“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