The Big Wave Trading models are under an across the board operational NEUTRAL/SELL condition following the sell off on 6/29 on very strong volume. The NYSE and DJT are under an operational SELL signal while every other major market average is under an operational NEUTRAL signal. A break below the 6/29 LOD’s in the COMPQ, SPX, and DJIA will throw these models into an operational SELL signal. The RUT remains a fluid situation.
Despite the overall weakness in our models, we still have not received any major sell signals or topping signals. We are still extremely long this market with almost all of our current holdings registering either large gains, small gains, breakeven, or tiny insignificant losses. We will continue to hold these long positions until major support levels are violated. For now, every name we are long is still trending higher.
When and if these long signals break their key support levels, we will be stopped out. In fact, all of our long signals have very tight stops just below key support levels. If the market continues to pullback we will be taken out of any stock that stops uptrending. With our stops so close to the most recent key support levels, it would not take much of a market sell off before we are back to being in heavy cash. For now, we remain prepared for any and all outcomes.
Following this past week, it is becoming clear to us that there does appear to be a character change developing in the overall market. Our new long positions heading into Monday obviously are a mixed bag and the few long positions we have received post that Monday sell off have also been hit and miss. This is definitely a change of character in regards to our new long position signals.
On top of this, the quality of our long signals are diminishing and less and less “good looking” technical patterns are presenting themselves in my scans that I sort through every evening. If the 6/29 LODs go, you can be sure that we will be void of very many–if any–long signals (minus the few leading stocks in sectors that are doing well during any pullback). We have already begun reducing the position size allocated to each new long position following the 6/29 sell off. Our requirements for any signal to pass and become a new long position, until the market finds some sort of technical support, will be very high.
The bounce following the 6/29 sell off has definitely looked, traded, and felt like a dead-cat bounce. It is still too early to tell what the market wants to do here but on Friday the Russell 2000 failed its 6/29 lows and I do not see that as a short-term bullish development. The fact that volume continues to contract is also a sign of concern for any bull that believes the worst is behind us. In my opinion, there are too many noisy catalyst that could cause prices to move one way or the other right now that we believe it is wise to be a respectful bystander when it comes to calling a market bottom or top here.
For now, we will continue to hold our long term winning positions and keep a trailing sell stop behind them. When they hit their sell stops, we will take our profits and look for new long positions to enter. If there are no new long positions to enter then that will be even more confirmation that the market wants to downtrend. However, until we see the Fed raising interest rates it remains advantageous to look at pullbacks as potential buying opportunities rather than looking at rallies as potential shorting opportunities. Bottom line, we still have an accommodative Fed.
Have a great rest of your Fourth of July weekend everyone. We wish you all the best during the upcoming trading week. Aloha.
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – DATE OF SIGNAL
ANAC long – +128% – 1/20/15
AGIO long – +119% – 9/24/14
CBPO long – +106% – 10/24/14
VDSI long – +100% – 8/4/14
PAYC long – +93% – 10/30/14
SKX long – +91% – 1/26/15
SWKS long – +87% – 10/28/14
GIMO long – +72% – 2/2/15
BLUE long – +69% – 2/25/15
VRX long – +67% – 11/17/14
EA long – +64% – 11/10/14
AVGO long – +63% – 10/28/14
PANW long – +59% – 11/10/14
RCPT long – +55% – 2/20/15
EGRX long – +50% – 4/9/15
SERV long – +46% – 11/7/14
ADPT long – +43% – 5/18/15
AMBA long – +33% – 5/14/15
CACC long – 29% – 4/8/15
DXCM long – +26% – 4/2/15
