From the Trading Desk

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio is under multiple signals currently, as small caps are significantly outperforming big caps. Overall the Model is weighed mixed BUY to NEUTRAL with the Russell 2000 being under a clear BUY signal, the Nasdaq under a BUY/NEUTRAL signal, and the SP-500, DJIA, and NYSE being under NEUTRAL signals. For what it is worth, the Nasdaq will switch to a BUY mode with a new high printed on the index, with or without volume.

As has been mentioned here every weekend since May 22nd, all signals should be taken with a grain of salt during choppy summer time sessions where volatility increases. This also being a QE/POMO market, all SELL signals must be taken with baby steps until a clear roll over on heavy volume is triggered in all major market indexes, leading stocks, ETFs, inverse ETFs, leveraged ETFs, and inverse leveraged ETFs. Unless there is a complete confirmation, funny money printed by the Federal Reserve will continue to act as a floor. In time that will change but for now betting against that trend is foolhardy.

With the switch in the Russell 2000 to a BUY mode and a switch in the Nasdaq to a BUY/NEUTRAL mode, we can now operate a little bit more aggressively on the long side in small cap and technology related positions. We are also taking off our remaining hedges and are now only long individual stocks in the managed accounts. If the market decides to roll back over, we will not hesitate to start building our hedges once again.

The biggest lesson to be learned this past week is that trying to call or predict a top in this market is, for now, not a very profitable methodology when the tape is dead. The saying “never short a dull market” comes to mind, first off. Second, “never short a QE/POMO market” follows right behind. The bottom line is that is just does not pay to be a “committed” bull or bear. This market remains very unfriendly to trends and trend followers, overall, and staying constantly neutral and flowing like water is the best advice I can give to anyone trying to navigate it.

Overall, it is shaping up to be another no-to-low volume rally, following an above average volume sell off. This pattern was never sustainable before 2008 and now it is the norm for the past three years in a row. It is what it is.

OK, it’s time for me to catch one last round of the nine-day swell that has been hitting my backyard in Lahaina. While the market hasn’t been full of action for trend followers lately, at least the Pacific Ocean has been for surfers. If you can’t ride one wave, ride another. Have a great post-holiday weekend. Aloha from Maui!!

Top Current Holdings – Percent Gain since Signal – Date of Signal

CAMP long – 175% – 4/26/12
POWR long – 140% – 12/11/12
RVLT long – 124% – 3/26/13
CSU long – 100% – 9/4/12
WAGE long – 93% – 1/8/13
FLT long – 89% – 9/6/12
ASTM short – 81% – 7/17/12
HEES long – 80% – 9/4/12
CHUY long – 68% – 1/10/13
SBGI long – 62% – 3/22/13
GLL long – 58% – 2/14/13
ADUS long – 52% – 4/22/13
V long – 48% – 8/31/12
WDC long – 47% – 1/9/13
TECUA long – 46% – 2/5/13
INSM long – 38% – 4/19/13
MEI long – 37% – 4/10/13
LGF long – 31% – 4/19/13

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