The Big Wave Trading Portfolio model remains under an awkward position with our model currently under a BUY signal in the Nasdaq 100 index and a NEUTRAL signal in all the other major market averages. As each average hits a new 52-week high, the NEUTRAL signal will switch to a BUY signal but for now only a very small arena of stocks are showing real solid RS here and it is in an index that we normally do not track. However, when a certain index is leading you can be sure we will take notice and move our investing accordingly. Therefore, for now, the Nasdaq 100 index is on our radar and we will operate on the long side with solid signals accordingly, even with the rest of our model under a NEUTRAL signal.
Despite the recent gains and strength in the Nasdaq 100 my scans and overall watchlist give me that same feeling I have had since the selling started which is that this time we have something different from the 2013 pullbacks. In 2013 the indexes violated their 50 day moving averages but when they did so most stocks in my portfolios would hold that line. This time that was different. During the previous pullbacks, most of my stocks sold off on lower volume. This time they did not. During previous pullbacks, my long scans stayed healthy with leading sectors holding up well. This time they are not (Biotech excluded) and defensive industries like REITs, Aerospace/Defense, Utility, Oil, Gold and Silver are starting to dominate my scans.
When the previous leading sectors like Banks, Techs, Biotechs, Solars, and other innovative sectors would pullback they would do so on lighter volume and their charts would stay green/yellow. Now we have higher volume pullbacks, real breakdowns, and very yellow/red charts. This is very telling. It indicates a market that is not healthy and if we do continue to move higher more than likely will not do so in a nice stair-step pattern like it did in 2013. Does it mean this rally is doomed to fail no matter what? Of course not. However, the odds are very high that the potential gains here will not outweigh the potential losses that can occur from a market with its current technical setup.
What if the market continues to rally higher from here without another pullback? Well then it looks like for the time being that I will be underinvested and will have to play catch-up. However, if that is the case, you can be sure that the market will offer up plenty of leading stocks that will setup in sound consolidation patterns and produce actionable buy stop pivot point areas or buyable breakouts. It will be impossible for an uptrending market to not do this, if it is healthy. If it is not healthy, then we will chop around and I will not worry about the possible missed gains because it simply is not in my DNA or nature to daytrade for quick action or to short-term support/resistance trade. If that is your style, and this methodology is not working, then work with it.
Another indication that something is off with this uptrend (ie…it is a suckout) is that once again we do not have any actionable new long signals. The positive from Friday’s session is that there are no sells for Tuesday which can be considered decent considering the past few up days we have not only had partial sells but full sells. Something else we rarely ever saw in 2013. There are so many differences with this pullback and subsequent rally compared to all other pullbacks and rallies in 2013 that forces my experienced mind to tread lightly here.
If you have a methodology that can pinpoint and attack the momentum stocks that remain in the small cap arena or you are able to focus on the Nasdaq 100, set your buy stops, and then execute on them, you will do well. If you don’t have the nature, ability, or time to trade like this, then you are going to have to wait for the tape to become more orderly again. Until then, it will be time to do what Jesse Livermore says is the hardest thing to do. And that is sit. Sit on your cash waiting to deploy it in a great setup.
Surf remains extremely active on our north shores of Hawaii. The insane winter of non-stop surf continues. Perfect winter weather and perfect winter surf. Those of us that live outside of the matrix couldn’t ask for anything more. Aloha and enjoy the long weekend.
TOP CURRENT HOLDINGS – PERCENT RETURN SINCE SIGNAL DATE – DATE OF SIGNAL
NOTE: The top current holdings below are not full positions anymore as a lot of profits have been taken following the pressure the market observed in late January. That being said many members of this website still have full positions and have the full unrealized gains still. At the same taken, some members have been shaken out of most if not all of their positions. If you do not see a stock on the list anymore that was on the list before with large gains that means we have exited the full position (IE…FLT, ADUS, ONVO, WST). Hindsight is 20/20 and FLT, WST, and ONVO might bite me in the arse but our hard rules are our hard rules. In this QE environment though, we might still need to implement further revisions to our sell rules. As always, this career, is a work in progress. It always has been and you can be 100% sure it always will be.
CAMP long – 415% – 4/26/12
WAGE long – 220% – 1/8/13
POWR long – 220% – 12/11/12
VIPS long – 219% – 7/17/13
HEES long – 154% – 9/4/12
AER long – 123% – 6/27/13
FLDM long – 119% – 8/28/13
LOCK long – 116% – 5/20/13
CMGE long – 103% – 12/16/13
WDC long – 97% – 1/9/13
DDD long – 93% – 4/30/13
CLFD long – 82% – 9/24/13
V long – 76% – 8/31/12
JAZZ long – 76% – 10/22/13
FB long – 65% – 8/23/13
USCR long – 60% – 4/12/13
ALXN long – 45% – 11/15/13
TPL long – 44% – 10/21/13
GOMO long – 41% – 12/13/13
ICLR long – 38% – 4/30/13
ARC long – 36% – 10/16/13
SCTY long – 30% – 12/19/13
CADX long – 28% – 1/10/14
Nice work … First time that I come across this web site. Nice to see similar thinking ….
Thank you so much my good man. Much appreciated. Aloha.