Stocks End Mixed as Volume Slips

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

4 New Issues Every Growth Investor Should Own

4 New Issues Every Growth Investor Should Own

PCLN Slides in Heavy Trade as VIX Continues to Slide

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

Russell 2000 and NASDAQ Lead the Way as Volume Jumps

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

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

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

Big Wave Trading Portfolio Update And Top Current Holdings

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

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

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

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

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

For the Second Straight Day Stock Pull Back Ahead of FOMC Announcement

The day kicked off with decent economic numbers as well as consumer confidence figures. The Chicago PMI was better than expected and after a bout of disappointing economic releases last month. This was a bit of good news albeit not great. However, stocks weren’t able to hang onto to gains as sellers took hold of the day. Volume ran higher throughout the session, but end-of-month rebalancing kicked it up quite a bit at the close. Finishing near the lows of the session, but unlike previous sessions the losses weren’t that bad. Heading into tomorrow’s Federal Reserve rate announcement the market is clearly expecting another round of quantitative easing and will be certainly looking for the central bank to deliver. For our trading it does not matter much whether or not the Federal Reserve decides to monetize our debt further. We only care about trends and if we get one we go with it. Sure, a policy debate can be made the Federal Reserve is simply kicking the proverbial can down the road. In reality, our trading relies on price action rather than opinion. Even if the Federal Reserve does announce a new money printing scheme does it guarantee the stock market goes higher? It will certainly help out precious metals and commodities, but there are no guarantees. Follow the price action and know your exits as you can possibly figure out how prices will react to any news. Yesterday’s commentary I briefly mentioned sentiment. Bill Gross the self-proclaimed (unconfirmed) Bond King penned an article claiming stock returns are essentially a Ponzi Scheme. He may be right or wrong, but aren’t Treasury Yields essentially the same thing? Social Security, while not illegal by the government standards relies on the same fundamentals. You need more investors to pay off current ones. A big reason Social Security will run out of money (other than Congress stealing from its coffers) is there will be more retirees than those paying into the system. Social Security does not pay out on the profits it makes from investments, but from the new ones who are paying into the system. Regardless of the topic at the end of the day, a bond guy writing an article about stock returns (mind you, PIMCO just recently opened an equity arm) is quite interesting here. Hidden agenda? There has been research regarding bond yields and stock returns. Interestingly enough a rising bond yield correlates well with a rising stock market. Why? As bond prices fall (people selling) the capital flows from bonds to equities. It doesn’t take a rocket scientist to see the correlation there. Since 2008 we have seen an unprecedented amount of cash flow into bonds and outflows in equities. When will this trend break? If and when the trend does break will capital flow to stocks? The answer lies in trend following and with Big Wave Trading. Tomorrow’s Federal Reserve meeting will bring on an exciting afternoon. Have a game plan and trade it. We’ll be enjoying the fireworks as others scramble to get into positions.

Stocks Take a Step Back in Quiet Session

For the 9th Monday in a row the market closes lower on very light volume. After Thursday and Friday’s trading sessions today’s pullback is a welcomed sign and a very bullish one. The Russell 2000 led the decline with the NASDAQ not far behind with losses of .56% and .41% respectively. The key point here was volume did not accelerate with the selling and dried up on the day. Institutions were not dumping stock today and for now a good sign heading into a fun filled central bank week. Wednesday the Federal Reserve kicks off the news week with their rate announcement in the afternoon. Tuesday we have a few economic releases, but the focus will be on Wednesday and would expect another day similar to what we saw from the market today. I am not trying to predict what will happen tomorrow, but merely pointing out volatility kicks in after rate announcements. We’ll be focused on the price action of our stocks rather than guessing where we may go from here. Sentiment continues to be quite negative. AAII Bulls have dominated the survey has of late and II bulls continue to disappear. Any interesting poll came across CNBC today and one that asked if the current rally was going to continue. 71% of respondents thought it was going to be short-lived and we’d head lower. Mind you this is CNBC whose job is to pump stocks and it was quite astonishing their viewers are that bearish. Is it that the investing public is too bearish on this market? Time will tell and so will prices. Today was much of a do nothing day. A very boring day, but one that was a good step forward for our buy signal.

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

Its Quantitative Easing or Bust

It is quite clear the market is waiting for the world’s central banks to print more money. Futures were heading lower along with European markets when the ECB’s Draghi issued comments about saving the EURO at all costs. Translation: they will print EUROs. The stock market’s reaction to Draghi’s comments were positive as price gains were strong on above average volume. End of day action wasn’t ideal and the S&P 500 was the only index to look ideal. However, what a difference rumors of quantitative easing will do for the market. There isn’t something quite right with this market, but with the hint of further easing the market will continue to trade wide and loose. Earnings season has not been kind as we are on pace for a very disappointing earnings season. While we are very price driven we focus on growth stocks. Unfortunately, without growth in fundamentals our universe of stocks shrink and this is the current situation we are in. The lack of growth in the market on the fundamental level has us seeing a narrowing universe of stocks. Not to mention this earning season has destroyed a few of our leading growth names. We can always hope the miracle of quantitative easing will save our stocks and set off another rip roaring rally. The AAII survey continues to lean towards the bearish side of things. It is easy to see as why the folks answering the survey are bearish. Earnings season is not spectacular and economic news has NOT been good. June’s PMI were very negative and recent home sales both pending and new have been disappointing. Manufacturing data has not been signaling growth, but contraction. Outside of quantitative easing there isn’t much to be bullish on. The next FOMC meeting is next week and on Wednesday they will release their policy statement and rate decision. We’ll focus on price and follow our rules while the rest use discretion and opinions to navigate this market. Tomorrow’s GDP report will set off fireworks for the market. Sit back and enjoy the ride! Have a great weekend.

Industrials Lead the Market on the Backs of BA and CAT

Stocks end the day on a sour note with action dominated by reaction to earnings. Economic news from new home sales did not help matters, but dip buyers were on the prowl. BA and CAT helped the Dow Jones Industrial Average lead the way while AAPL weighed on the technology heavy NASDAQ. Remove earnings from the picture and you are left with a pretty dull day of trading. Despite the mixed results from stocks the VIX fell on the day as fear left the market once again. Ben Bernanke’s Federal Reserve put on the market seems to keep this market from falling apart. When you boil it down today was simply a “nothing” day. Last hour of trading saw the NASDAQ move from its high of the day right back to the mid-point of the trading session. Yesterday’s last half hour of trading was supported by rumors of the Federal Reserve taking action sooner rather than later. At this point, how much more can the Fed do? Is another round of QE going to do much of anything? Rather than hand out another $400-600 billion to banks why not hand out $5,000 to every taxpayer (those who paid taxes) making under $250,000? Would that not help solve the problem? At this point, the banks have been bailed out enough time for the consumer to get something! By the way, while giving out free money may sound good in reality it is a terrible idea. It is a short term fix that solves very little for the long haul. It is highly unlikely we’ll see either the Federal Reserve or Washington DC do anything that would solve our fiscal issues. Money printing prolongs the agony and DC simply cannot agree too much of anything. At this point, the market believes in the Federal Reserve put and you see it whenever there is a rumor regarding action. We’ll focus on the price action of the market and the stocks we follow. Price action continues to favor the weak side at the moment and until we get a big volume move in either direction we are playing it safe. Always make sure you know your exits to both winning and losing trades. Enjoy the market tomorrow!

Stocks Fall on Higher Volume; AAPL Dives after Reporting Earnings

A terrible Richmond Federal Reserve Manufacturing index reading helped set a negative ton for the market. Volume jumped on the day as turnover picked up as sellers gained control over the market. Volatility jumped as fear appears to be settling into the market, but the index remains just above the 20 level. Despite the selling all the attention was going towards AAPL and its earnings release at 4:30 PM EST. Big selling today on volume today as the Dow Jones Industrial Average and NASDAQ Composite both lost their 50 day volume average. It appears the trend may be changing and the market is about to head lower. AAPL reported earnings this afternoon and the market did not like what it heard. The stock closed the after-hours session down more than 5.5% on big volume. It is such a big portion of the NASDAQ and NASDAQ 100 it will have a huge impact at the open tomorrow. AAPL was such a large part of the rally from December and if the stock falls here it will drag the NASDAQ down along with it. At the moment it appears AAPL wants to head lower. Other stocks posting earnings in after-hours were NFLX, TRIP, and BWLD. All were down double digit percentage wise. TRIP and BWLD had been holding up and consider leadership. NFLX was a former leader and continuing its decline. The troubling aspect is TRIP and BWLD heading lower. TRIP’s earnings reaction took down PCLN, but PNRA was able to shake off BWLD’s earnings and jump in after-hours trading. Leading stocks continue to look weak and their reaction to earnings are not inspiring confidence. Earnings season has not been kind to the market. We have had some bright spots, but not enough to overshadow the disappointments. If we simply ignore the noise from market pundits and their opinions we can see a market on very shaky ground. Monday’s session we saw the NASDAQ get support at its 50 day. Support at the 50 day is usually positive, but today’s reversal and falling below the moving average with volume is all but positive. Just looking at the facts presented in front of us and it appears this market wants to head lower. If we are wrong we cut our losses. Bulls will be hanging on to dear life and hoping the plunge protection team saves the day.

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

NASDAQ 100 Carries the Market Higher Despite Disappointing Manufacturing Data and Jobless Claims

Economic news was not good this morning, with the Philly Fed showing manufacturing contracting and jobless claims contracting much more than expected. Initially the market did sell off on the news but buyers jumped back into the market pushing the NASDAQ back to intraday highs just after noon time. Early afternoon selling, once again, was met by buyers as this market appears it just can’t go down. Regardless of the reason we continue to see support rush into the market any time sellers get a leg up. A few financials were struggling, but overall the market remains in an uptrend and we’ll continue to act accordingly. A surprise out of the AAII investor survey was it showing the number of bears jumping above 40%! Those who are bullish fell to 22% and it is surprising considering the move in stocks since JPM issued earnings. Sentiment is not something you would want to trade off of, but it is interesting where folks are at with this market. Perhaps it shows people are bearish and feel the Federal Reserve will save the market. The big boy financials certainly aren’t following up gains from earnings. MS reported this morning and the stock has been getting hammered. BAC, JPM, and GS continue to act very weak! Technology stocks are certainly in favor with EBAY, QCOR, and SNDK earnings. Last week it was JPM who got the party started with its earnings release and we have seen very little follow-through. We’ll stand pat with our rules-based investing and leave the guess work to others. Lagging the broader market in a significant way were Small Cap stocks. The Russell 2000 fell .36% today, while the NASDAQ jumped .79%. Even though the NASDAQ backed off its highs of the day, the index put in a solid day, unlike small cap stocks. It is unfortunate, but investors are just not favoring small cap stocks for whatever reason. Perhaps the Bernanke put is only dividend yielding stocks? It is anyone’s guess and for now small cap stocks as a group are not moving and we’ll latch onto the stocks that are moving. Just another day in paradise! Cut your losses and let your winners ride! Have a great weekend.

Stocks Add to Tuesday’s Gains as Volume Ends Higher

For the second straight day, Ben Bernanke testified in front of the house and stocks pushed higher. Housing data was a bit better than expected, aside from building permits. However, a few home building stocks like HOV and PHM did not agree. INTC lead the semi-conducting stocks and the rest of the technology sector higher. NASDAQ led the major indexes higher with solid gains, but off the highs of the session. We continue to be in rally mode and have witnessed a solid back to back days of gains. Despite potential headwinds facing this market and it being the summer time, we have quite the potential to run further. This might change tomorrow or Friday, but for now we are in rally mode. If we are wrong we simply use our rules to exit our positions and move forward. No guess work here and we certainly aren’t going to act upon any emotion. Know where your exits are both for losers and know when to exit your winners. Banks were looking pretty good, but earnings from BAC disappointed the market as the stock sold off in heavy trade today. GS and JPM both look weak here and after enjoying nice gains from JPM’s earnings release last Friday we have seen a lack of follow-through from many of the banks. BBCN and WTFC bank stocks we have liked continue to do well, but it is the big boys weighing on the entire sector. As we progress we’ll continue to look to see where our exits are and potential entries and go from there. We’d rather to see financials continue to lead the market as they tend to be the first group out of the gate during a rally. Where this market goes is anyone’s guess! For now we have a trend to push higher and until we get signaled otherwise it is the long side we go. Cut your losses and ride your winners.

Fed Chief Does not Signal QE3, but the Market Disagrees

Despite a better than expected Housing Confidence Index it was all about the Fed Chief. Chuck Schumer said it best and it was what got the market off the lows. He basically stated that DC will not get its act together and the Federal Reserve must act. From that point forward the market moved off its lows as volume surged in the market. Regardless of your view at this point the market wants to move higher in the short term. Late day selling did put a cap on the day, but the overall gains in the market certainly paints a bullish tint. Until we get further selling, this market wants to move higher. The market clearly expects quantitative easing to help support it going forward. It is quite sad that this market needs the fed to print money to support this market. Earnings season has not been stellar and many stocks have missed their estimates. At this point, we cannot ignore the price action simply because we think the economy is in a tail spin. For now, this market wants to move higher and we’ll be moving along with it. Do not fight the trend. Ben Bernanke moves from the Senate to the House tomorrow where he’ll face even more questions from Congressmen/women. Unfortunately for Ben, he’ll like face the same lame questioning he received today. Majority of the questioning was grandstanding by both parties and did not ask any very pointed questions. Essentially, what we got today was Congress and the Senate will not do anything and they expect the Federal Reserve to print away their problems. Elected officials are terrible and Schumer pointed the problem out. The trend is your friend and do not forget it. Tomorrow may bring a change in trend, but for now this market wants to move higher on the high of quantitative easing…part III. Do not fight the trend no matter how much you believe you are right. This is precisely why we cut our losses. Ride the trend higher and get off when the trend reverses. Big Wave Trading is your guide.

New Seeking Alpha Article

Four Medical Stocks Moving In A Trendless Tape.

Retail Sales Disappoint as Tensions in the Middle East Grow

The market was showered with very disappointing retail sales figures showing the consumer cooled quite a bit in the month of June. NYSE volumed dried up significantly, but at the same time NASDAQ volume moved nearly 6%. While the NYSE indexes escaped distribution the NASDAQ did not notching its 4th distribution day over the past few weeks. The day’s action was a decent day of consolidation over the 50 day, but with distribution quietly piling up on the NASDAQ the Big Wave Trading Market Model remains neutral. Outside of earnings the market will be looking towards Ben Bernanke’s comments on Thursday. Ben Bernanke will focus mostly on the United States fiscal issues and how Europe is constraining growth. However, many traders will be looking for the Federal Reserve Chairman to talk about a third round of quantitative easing. While he’ll touch upon the subject it will be interesting to see the aftermath of his testimony. Will Ben Bernanke say QE3 is on the table and the Fed is ready to implement it? Time will tell and we’ll be ready to react. In the Middle East an interest development occurred today and that was a US ship firing upon an Iranian boat. The market did not react to much other than crude oil moving higher closing higher than a dollar a barrel. While we aren’t about to make any decisions trading based upon the idea we are going to war with Iran, but from an observation it does feel like tensions are rising. We remain disciplined in our approach, but it will be interesting to see if we get any further developments out of the Middle East. At the very least it will provide us with some fireworks. Earnings season is underway and while it has been a somewhat disappointing season so far we have the bulk of reports coming over the next few weeks. Stick to a disciplined approach: trend following. Know your exits!

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

Stocks Have a Wild Ride Close Lower

Earnings season has not been kind to stocks and it kicked started the market to the downside. Europe’s markets were selling off as the EURUSD fell below 1.22. Selling was intense, but backed off as buyers stepped up. The NASDAQ sliced through its 50 day moving average while the S&P 500 was able to hold above its 50 day. Volume rose on the day across the board as another distribution day is added. The last 15 minutes of the session was met with sellers trimming a good portion of gains seen since the morning lows. Today’s action was not terribly bullish despite coming off the lows. We remain cautious here. Stocks like PG and WMT were helping out the Dow Jones Industrial Average move higher. The Dow was the index holding up best today is a key sign investors were moving in a defensive manner. We do not believe a market lead by the Dow will be one that produces a strong move to the upside. Our leading stocks continue to look weak and are not inspiring much confidence in this market. We’ll stick to our rules and await our signals. Interesting headlines hitting the wires tonight with Italy being downgraded two notches by Moody’s and China’s GDP growth figure. Italy’s news is not really surprising to me, but I’d argue its rating should be junk. Remember when most investors were duped into thinking the Greek’s would meet their obligations? When all is said and done Greece is likely to have all its debt liquidated leaving bond holders high and dry. Will Italy and Spain be any different? Certainly just as big will be whether or not China is slowing more rapidly. Then again, can you trust what it prints for GDP growth? Too much speculation to gamble money on, but is an interesting intellectual debate. Remember leave the investing to a rules-based system rather than an opinion! If I had to guess tomorrow we’ll see stocks climb higher and close in the green. Then we can get headlines into the week the indexes snapping its losing streak. Investing based upon this would simply be gambling. Trade your plan and leave out the guess work. Have a great weekend and get out there and enjoy life.

Energy and Financials Hold up the S&P 500

The S&P 500 and the NASDAQ are barely hanging onto their respective 50 day moving average as the Federal Reserve meeting minutes fail to spark buyers or sellers from jumping in with both feet. Crude oil was the big story on the day with the commodity jumping more than two points helping out the energy sector. Saving the S&P 500 the energy sector gained more than 1.4% on the day while the financial sector gained nearly .8%. Without the help from these sectors the S&P 500 would have sunk hard. Leading stocks continue to be sold off as another signal of weakness in this market. The market was able to overcome some selling after the Fed minutes and is a slants to the positive side of things. Big Wave Trading market model is neutral and we’ll need to see a big volume push to either side to get us in either direction. Volume was mixed on the day with surprisingly volume higher on the NYSE and lower on the NASDAQ. As of late we have seen the opposite situation where NASDAQ had seen the volume come in higher, but NYSE lower. Perhaps today may signal a change in the recent short-term trend (down), but it is hard to get too excited when leading stocks aren’t the ones showing the support. It appears the market is ignoring the lack of commitment currently from the Fed to do QE and wants to push higher. We aren’t about to guess where the market is heading next and we’ll continue to follow our rules based trend following system. Tomorrow morning the ECB will come out with a few items and it appears the market is expecting them to talk about increasing the fire power of the ESM and EFSF and LTRO. These are all short-term fixes to a long term problem. Unfortunately, for the Euronations they need to swallow the hard pill Estonia and Iceland did to recover from this problem. Defending the status quo will always lead to a bigger problem down-the-road. Our focus remains on following our rules and pushing forward regardless of the direction the market takes us in. While we may have opinions they aren’t mixed in with our trading. Rules based systematic approach to trading stocks is our niche to beating the market.

Volume Jumps as Leading Stocks Slump

A big distribution day strikes the market, but the real story is how leading stocks fared in today’s session. While we can focus on INTC, AA, or CSCO the real story is how leading stocks acted today and what they are foreshadowing. Distribution days happen in uptrends and are quite normal. However, today’s action in leading stocks foreshadows a very bleak picture for the market ahead. While AAPL price wise held up okay volume was much higher suggesting sellers are winning the battle. Our major market averages are above their respective 50 day moving averages, but it does not appear underneath it all things are looking good. One major leading stock happens to be QCOR and today’s reversal after yesterday’s big point gain smells quite FISHY! Other leading stocks like ISRG, PCLN, FOSL, CMG, and LULU are breaking down and are not playing nice in the sandbox. This action usually spells out trouble for the market even though our distribution day count is low. It is never a good sign when your leading stocks get pounded and is often a sign for more trouble ahead. Tomorrow will be an interesting day in an option expiry week. We get the FOMC meeting minutes from the most recent Federal Reserve Open Market Committee meeting. I am sure the market will be itching to see if the Fed talked about further bond buying or what we like to call MONEY PRINTING. Quantitative easing or money printing or monetizing debt which ever you prefer is something the market has been hoping on. We’ll see if the Fed talked anything about more bond buying. At this point, what else will it do other than monetize our debt and make us become more like Japan? For now, this is all speculation and the action we are seeing is quite negative for the market. There are many headwinds facing this market and many of them are known. However, what the media calls “headline risk” is simply a non-factor for trend followers. We follow price not what Mandy says on CNBC is breaking news. Cut those losses.

AAPL Keeps the NASDAQ Afloat as the Market Aways Earnings Season

Coming off a holiday week stocks ended slightly in the red with volume coming in higher across the board. The Dow Jones industrial average along with the NYSE composite both notched distribution days, but the NASDAQ and S&P 500 skirted distribution. AAPL was certainly a star of the session despite volume coming in lower for the stock. Today’s action comes as no surprise to us as many market participants were coming back from vacation. The market clearly is waiting on earnings and first up to bat is Alcoa. We are still in a weak buy signal and we’ll continue to act accordingly until the market tells us otherwise. It is nice not having the troubles in Europe dominate the talk on the air waves. Well, there was some talk, but not the pounding on the table many have been doing nowadays. Attention is now being drawn towards earning season and it will be interesting to see how the market reacts to the many companies reporting on their earnings. NKE and F are two examples of where the global slowdown is clearly hurting them on the top and bottom lines. We’ll sit back and where we need to take action we will and will not be guessing on the direction of stocks will take prior to earnings. We follow trends and certainly do not guess where they may happen next. Alcoa reported better than expected earnings and revenues after the market close. It reaffirmed its guidance for demand, but has yet to express any global growth. The stock was up more than a percent after releasing earnings, but now is hardly above where it closed. AA is not typically a name we’d like to get after since it isn’t a growth stock, but from an economic stand point it is a barometer. The lack of oomph in the after-hours session is quite puzzling and while we aren’t going to act upon it we can certainly ascertain something isn’t quite right. Earnings season has officially begun and let the games begin! A few leaders held their ground while another was unable to hold a key moving average. Both V and MA traded down to their 50 day moving average. Finding support, both stocks were able to hang above their respective 50 day moving average. On the other hand, LNKD was unable to hold its 50 day average. While volume was not above the average volume, it was the most volume seen by the stock since the day the Russell indexes rebalanced. The stock has been climbing on tepid volume and today’s action doesn’t bode well for the stock going forward. Remember to know where you are going to sell out of a position! Cutting your losses is your number one priority. Profits take care of themselves, but losses never do.

Big Wave Trading Portfolio Update And Top Current Holdings

Big Wave Trading remains under a weak BUY signal (10%) generated on June 29th. The past week was a very inactive week for us with only a few long signals generated (all on Monday). We continue to be in a trendless intermediate market period. From February 3rd to July 6th, the Nasdaq has moved a whopping 1%. From May 9th to July 6th, the Nasdaq has moved 0.09%. The market remains trendless in a range bound trading range. Outside of the Biotech, Regional Banks, and Homebuilders sector, there really is not that much that is blowing me away in individual stocks. The wedging low volume breakouts in leading CANSLIM stocks simply do not interest me in an overall low volume tape. Historically, it is a very risky trade. Over the course of the past three years it has become a higher odds trade due simply to the market being manipulated higher via the printing press via QE1, QE2, Operation Twist1, Operation Twist2. Still, this is a trade (low volume moves) I will not take unless the chart pattern is tight. There are a lot of stocks still building solid bases out there that puts the odds in favor of breakouts. But at the same time, there are price/volume flaws with a lot of these patterns like PCLN, AAPL, GOOG. They have heavier volume on the left side of the base when selling off and lower volume on their current right sides as they rally. This is the opposite of what you want to see, historically. However, in this new world we live in, it could very well work. This is why price is king. We will continue to focus on price at Big Wave Trading, waiting for a stronger BUY or SELL signal. The current signal is weak and needs strength confirmation before we can even think about getting 50% of our portfolios invested on the long side. In fact, the signal is already coming under pressure thanks to the “technical” distribution day on the Nasdaq on Friday. It was a technical distribution day because we were down on heavier volume. However, the intraday reversal was bullish. Therefore, the overall session can be taken away as a positive for the bulls. Overall, this means we are like Switzerland here. We are under a BUY signal but we are very neutral in that our team both see an equal amount of positives and negatives out there. There is no real clear upcoming direction we can attempt to forecast at Big Wave Trading due to the mere fact of there being so many cross-current data coming in from the micro and macro front. It is very much a waiting game. At least it is summer time. I know it is hot on the mainland but it is perfect on Maui and the waves have been big and strong for this summer. If this is what global warming is all about then I am all for it. That is until it hits my pocket book at the grocery store thanks to all the damaged corn, grain, and other ag crops. Aloha and have a wonderful weekend! Top Current Holdings – Percent Return – Date of Signal AVD long – 90% – 1/10/12 BVSN short – 76% – 3/19/12 CAMP long – 34% – 4/26/12 VRNM short – 31% – 4/10/12 PHMD short – 31% – 5/11/12 WZE short – 26% – 4/10/12 MAGS short – 25% – 4/18/12 ANGI long – 25% – 5/31/12

The Market Awaits the Jobs Reports as AAPL Moves Higher

There was a whole host of news for the market to digest this morning from the ECB rate cut to the Chinese cutting its rates. The ECB did not increase the size of its bailout mechanisms despite the cry for more. We did get somewhat good news with the ADP report showing 176,000 jobs were created in the month of June. Unfortunately, only 4,000 were manufacturing jobs. Jobless claims were better than expected, but failed to ignite any excitement over the employment picture. Another disappointing ISM release this time in the non-manufacturing space showed the service sector grew less than expected. While the NASDAQ was able to get off the lows of the session late day sellers knocked the index to close flat. This market awaits tomorrow’s jobs report and we remain in a buy signal. AAPL was a big part in the success of the NASDAQ Today jumping more than 10 points. News of a smaller iPad certainly helped buyers to jump back into the stock. Volume was above average today, but it was the first time since May 22nd did the stock experience above average volume. The recent move has been in light volume and while the gains have been nice there isn’t anything screaming about institutions buying this stock hand over fist. We won’t argue with the gains, but something to keep an eye on as this market moves forward. The lack of volume on the upside isn’t anything new for discussion, but an interesting development is with the AAII sentiment survey. Bears dropped 9 points, but it is the lack of convinction from either side that is interesting. Bulls and bears are at 33% a piece with 34% of respondents neutral. Traders are going the way of Switzerland and not chosing any sides. Trend followers do not care which side of the market we need to be on we just go there. However, the neutral bias continues to be a common theme with sentiment these days. This entire rally has been on the back of the Federal Reserve Bank coming up with a new bond buying program. Ben Bernanke was all over this question in his last question and answer session saying unemployment was a key indicator for him and the fed. Tomorrow’s unemployment figure, expected to be at 8.2% was the indicator Big Ben Bernanke is keeping an eye on. Tomorrow will be a fun day! Enjoy the weekend.

Stocks Finish Higher Shaking off Poor Manufacturing Data

Stocks closed higher on the NASDAQ for the second straight day despite June’s ISM Manufacturing showing the industry contracted. While there are troubling signs within the data the market was able to push higher. Small cap stocks lead for the day doubling the gains seen on the NASDAQ. Volume was light on the day, but no big surprise with Independence Day on Wednesday. Never fight the trend as today’s market certainly highlights this important lesson. Our Market Direction model shows a buy signal and it is based upon the market action not market opinion. The ISM report shows some very troubling numbers. Numbers would point to the United States economy in or on the verge of recession. One would easily think the market should react poorly and sell off on the news. Initially, the market DID sell off and looked as if we were going to head lower. Buyers showed up and supported the market. It doesn’t matter who they were (“PPT”) all that matters is they should up supporting the market. In the end, it boils down to price action and not what your opinion about the market’s direction. An important step for the market happened today and that was taking out the most recent high. One may think a double top pattern is forming, but the mere fact of making a new high has taken out the downtrend started at the March high. The new high has put in a new higher high. For trend followers this is an important step for the market to continue higher. It is not a guarantee that we will continue to make new highs, but then again no one knows the future. We have rule number one to help us save ourselves if the new higher high for some reason fails. That rule: cut your losses. “Know when to fold ‘em.” If you want to see the numbers behind the ISM figure, I’d suggest heading to here: The trend is our friend. A friendly reminder: there is an early market close on tomorrow prior to the Fourth of July holiday! Enjoy.

Big Wave Trading Portfolio Update And Top Current Holdings

It was an exciting end to what was a boring week. The weak SELL signal that our portfolio was under switched to a NEUTRAL signal on Friday morning with the Nasdaq gapping above the 50 day moving average. This automatically put us at NEUTRAL as the 50 day moving average was the fail safe area. In the final 30 minutes of trading the stock market indexes began to take off again on strong volume. This then switched our model into a BUY signal. This signal is not being confirmed by volume in the Nasdaq, Russell 2000, leveraged and non-leveraged ETFs. This means that we will continue to trade small but we can increase our long positions in our portfolios due to recent longs all working out the past few days. Since the BUY signal was triggered at the EOM, we can not say that this is a true strong signal. There simply are too many non-confirmations. The model will need to see further confirmation via price and volume in the indexes and ETFs if it is to get anywhere near 50-100% invested. The best aspect of the BUY signal comes from leading stocks with strong fundamentals and technicals. Even though these breakouts/moves are not even close to being perfect, we must recognize in this strange QE/Operation Twist environment volume has become irrelevant for the first time in history. There is no other point in time going back to 1880 on the DJIA, 1957 on the SP 500, and 1971 on the Nasdaq where you will see the market rally for any period of time on below average monthly volume. If you pullup a monthly chart plotted with a 50 monthly volume average you can see that there has never been a time where the averages have rallied on below average volume. The shocking thing about this is that this has been going on since the end of 2008 on the SP 500 and since the end of QE1 in 2010 on the Nasdaq. So this is unprecedented trading and the lack of volume will continue to keep us off of margin until the 50 day weekly and monthly volume average sees some kind of decent accumulation. Market manipulated money printing rallies are simply not going to produce the old 100%-500% gains in 6-12 months like we got used to in leading momentum stocks from 1982-2008. Only a major market reset where prices can find a real bottom is going to unleash another round of accumulation buying. The current BUY signal will switch to NEUTRAL if the market closes below Friday’s LOD. There are some nice bases out there that are still forming in strong CANSLIM quality names. If these continue to breakout, we will continue to increase our long exposure per each position. In this tape, no trend is safe, so we must move very carefully. Going all in 200% margin right here is simply foolish as volume does not confirm this is going to be a powerful move across the board. If that volume comes in during the next couple of weeks, wonderful. If it doesn’t, will you really be surprised? I know I will not. Have a wonderful weekend and aloooooha! Top Current Holdings – Percent Gain – Date of Signal AVD – 84% – 1/10/12 BVSN short – 74% – 3/19/12 VRNM short – 38% – 4/10/12 PHMD short – 33% – 5/11/12 MAGS short – 28% – 4/18/12 WZE short – 27% – 4/10/12 ANGI – 26% – 5/31/12 SNTA – 25% – 6/26/12

Merkel Cancels Meeting Sends Stocks off the Lows of the Session

The morning got going with GDP coming in-line with expectations. Putrid growth of 1.9% was in-line with expectations, but far from where we should be 3 years removed from 2009 lows. Shortly after the market opened the Supreme Court upheld Obamacare and the market got interesting. Stocks ended up heading lower after creating a bit of intraday volatility. Nearing the end of the day it appeared sellers were about to unleash on stocks, but Angela Merkel had other ideas. Sending the EURUSD currency pair higher, Merkel canceled her press conference and sent US stocks well off their lows. Hope is still alive the EU summit will produce a solution to European lows. The underlying story of the day was the brutal beating leading stocks took during the day. Big Wave Trading remains in sell mode and today’s craziness confirms our market model. The crazy moves the last two days at the closes on rumor is quite astounding. Yesterday we had the Supreme Court decision shooting down Obamacare. Now, we get Merkel cancelling a press conference and the European Union is saved for another day? Debt on top of more debt is not a solution and at some point hits the point of diminishing returns. Tomorrow, despite the bar being set low will certainly provide some more fireworks. After-hours today RIMM reported terrible earnings as the company continues its downward spiral. It is no surprise the stock continues moving lower. NKE on the other hand was a leading stock and its after-hours action is very troubling. UA another leading stock was hit in sympathy and not to mention has broken down lately. It is never a good sign when leading stocks get hit hard. There are other leading stocks breaking down leading us to be very cautious. We are in sell mode for a reason and until the market can turn around with leading stocks we’ll stay in sell mode. Next week we’ll get holiday trading with the fourth of July landing smack-dab in the middle of the week. Get out and enjoy the weekend!

Stocks End Higher For Second Straight Day as NYSE Volume Drops

Better than expected GDP and Pending home sales helped boost the stock market in the early going, but the rally appeared to stall out after lunch time. Heading into the 3 o’clock hour it appeared the market was ready to rollover into oblivion and then rumors started to fly. Obamacare would be struck down with a 6-3 vote by the Supreme Court justices. A big blow to Obama, but a positive for the stock market or so it’s perceived. Volume ended mixed once again with NASDAQ volume higher and the NYSE lower on the day. The close wasn’t stellar again for the second straight day with the market unable to hang onto the highs of the day. Some positives as we did close higher, but we remain in sell mode until the market can prove an uptrend can be sustainable. A few leading stocks sold off today, but two in particular were quite nasty. ORLY and CMG have been two stock market leaders for quite some time and their actions today are quite negative. Even MNST had a bad day, but CMG and ORLY were particularly ugly. This is not the type of moves you want to see out of your stock market leaders. AAPL has been relatively quiet over the entire month of June. AAPL was a major contributor for the early ’12 rally. Perhaps it is putting in a base, but for now the stock has yet to move. The picture of leading stocks is not as clear as we’d like and will continue to monitor. Tomorrow we’ll get a reading on GDP. The market is looking for 1.9% quarter over quarter annualized growth. Let’s be honest, we have zero clue what the number will be. However, we can use the price action to our advantage and follow it. If the number is lower than 1.9% it would certainly have the market pundits getting after the fed to print more money. How will the market react then? It is useless to guess here and to position yourself solely based upon your opinion on the number is silly. Use price as your guide and leave the guess work to CNBC. Stick to price and cut your losses.

Stocks End Recoup Some of Monday’s Losses; Volume Mixed

The markets did their best to rebound from Monday’s sell off, but fell short. Volume ended mixed on the day with the NYSE volume coming in lower and the NASDAQ coming in better than Monday’s levels. Economic data was disappointing with Consumer Confidence and the Richmond Fed disappointed with lower than expected readings. Case-Shiller report on housing was better than expected, but still showed housing prices fell overall. Today’s market closed was a bit disappointing as the major indexes clsoed off their highs. While today’s green close is a step in the right direction there is much more work to be had if this market wants to rebound. Angela Merkel’s debt sharing comments did send stocks immediately lower, but the market was able to rebound and push higher. Perhaps mutual funds looking to deploy cash for month end reporting had something to do with the move, but anything is possible. The action today was very much like Friday’s market action trying to recover from prior day losses. We remain in sell mode despite the rally today. Tomorrow we get durable goods figures at 830 followed by pending home sales at 10am. However, market pundits will likely look to Thursday’s arrival for first quarter annualized GDP figures. The market is looking for growth of 1.9%. Our economy is not humming along as it should and worse of all we are bumping up against the business cycle. Every 4-6 years the economy enters into a slowdown and by all indications our economy is about to enter into one. Any disappointment should usher in lower equity prices, but we’ll simply follow where the market will take us. Who knows? A very negative number could usher in a new round of quantitative easing! In the end price matters and rules above all else. Price destruction going on with European stock indexes is quite extraordinary. Germany, Spain, and Italy are three looking mighty vulnerable at the moment. All three remain in downtrends and especially scary is the German DAX index. The Germans are the ones holding up the Euro and with the weakness in their stock market certainly speaks volumes. Europe will drive a lot of the conversation and certainly will weigh on the minds of traders globally. Cut those losses short and enjoy the ride.

NASDAQ Leads the General Market Lower

Despite positive news from the Dallas Fed Manufacturing survey and new home sales data the market sold off. The NASDAQ led the decline closing lower by 1.95% followed by the Russell 2000 down 1.71%. Volume overall was lower than Friday, but Friday’s volume was exaggerated by the annual Russell rebalance. Price action is most important with the averages closing off their lows, but overall price action continues to be weak. It appears now Friday’s market was merely propped up; engineered to assist with the Russell rebalance. We remain in sell mode and today’s sell off confirms we are in a very weak market. We can certainly blame Europe for our woes, but in the end price is all that matters. Commentary on whether or not Europe’s troubles or the United States fiscal cliff is to blame really is nonsense. Price will always lead and by the time you get done figuring out what may or may not happen the opportunity to take advantage may pass you buy. Even worse, if you are wrong do you know where you get out? In addition to following price you must practice a sound money management discipline. What good are entries if your exits are poor? Money management is certainly something many traders have yet to master. Where do you exit? When do you exit a losing or winning position? Have a sound plan on when you exit a position and execute that plan. Do not let your emotions take you away from your game plan. Your emotions are one of the hardest things to master and it is vital you do so to become a successful trader. We are still witnessing a lot of downside pressure on plenty of stocks. INTC is one of them, but there are others. Signals on the short side as well as inverse ETFs are presenting themselves to us. After Thursday’s rejection at the 50 day moving average for the NASDAQ we are still primed to test June lows. Perhaps we can turn things around and head higher, but there is a ton of overhead resistance. One can look at Thursday and figure it out. Remember, we are in sell mode at Big Wave Trading and will act accordingly. We have yet to see the situation turn for us to get long this stock market. Get a game plan and join Big Wave Trading!

More Twist, No QE as Stocks End Flat

The story of the day was the Federal Reserve and its actions. With very little on the economic front the market turned and waited on the Federal Reserve to deliver its rate and policy announcement. Failing to initiate a third round of quantitative easing the Federal Reserve did extend its “Operation Twist” until the end of the year. Stocks reacted in volatile fashion and during Bernanke’s testimony, but finally settling near the unchanged level as volume fell on the day. Taking a step back we saw a good day of consolidating the recent gains. Avoiding any further deterioration will be a must for us to continue on a new uptrend. Gold and crude oil did not react as if there was going to be immediate action by the fed to pump more liquidity in the market. Crude was down more than 4% at the stock market close a big tell the trend in crude remains to the downside. Gold finished down roughly 1% on the day as both commodities continue to act as if the Federal Reserve will not print any money any time soon like the equity market. It is quite clear stocks are expecting the fed to step in with further easing to support the market. At the end of the day we follow price and where it goes we do. Opinions mean very little. Listening to Bernanke during his press conference it is apparent he is looking for Congress to get its house in order. The unfortunate part of the quantitative easing is in order for it to work properly budgets must be balanced. Continuing to raise the debt burden only acts as a drag on the economy. Sure short-term bursts of debt are okay and manageable. However, massive debt spending over extended periods of time coupled with money printing is very flammable. History has provided enough evidence when money printing goes unchecked, fiat currencies always dissolve or evolve causing very painful contractions. We need our fiscal policy in order to avoid financial disaster down the road. Luckily we have price as our guide and we’ll be taking full advantage. The future is unknown and while many will try to predict what will happen know one actually knows. Using a rule based system allows us to focus on what matters and ignore the junk you hear from the financial media. Cut those losses and let your winners run.

NASDAQ Captures its 50 Day as Volume Rises ahead of the FOMC

Another good day for the markets as leading stocks continued to see breakouts. Volume rose on the day, but remained below its 50 day volume average. The market was able to ignore poor housing starts while building permits picked up more than expected. European markets closed higher calming fears over economic collapse in the Eurozone. Small cap stocks lead the market today with the Russell 2000 rising 1.8%. The NASDAQ was able to close with gains of 1.19%, but last hour selling did knock the index off its perch. We are not about to argue with the market and the rise over the past few days has been on better volume and we’ll follow the market’s lead. Tomorrow’s FOMC rate decision along side Bernanke answering questions from reporters will certainly have the market on its toes. Certainly we would want to avoid any sort of major meltdown ruining the current uptrend in the market. While we haven’t gotten a strong confirmation day if this market can avoid heavy distribution the better chances we have of continuing the trend. It is anyone’s guess what the FOMC will do, but given the recent testimony from Bernanke QE3 is not a likely scenario despite the market begging for it. Bernanke needs a plan out of DC of getting our debt under control by running surpluses. Without a plan it is very difficult to introduce a third round of easing with risks of skyrocketing commodity prices. In the end, no one knows what the FOMC will decide on and it is prudent to follow price. Switching gears and focusing on price the NASDAQ was able to regain its 50 day moving average. This is a very good sign for the market. Of course we’ll need to see the NASDAQ hold onto this moving average, but for now we have a significant development. In addition, we have quite a few leading stocks breaking out. They will need to continue the positive action for it to be a positive for the market. If we get headfakes from these leaders it will be a signal to get defensive. Right now, we have a green light from the market. Tomorrow will be an interesting day and it will be fun watching the action. Cut those losses!

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

New Seeking Alpha Article - Four Stocks Hitting New Highs In A Weak Tape

I penned this last weekend but am finally getting around to post this on this blog site.

Rumors of Central Banks Moving to Provide Liquidity Help Lift Stocks

Good news for consumers as CPI dropped, but a worse than expected jobless claims figures continues to show the weakness in the job market. The big story of the day was rumors of a joint strike by central bankers to provide liquidity to the market. Money printing operations has already pumped over $6 trillion into the market and we continue to see the need for more. Stocks did get a big boost, but failed to retake Wednesday’s high. Volume jumped on the NYSE and NASDAQ, but it continues to be very light and below average. Not too many institutions were out buying the rumor over further easing. The market continues to search for direction on day 9 of this attempted rally. Tomorrow we get quadruple witching Friday and you can bet volume will be explosive during the early going. The market will certainly be adjusting to where traders want to be positioned for the Greek elections on Father’s day. A secret “poll” was released in Greece sending Greek stocks higher ahead of this weekend’s elections, but does it even matter? Given the Spailout the Greek’s will want similar terms and then what? Can Italy borrow even more at 7% while only collecting 3%? Is piling more debt on top of debt going to work this time? This is precisely why following price and not guessing where the market will be is much more efficient way of producing superior gains from the market. Sentiment this week tipped the scales back to neutral with bears falling to 36% while bulls jumped to 34%. Neutral market participants continue to be the main driving force of sentiment. Respondents are simply not willing to step in either direction, something we haven’t seen from the market in a long time. The next major move will certainly be powerful with the number of neutral market participants remain very elevated. Happy Father’s day to those dads out there who do their job! Get out and enjoy the weekend and life!

Stocks Try to Recoup Yesterday’s Losses in Mixed Trade

European fears remain, but rumors of the Federal Reseve moving towards quantitative easing part three brought buyers back into the market. Gold and silver jumped on the news, but both precious metals remain well off their highs. Early trading saw sellers give way to buyers as the market was fed rumors of of further easing by the Fed. It appears the only thing that will get buyers into this market is for the Federal Reserve to simply print money. Today’s market wasn’t too exciting with volume well below average. We again, failed to produce a follow-through for the most recent rally attempt and we continue to remain in on shaky ground. The price gains were solid today despite the tepid volume. What we’d really like to have seen is gains well above 1.5% with volume jumping above yesterday’s level AND above average. Today was day 7 of an attempted rally and while follow-through days can occur after day 7 they tend not to produce tremendous gains. In addition, this is June and June follow-through days have only once produced a viable rally. At this point in the rally attempt given Monday’s action it feels highly unlikely we’ll see a successful follow-through day. If we do get one we’ll act accordingly, but for now a follow-through day is not likely. The intraday swings we are experiencing continue to widen. The VIX still remains relatively low considering the move we have experienced since the start of May. It appears market participants are not THAT fearful of future volatility. Just looking at the past 5 trading days the market has swung quite a bit between the intraday high/low. While this may end up being meaningless, but increasing intraday swings without further price movement tends to be bearish for the market. If we were moving higher it would be a different story. Last Thursday and Monday’s reversals are not ideal in this market and we’ll need a big push above those highs to get this rally going. Always cut those losses! Getting in is half the battle.

Markets Say No to Spailout, Stage Big reversal

The EU bailout of Spanish banks was received well when the futures market first opened Sunday evening. Sellers dominated the day as the markets sniffed out and disapproved of the Spailout. US equity markets did enjoy a good start, but selling was unforgiving and relentless heading into the close. Volume was higher than Friday’s dismal showing. At this time, volume is not going to matter as price action is clearly on the negative side. Price action says it all and it is not saying good things about this market. Not helping matters was AAPL’s big reversal despite its annual June meeting. AAPL did not announce any new amazing new product like apple TV or a new iPhone. The stock now appears to be failing at its key 50 day moving average suggesting May’s lows may be the next target of the stock. GOOG has already had a head start on AAPL as the stock put in an ugly reversal day. Both tech giants do not look healthy at this point and will continue to put tremendous pressure on the NASDAQ if selling continues. Volatility kicked it up a notch today getting support as the market digested the news out of Europe. The VIX jumped right off its 50 day moving average today and certainly shows a bit of a fear coming back into the market. At May’s lows the market failed to produce any sort of capitulation. The VIX never made it above 30 a key level where panic enters the market. Until panic enters the market we’ll likely continue to see lower lows and lower highs in this market. Adding to the mess we call a market will be options expiry. Greek elections are being held on Sunday and combining the elections with Spailout options expiry will certainly add layer of complexity. It is crucial we stick to price action of the market rather than guessing what might happen if the Greek elections go one way or another. After today it is pretty clear the bias is still negative. Stick to your stops and cut your losing positions. Your long term success in the market depends on it.

Big Wave Trading Portfolio Update And Top Current Holdings

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

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

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

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

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

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

4 Gold Stocks For A Bear Market

Market Finds Relief, but Volume Fades

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

Stocks end Mixed as Volume Slumps

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

Big Wave Trading Portfolio Update And Top Current Holdings

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