The Big Wave Trading Portfolio is currently under a NEUTRAL condition across the board as most major market indexes continue to trade in a narrow overall price range the past few weeks. This is not surprising given that we have now been overbought for the past couple of weeks. While the indexes are slowly working off this overbought condition on the intermediate time there is still some downside risk with all of the osciallators I watch starting to really rollover here. It would not shock us here if the major market averages did pullback to their 200 day moving averages. We are prepared for that potential outcome.
While we are not banking on this happening we are respecting the velocity in this rollover from the overbought conditions in the four oscillators we do watch. This being said, nothing states that the market has to move lower here. We could have easily found a floor on Friday and we might be off to new highs by the end of the week. The odds say don’t bet on that outcome. The prudent speculator will at least respect that anything can and will happen in this tape.
For now, we believe that with a ZIRP policy still in effect and a strong US Dollar index now that it definitely doesn’t pay to fight the overall macro trend. As long as rates are low, the best option continues to be to BTFD. However, I would love to see this market come down and get oversold before plunging into any one leading stock. For now, since we are still overbought, it pays to keep new trades smaller until we can at least see which way we want to break out of the current price ranges we are in.
Short-term while we believe stocks should move lower it should eventually lead to a floor so I don’t recommend just selling your stocks here because we should continue to pullback. It is prudent to sell off your laggards and move that capital into either cash for the next round of leaders that breakout with the overall market or into any current leaders showing no signs of weakness. While we did have some moving average violation sells on Friday nothing looked too terrible outside of REITs and Oils. We now only have one stock each in our portfolio exposed to those sectors. Not too long ago we had over a handful. That tells you all you need to know about those two sectors right now.
Alright everyone. Enjoy the rest of your weekend and we wish you the best during the upcoming week. Let’s see which way this market wants to go. It looks like it should be lower but our current long positions that have not violated any trendlines or moving averages would love an upside surprise. Thank you. Aloha.
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE OUR SIGNAL DATE – DATE OF SIGNAL
VIPS long – 479% – 7/17/13
HEES long – 233% – 9/4/12
AER long – 165% – 6/27/13
WDC long – 128% – 1/9/13
TPL long – 120% – 10/22/13
USCR long – 83% – 4/12/13
OVAS long – 48% – 8/8/14
ENPH long – 37% – 8/14/14
BDSI long – 28% – 8/19/14
