Sentiment continues to be negative, but the Investors Intelligence survey continues to lack the negative bearish sentiment. AAII survey certainly saw bears jump in terms of percentage and its bull ratio near lows, but the lack of bears responding to the II survey is somewhat concerning if you are bullish. The NASDAQ has corrected roughly 10% from its March highs which should be ushering in a bearish view point. However, we continue to see the neutral camp dominate the II survey. Given our current situation nothing that happens from here on out will not surprise us.

FB will be an entertaining IPO and will likely be a wild ride given the current market situation. We are oversold and a bounce would not be out of the ordinary for a quick snap rally to occur. Tomorrow’s options expiry will certainly provide the morning with fireworks. The oversold nature of this market tomorrow would be as good of a time as any for this market to push higher to work off the current oversold conditions. Cash is king here and we are looking forward to the weekend.

Get out and enjoy the weekend!

Update: If by some chance I can not get any of the stocks short below I will replace them with ATEC. ATEC could still be a new short. That is a big rollover breakdown. Check back in the AM. I’ll update this post with my decision after I place my orders tonight. Oh yeah and a reminder: None of these setups are perfect because we are oversold. If you want to make any of the 5%ers into a 10% or 20% or even 50% position that is on you. You figure out what you are comfortable with. I know when I should push. We would push here, if we were not so oversold.

New Short Positions: SNTA PCYC CLDX (5%) GOOG GGC ARIA (2%)

SNTA – The final cut loss is with a close above the 4.14 level.

PCYC – The final cut loss is with a close above the 29.33 level.

CLDX – The final cut loss is with a close above the 50 day moving average.

GOOG – The final cut loss is with a close above the 633.83 level.

GGC – The final cut loss is with a close above the 32.03 level.

ARIA – The final cut loss is with a close above the 17.47 level.

Adding To Existing Short Position: CMG (2%)

CMG – The final cut loss is with a close above the 406.24 level.

New Long Positions: none

none

If one had to guess just by looking at a chart of the NASDAQ it is quite easy to see the 200 day moving average is a logical next step for the index. Yes, we are oversold and sentiment is getting quite negative we have yet to see any real panic set into the market. The VIX, a measure of fear has yet to signal real fear in this market. Perhaps a move above 30 would signal enough fear, but it has yet to eclipse the 30 level. Talk of another flash crash is always imminent given the even happened only two years ago. For now we have a market creeping lower and lower and even with FB coming public on Thursday there is very little that can save this market from the inevitable.

The United States has been on a war path regarding spending. Wars, social security, medicare, prescription drug coverage, etc are a big drag on the government budget. Unfortunately, Washington DC will not tell the American public the truth. Spending needs to be lowered end of story. The Buffett tax is only estimated to bring in a few billion dollars a year extra! We have a 1.5T yearly hole at the moment that Obama feels quite comfortable with. This is nuts! The only fix is to overhaul the tax code into a one page simple code and reduce spending. However, the media and Obama administration do a great job distracting the public from the facts. If anything, the United States fiscal cliff is far more dangerous than a Greece leaving the EURO.

As a reminder, this week is options expiry and Friday should be a fun day. Tomorrow will more than likely be a bit more entertaining with FB coming public. We are not planning on participating in the IPO nor trading it on the first day. We’ll sit back and wait for it to base much like EBAY and GOOG did after their debuts. We’ll be patient.

Execute you trading plan and cut those losses short.

New Low-Quality Long Position: PCYC (1%)

PCYC – The final cut loss is with a close below the 27.39 level.

Adding To Existing High-Quality Long Position: MSA (2%)

MSA – Cut your final loss with a close below the 42.40 level.

New Short Positions: FRP AEH CPO (2%)

FRP – Cut your final loss with a close above the 5.75 level.

AEH – Cut your final loss with a close above the 50 day moving average.

CPO – Cut your final loss with a close above the 55.24 level.

Big Wave Trading has been under a sell signal for a bit here and now we can see why. The market remains oversold, but if the market has taught us anything it is these conditions can last for quite some time. It wouldn’t surprise us if the market produced a rally over the next day or two to resolve some oversold conditions. However, it is quite clear the trend is down and any counter trend rally should be shorted. We can blame the situation in Europe or even point to the fiscal disaster awaiting the United States. It simply doesn’t matter, price wins and we’ll follow its lead.

Just to throw a monkey wrench into the mix this week happens to be options expiry (OPEX). Always appears the market tends to get into a volatility craze prior to OPEX. Today we saw the VIX index multi-month highs confirming the selling we see on the S&P 500. This goes for the NASDAQ too, but the S&P 500 has been leading us lower and given the moves in the VIX it appears the selling isn’t done.

All signals are pointing to this market pushing lower and there is not much we can do about it. Sure a bounce may occur, but it won’t have the gusto it would need to kick off a new market rally. Too much damage has occurred and it will take a lot to repair the damage. Cut your losses and enjoy the ride.

New High-Quality Long Position: PENN (1%)

PENN

New Low-Quality Long Position: HPP (1%)

HPP

Adding To Existing High-Quality Long Position: CHSP (1%)

CHSP

New Short Positions: PLAB URI (2%)

PLAB

URI

Adding To Existing Short Position: BECN (2%)

BECN

There are plenty of reasons for this market to turn lower. A Greece exit is projected to be a very costly, but may be necessary venture. In the long run it may be the best case scenario to stop endless bailouts. In addition, the market is sniffing out the ramifications of the fiscal cliff the United States is headed towards. Higher taxes and lower spending to curb deficits will certainly lead to an economic slowdown. When you include government spending in GDP (remember, government has to take from corporations and consumer) of course when government spending is contracting so will the economy. There isn’t much other than taking our medicine we can do to avoid the inevitable.

One saving grace in the near term is the oversold conditions we have in the market currently. While conditions can remain oversold for quite some time coupled with the overwhelmingly bearish talk and lack of bulls it would not be inconceivable for a rally to occur. Shorting at obvious times tends to end in disaster for many. Have a game plan and execute it flawlessly.

Over the next 24 hours at some point Greece will decide one way or another if they will pay more than 400 billion dollar principle payment. It’ll be interesting to see if they are going to pay it or not as it will be a significant headline driving the morning buzz regarding the market. It wouldn’t surprise me if somehow the Greeks were allowed an extension or some sort of relief to avoid a potential disaster. Have a game plan and leave the guess work to CNBC’s market pundits.

Cut your losses short and enjoy this market.

Night update: ACFN is not available for short sale period at IB. Trade is off. You can take it if you like. It was an overall weak day for the market with the SP500 throwing up a distribution day. Volume was lower on the Nasdaq but the ugly feel of today was still clear. A bounce toward the 50 day moving average seems very plausible here but further deteoration by retail and banks stocks today make it clear where the market wants to go right now. If it will indeed do that is totally unknown. Since there is no longer a free market and thus federal intervention could come in at any moment and turn these charts around, you have to have 0% bias to one side or the other. However, the writing is on the wall for this summer to not be a fun one for bulls. I am shocked we continue to get long signals but it isn’t like they are in the bullish tech sector. We have a food and metal stock today. We had a medical stock on Friday. It is defensive industries. Biotech is increasingly, it appears, becoming a safety zone too. How things change decade from decade. One of my favorite stocks right now basing is HXL in the Aerospace sector. We shall see if that decides to breakout. That might be our first 5%er in a long time if it does. The trend is becoming clear and we continue to build our short positions via inverse ETFs in the IRA or shorts in the margin account. Patience. Patience. The big money might be coming soon.

New High-Quality Long Positions: UNFI MUSA (1%)

UNFI – Cut your final loss with a close below the 50.38 level.

MUSA – Cut your final loss with a close below the 15.27 level.

Adding To Existing Long Position: HSFT (1%)

HSFT – Cut your final loss with a close below the 15.72 level.

New Short Positions: KEP RPRX (2%)

KEP – Cut your final loss with a close above the 9.90 level.

RPRX – Cut your final loss with a close above the 7.89 level.

“Every once in a while you must go to cash, take a break, take a vacation. Don’t try to play the market all the time. It can’t be done, too tough on the emotions.” — Jesse Livermore

“FYI – JPM $2b loss was someone’s $2b gain.” — Big Wave Trading’s second-in-command, MarketSpeculator

The Big Wave Trading Portfolio continues to be under a SELL signal triggered on 5/4. This has been the strongest SELL signal YTD as multiple confirmations in various futures/ETFs were triggered. However, due to the current choppiness of the market, possible QE3, and frequency of recent false signals, we are moving slower into our ETF positions. Still the bottom line is that the signal remains true and proper price/volume action is following. While we remain under a SELL signal we have been getting a lot of long signals from the Biotech and Housing related sectors of the market. Indeed it remains a mixed tape. There is more bad than good out there but it is still not weak enough to push short positions heavy. If there were not any long signals in quality stocks, this would have us wanting to push. Instead we will be patient and wait for real follow-through to the SELL signal that was produced on 5/4. Overall we remain like water. Very liquid and willing to move from one direction to the next until we get what we need to push us all-in on full margin. Right now, capital preservation instead of hitting home runs remains the name of the game and has been since our large gains in February were completely taken away by March and April false signals. It’s a tough environment but professional traders know that a big trend always follows. This type of tape is meant to wear you out not necessarily knock you out. Those that are patient and careful with their capital when signals are not immediately followed-through are going to do much better than wild and loose trading. If we do not break down here and instead reverse back above the indexes 50 day moving average obviously the SELL signal will be taken off. We remain under the thesis that any rally here to new highs would be even more bearish than before. Volatility is too low and breadth is too poor for any sustainable uptrend to come about. A market being lifted by a few stocks always crashes. Before we can have any real uptrend to make some real powerful gains, this market needs to correct. If QE3 comes to the rescue we believe that it will only lead to a more powerful and vicious black swan swoon. A correction here would be healthy. A rally would not. Only after a correction will we be looking to get heavily long high quality breakouts in stocks or fully long a BUY signal with leveraged ETFs.

Top Current Holdings – Percent Gain – Date of Signal

LQDT – 79% – 2/1/12
AVD – 75% – 1/10/12
BVSN short – 64% – 3/16/12
MNST – 42% – 1/13/12
ABR – 28% – 2/29/12
VRNM short – 27% – 4/10/12

New Long Positions: MDVN HSFT (1%) KSW (1%)

MDVN

HSFT

KSW

Adding To Existing ETF Position: UVXY (5%)

UVXY

New Short Positions: PRKR PHMD

PRKR

PHMD