Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

Big Wave Trading remained under a NEUTRAL condition all week, until Friday. The NEUTRAL condition changed around 1:15pm EST when the market blasted higher following an already strong uptrend throughout the day. The move on Friday was more than 2% on the Nasdaq and volume was higher than the day before and above average. That is exactly what we wanted to see to have confidence in any BUY signal. Sadly, there have been so many recent switches in the model that, under our current state of affairs in the market, we can not press like I would want to at this juncture. There was not a severe wash out, there was absolutely no fear in the VIX, and the II survey did not see bears ever take out bulls during the most recent pullback. We are at such low VIX levels that it is hard for us to see how any rally can create substantial gains from these levels. There will be stocks that overall do well compared to the market but these stocks will not be able to produce any meaningful gains with the volatility so low in the market. Still, there are plenty of stocks moving but sadly they are moving in one day. If you backtest leading stocks going back 130 years you will see plenty of breakouts where you have time to get in the following day or on a pullback. In 2012, that has been basically impossible as all high quality stocks seem to move 10-30% in one day zooming well beyond their pivot point making any new long position a pipe dream. The most extreme example is a non-CANSLIM thin stock. DWCH. That 30% move in one day is impossible to buy, unless you were on it intraday. Other more rational examples involve a stock I have tried to go long for weeks but every time it moves it moves 8%+. SSYS. I can not chase these one-day moves in a tape that is so unfriendly to trends. A reversal per QCOR or WWWW seems to be the pattern when you chase. Very few can do a MLNX. We are heavy cash but have been able to increase our long exposure the past week as we are in the black in 6 out of our 7 last long positions. All we need now are clean breakouts or perfect moves (price, huge volume, max-green BOP) to go 10-25% long a single position. More follow-through to today’s gains would be confirmation to look for additional pocket pivot point buy signals in CANSLIM stocks that have already broken out to new 52-week highs. We have a good possible uptrend setting up here. We will just need to see more follow-through and make sure we do not reverse this move next week. This is still a market held hostage by government interference and it will not change until we know they are going to get out of the way. The best indicator we saw today that this rally could have legs is that money came out of bonds across the board on Friday. Nobody knows if this is going to be a one day pattern or a trend change. If it is a trend change, that bodes well for equities. The future is unknown but for now it appears it could be a good week next week. Let’s see if we can get some follow-through and bust out of this trading range we are still in. Yes, we are still in a trading range. From May 4th to Friday, the Nasdaq has moved a whopping +0.06%. Aloha and have a wonderful/fun weekend! Top Current Holdings – Percent Gain – Date of Signal BVSN short – 82% – 3/19/12 AVD long – 65% – 1/10/12 PRXI short – 38% – 3/30/12 MAGS short – 36% – 4/18/12 CAMP long – 34% – 4/26/12 CLGX long – 32% – 6/19/12 ZLCS short – 25% – 6/19/12

Big Wave Trading Portfolio Update And Top Current Holdings

“Trading is a waiting game. You sit, you wait, and you make a lot of money all at once. Profits come in bunches. The trick when going sideways between home runs is not to lose too much in between.” -Michael Covel “I’ll keep reducing my trading size as long as I’m losing… My money management techniques are extremely conservative. I never risk anything approaching the total amount of money in my account, let alone my total funds.” -Randy McKay The Big Wave Trading Portfolio remains under an extremely weak BUY signal that was triggered on 7/18. The signal was so weak that not a single ETF or leveraged ETF position was initiated. Instead it was a signal that we could increase the size of our new long positions. However, that was not allowed to happen as the most recent long position did not move higher and thus an increase never occurred Thursday or Friday. Following Friday’s sell off on heavier volume, the extremely weak BUY signal is under severe pressure and a move below the 2904.24 level on the Nasdaq will switch it back to NEUTRAL. The Big Wave Trading portfolio did not have a good week, losing 1.5% bringing us to a -5.5% return YTD. Some may choose to hide from their losses. We would rather tell the truth and bring to light how seriously difficult this current market environment is compared to 1995-January 2011 markets where trendless periods were not nearly as long or complicated as what has occurred the past two years. This period of underperformance coincides directly to volume drying up on the indexes and contracting on the weekly and monthly time frames. Protecting capital continues to be the name of the game. Our returns can be compared with other trend following system traders here. One interesting note is how closely correlated the trading has been the past 100 days to the same 100 day period in 2011. If history is going to repeat itself in back-to-back years (something you almost never see) then we should expect the beginning of a severe sell off starting some time next week. I am not saying it will happen. It is merely an interesting historical talking point. The one trade that has been working is going short stocks that gap down in the morning following releasing earnings statements. Going short in the morning and then covering at the EOD has been a high reward/low risk methodology since earnings season started. With guidance not coming in too rosy, you would think, that this data combined with our macro data and action in the overall stock market would mean a market pullback is just around the corner. A lot of things are lining up. Sadly, reality is held hostage by the Federal Reserve and other world banks. Another round of printing can start at any moment. While it is unfortunate the system is not an open free market anymore, it is the environment we are in. We are going to just have to deal with it. When the market does crack on strong volume, I am sure trend followers are going to make a lot of money. I have a feeling the sell off, when it does start, is going to last longer than just a couple of days. But what do I know. The only thing we care about is price. If it is moving in our direction, it is wonderful. If it is not moving in our direction, it has to go. Big Wave Trading continues to cut losses extremely quick when we are wrong. We were giving new recent long positions more room to work, as they were producing gains, but Thursday’s negative divergence in advancers to decliners followed by Friday extremely poor action on heavier volume is our clue to go back to being extremely defensive with stocks showing us losses or not moving at all. Losses will simply not be tolerated. If it shows a loss, some of it has to go. No matter what. Aloha and have a great weekend everyone! Top Current Holdings – Percent Return – Date of Signal AVD long – 78% – 1/10/12 BVSN short – 78% – 3/19/12 MAGS short – 33% – 4/18/12 PRXI short – 33% – 3/30/12 CAMP long – 28% – 4/27/12 PHMD short – 28% – 5/11/12 ZLCS short – 25% – 6/19/12

Big Wave Trading Portfolio Update And Top Current Holdings

It was another summer-time trendless week, this past week, in the stock market. The decline on Tuesday switched our weak (10%) BUY signal to a NEUTRAL signal. The weakness that followed on Wednesday and Thursday was not enough to switch our model back to SELL as volume was below average and late day rallies took prices off their lows. On Friday stocks rallied but did so on the lowest volume of the week for the Nasdaq. Therefore, we remain under a NEUTRAL signal at Big Wave Trading, holding an extremely large amount of cash. Cash levels are at a point that has not been seen since late 2007 and early 2008. Everyone knows what happened post Q2 2008. This is to not say that will happen this time. Predicting the future is not our game, since it is 100% impossible to do. It is just a recent historical observation. Our game plan is clear. We are waiting for an above average volume breakout to the upside or downside. Once we receive that signal, we will invest accordingly. We are prepared for a rally, a sell off, or more sideways action. New positions continue to remain small, as historical signals that made significant gains in the past continue to throw off false signals. This amount of false signals has never occurred before in my career, spanning from 1996-now. Therefore, we get smaller and smaller and will remain small until our new positions start producing more and bigger wins to fewer and smaller losses. Recent Biotech, Small Banks, and REIT longs have done very well for us lately but they are not producing the gains I want to see right after initiating a position. Nothing is producing huge gains and it is 100% correlated to the overall market. This should surprise no one as 3 out of 4 stocks follow the general trend of the market. When the trend is trendless, you get weak moves. From February 3rd to Friday, the Nasdaq has moved 0.10%. From May 9th to Friday, the Nasdaq has moved -0.89%. Not quite a trending market, huh? This period will end. Hopefully, it ends faster than the 1976-1979 trendless market ended. If it doesn’t, it is not a big deal because there will be short trend burst here and there (think of July to August 2011, the Flash Crash of 2010, and the uptrend from September 2010-February 2011). During the trendless periods, we will continue to reduce our exposure as new signals fail and cut losses much faster and not give stocks room that we would normally not cut as fast and give more room to work in a trending market. Maybe we will get some movement next week. If we don’t, that is fine with me. Why? Because I can not control the stock market. I can’t make it do what I want it to do. The only way to be at peace with it is to let it do whatever it wants to do and subsequently not get greedy trying to ask it to produce a big uptrend or downtrend right now when it simply is not. If you want to beat today’s market and continue to beat today’s market year after year decade after decade, you have to be OK with whatever the market does in the now, even if you don’t want to. Enjoy the weekend! Aloha! Top Current Holdings – Percent Return – Date of Signal AVD long – 96% – 1/10/12 BVSN short – 77% – 3/19/12 CAMP long – 32% – 5/4/12 VRNM short – 31% – 4/10/12 WZE short – 29% – 4/10/12 MAGS short – 28% – 4/18/12 PRXI short – 27% – 3/30/12

Big Wave Trading Portfolio Update And Top Current Holdings

“The less I cared about whether or not I was wrong, the clearer things became, making it much easier to move in and out of positions, cutting my losses short to make myself mentally available to take the next opportunity.” – Mark Douglas “Obviously you don’t want to overhaul a program in response to one year just because something didn’t work. That’s when you’re almost guaranteed that it would have worked the next year had you kept it in there. –James Klingler, Eclipse Capital, MAR, April 2002, Issue No. 278″ The Big Wave Trading model remains under a NEUTRAL signal. As it stands, the model will either switch to a BUY signal with a move above the 50 day moving average on above average volume (a low average volume move would not trigger it) or a SELL signal with a break below the 200 day moving average. The new BUY signal would be very weak and will have us only deploying small amounts of capital in 1x ETFs and select high-quality high-priced stocks. The only way any BUY signal will move the accounts into going 200% all-in would be a move of 2%+ on volume 25% higher than average on the Nasdaq or Russell 2000 with many dynamic leading high-quality stocks making strong moves on large volume. Unless there is massive volume in the market and stocks, we are not interested in going heavily long here. That is, of course, unless, we get another round of Quantitative Easing. If that is the case, the market is going to lift higher, and we will not stand in its way. We will join the melt-up by getting long 1x ETFs and following other high-price high-quality stocks higher but we will avoid margin. Before we even think of using any margin, like I said, we are going to need to see volume and green charts everywhere. These normally come only after a large correction has hit the market. We have not had a large correction for 3+ years. Every time we try to start a real correction to reset conditions so that new growth can come, we have the Fed intervene in all its glorious wisdom. Now, if we fail here and breakdown below the 200 day moving average on volume, I will go long 3x inverse ETFs in my IRA and will adjust the size to the strength and conviction of the breakdown. If we selloff on low volume, our model will take small 3x inverse ETF long positions. The risk accounts will continue to trade any and all breakdowns in individual stocks that have either rallied 300% or more from the 2009-now QE-fueled uptrend and/or stocks that are breaking down or reversing on strong volume that have no earnings and no sales growth. For now, it is NEUTRAL time, heading into the Greek elections. It does appear the market wants to move up here but as we have seen for 1 1/2 years now what we think should happen continuously doesn’t. One final note. Big Wave Trading never holds losers. If we take a position in a stock/ETF and it does not move in our direction immediately, we begin reducing our position. Losses are never tolerated. They are eliminated immediately when our idea is proven incorrect. Top Current Holdings – Percent Return – Date of Signal AVD – 80% – 1/10/12 BVSN short – 73% – 3/19/12 LQDT – 56% – 2/1/12 MNST – 56% – 1/13/12 MAGS short – 34% – 4/18/12 CAMP – 32% – 4/26/12 VRNM short – 30% – 4/10/12 SINO short- 30% – 4/12/12 PRXI short – 26% – 3/30/12 PHMD short – 25% – 5/11/12

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

Big Wave Trading Portfolio Update And Top Current Holdings

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