From the Trading Desk

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading portfolios all remain under a strong BUY signal as stocks tacked on more gains the past week with volume coming in higher than the previous week. Overall, it was another strong week and nothing out there is currently of concern on our radar.

Despite the low VIX, the high amount of bulls in the Investors Intelligence survey, and lack of extremely strong volume when we do rally, we find nothing out there that indicates this rally is in danger of failing any time soon. As long as we continue to see breakouts and stocks setting up in tight consolidation patterns, we will continue to operate from the long side accordingly.

While some stocks like SSYS and DDD are beginning to get ahead of themselves, overall there is still a lot of upside potential left in many high-quality CANSLIM stocks and stocks with low P/E ratios that offer high dividends. As long as they continue to move higher and set up as they are, there is simply no reason to be looking for a top any time soon.

Since there is not much to do but continue to set buy stop orders on stocks nearing breakouts, there is not much to address this weekend. While I do hear some commentators trying to call a top, we believe that price is truth and fresh breakouts from strong consolidation patterns are more important than talking heads. We will become cautious on this rally after we either see stocks go into parabolic price gains on arithmetic charts, see stocks breakout and then reverse (like NTE recently) in mass, or see 5-6 distribution days hit the overall market in 2-3 weeks. Until we see this happen, as previously noted, we will continue to hunt for strong leading stocks setting up in consolidation patterns nearing breakouts and trade accordingly.

Remember, even though the VIX is now below the 13 level, it can go much lower. In 2007 the VIX went below 9. That means that we could still see a substantial rally in US equities, despite the low VIX

Top Current Holdings – Percent Return – Date of Signal

CSU long – 65% – 9/4/12
HEES long – 56% – 9/4/12
CAMP long – 49% – 4/26/12
VRNM short – 44% – 4/10/12
POWR long – 33% – 12/11/12
FLT long – 32% – 9/6/12
ASTM short – 31% – 7/17/12
GNMK long – 28% – 11/16/12
HIMX long – 25% – 12/9/12

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