As we head into the new week there are cracks that are starting to show in the armor of the stock market. Distribution days have been common as this rally has become a little extended and finally on Thursday the market decided to crack. The selling on that crack followed through on Friday but we got another solid intraday reversal to help save the session from what could have been quite an ugly two day reversal. All in all, the market is under pressure but the uptrend still remains in tact and our operational models are still under an across-the-board BUY signal.

Now that the rally is under pressure we are stepping back from taking any new long positions until the market shows signs that Friday’s lows have a chance of holding. The only way a new long position will be taken is if a CANSLIM/Perfect Speculator scan quality name manages to produce an actionable signal with the price of the stock touching the 10 and 20 day moving average on the signal date, the stock trading in a solid consolidation pattern, and the price being no further than 2 ATRs away from either the 50 or 200 day moving average.

As for our current long positions. It is time to raise stops on any names that are showing a small loss to the most recent lows. For any stock with a significant gain it absolutely can not be allowed to turn into a loser. For any stock with small gains currently, I am not going to allow them to turn into anything more than a tiny loss. The market is not weak enough to abandon all hope yet on long positions but it would be terrible to see the recent gains evaporate here so make sure you monitor your stops. Unfortunately, for right now, this time around, we have more smaller gains than bigger gains. It is what it is. It is a byproduct of a still very unstable and low volume market uptrend.

I have an open mind here and it would appear based on the market internals (breadth and new highs), along with the quality of potential setups in leading stocks, that we could get back on track once earnings season is out of the way. The charts are good enough. They are not great. But they are still good. The flip side of that is that we are heading into a very seasonally weak period from May to October. Will the sell in May thesis stick this time around? I do not know.

All I know is I am prepared for the market to uptrend, to downtrend, to flatline, or to become as volatile as it can be and go nowhere. In this new world, I do not see how you can operate in any other way. As of right now, I am heavily long with a small volatility hedge with some cash raised following Thursday and Friday. I will continue to position myself as the market dictates.

I wish you all the best during the upcoming week. Aloha and I will see you in the chat room. If you would like to join the Big Wave Trading team feel free to take a free here.

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

CLR long – +98% – 2/11/16
GRAM long – +65% – 4/1/16
FPRX long – +35% – 3/18/16
OLLI long – +27% – 2/24/16