Heading into the new trading month of June our models remain under a very mixed combination of operational signals. The trading action the past week continues to indicate that the choppy erratic price action is going to stick around a bit longer. Our overall bias continues to be neutral in terms of the overall market but bullish in regards to individual leading stocks. Our new long signals and our current holdings continue to work, despite the chop we are seeing in the indexes.

Looking at each individual index, we are under an operational BUY condition in the Nasdaq and Nasdaq 100, an operational BUY/NEUTRAL condition on the SP500, an operational NEUTRAL condition on the DJIA, NYSE, and Russell 2000, and an operational sell condition on the DJT. The wide variety of mixed signals is more cosmetic here as we are nearly fully invested on the long side. However, the mixed signals acts as a weight on the amount of capital that is allocated to each new long position. As long as the operating models remain mixed, we will continue to allocate smaller allotments of capital in new long positions.

While we are heavily long on margin, we continue to keep an eye on the exit door. We are not blinded by our investments and while it has been a very good year for us at Big Wave Trading compared to the returns in the overall market we do see some worrisome developments in the data that leaves us a bit cautious here. That being said, we know that price is all that matters and as long as prices in our holdings are trending higher we are going to continue to be long. When they start trending lower, our stops will hit and we will be gone well before any real sell off occurs.

Our biggest concern is obviously the DJT. The DJT has only diverged from the DJIA like this 3x in history. 1928, 1973, and 2000. Go check out the 1-yr, 3-yr, and 5-yr returns in the overall market following this development. While this is definitely not bullish for the overall market, we can continue to rally for a while before this becomes a problem. Remember, we have not gone parabolic yet in a blow-off type run (look at the current Shenzen index in China for what a parabolic run looks like). When I see that move, I’ll start to look for a top. Until then, I am not even going to try to time a top in this market. The trend is my friend until our stops hit.

Expect more chop but be ready for a breakout higher or lower at the same time. The greatest traders are ready for every and all outcomes. They do not place their bets blindly and follow their bias without an escape plan or contingency plan if things do not work out. Be prepared and ready for everything and in this market always trade with hard stops on the book. Don’t give the illiquid market a chance to catch you with your pants down. I’ll see you in the chat room on Monday. Aloha.

TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – DATE OF SIGNAL

VIPS long – +597% – 7/17/13
AGIO long – +142% – 9/24/14
ANAC long – +106% – 1/20/15
BLUE long – +101% – 2/25/15
CBPO long – +99% – 10/24/14
PAYC long – +97% – 10/30/14
SWKS long – +95% – 10/28/14
VDSI long – +87% – 8/4/14
AVGO long – +75% – 10/28/14
SKX long – +75% – 1/26/15
VRX long – +74% – 11/17/14
GIMO long – +63% – 2/2/15
ESPR long – +59% – 3/9/15
PANW long – +55% – 11/10/14
EA long – +52% – 11/10/14
RUBI long – +51% – 10/29/14
CVTI long – +47% – 11/3/14
EGRX long – 46% – 4/9/15
DRRX long – 35% – 4/8/15
SERV long – +35% – 11/7/14
TERP long – +32% – 1/16/15
RCPT long – +31% – 2/20/15