of January. Monday’s close didn’t help out the situation as sellers had the upper hand sending the market to the lows of the session. Today is just one day, but we did see a slight change in character as we have seen the market get support in the final 30 minutes. Our uptrend remains, but we are certainly on watch for our exit signals. It is no surprise Europe is back in the spot light has they have tried to implement protections that are simply band aids rather than real solutions. Iceland is a great example of what should be done, but the Central Banks are in control and would be overrun if Europe went the way of Iceland. Spain and Italy have been pounded by sellers with the DAX finally feeling the heat. In addition, Europe is facing a EURO who has been on a tear against the Yen and US Dollar. Exporters are feeling heat and with the Eurozone needing exports to fuel their economy their currency is not helping. Price action suggests further destruction. The first week of February has not started off well with today’s move. We were quite overbought after the big move in the market from the morning of December 31st. A rest here would be normal, but with the big declines in Europe a “rest” may be quite volatility. Stick with discipline and your plane and execute! The debate over the “great rotation” continues amongst market pundits. With the Federal Reserve buying $85bln in bonds a month how will yields go higher? If you aren’t going to fight the Fed in the stock market why would you fight it in the Bond market? Just follow the trend and it will treat you well. Short term Trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/4/2013 149.54 -1.12% IWM UPTREND NO CHANGE 2/4/2013 89.28 -1.21% QQQ UPTREND NO CHANGE 2/4/2013 66.48 -1.74% USO UPTREND NO CHANGE 2/4/2013 34.78 -1.61% UNG DOWNTREND CHANGE 2/4/2013 18.67 0.70% GLD DOWNTREND NO CHANGE 2/4/2013 162.00 0.34% SLV UPTREND NO CHANGE 2/4/2013 30.69 -0.29% DBC UPTREND NO CHANGE 2/4/2013 28.48 -0.35% FXY DOWNTREND NO CHANGE 2/4/2013 106.24 0.64% FXE UPTREND NO CHANGE 2/4/2013 134.06 -1.06% TLT DOWNTREND NO CHANGE 2/4/2013 115.54 1.28% UNG change in trend. Good news for those who heat their homes with natural gas!

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio remains under strong BUY signals across the board. While we still hate the relationship between volume and price, we realize it simply does not matter in a world where printing currency is the modus operandi. With that being the case, price is our master and price remains in a strong uptrend. It is Super Bowl Sunday and there is no need to psychoanalyze the action of the previous week. It was strong and there continues to be excellent price action in leading stocks. That is all you need to know. It has been a great start to the year and we shall see if this continues in the month of February. Enjoy the Super Bowl everyone. Aloha from a very warm and beautiful Maui. Top Current Holdings – Percent Return – Date of Signal CSU long – 73% – 9/4/12 HEES long – 65% – 9/4/12 CAMP long – 57% – 4/26/12 VRNM short – 49% – 4/10/12 EAC long – 46% – 12/17/12 FLT long – 35% – 9/6/12 POWR long – 35% – 12/11/12 AXLL long – 34% – 1/4/13 ASTM short – 31% – 7/17/12 GNMK long – 27% – 11/16/12