The Big Wave Trading portfolio remains under a NEUTRAL condition as we await for this market to either break out to new 52-week highs or break down below the individual major market average’s 50 day moving average. For now, it appears, following Friday that the market wants to resolve itself lower. Especially since the Biotech and Solar stocks broke down on very strong volume on Friday. Even though it was quadruple witching on the options exchange it does not matter as the price action alone trumps the fact that the move came on a day of options expiration.
So what is next? Great rhetorical question from myself. Before Friday, we just got done reversing the negative action from 3/13. Following the action on 3/18 it appeared the market wanted to go ahead and tackle new high ground. However, in just one day, all of that was thrown on its head. The action on Friday is indicative of a market that does indeed want to pull back. Not only was the weakness in Biotech and Solar the main tip-off but the strength in REITs in my main long scan is continued evidence that we have a rotation of leadership into defensive industries and not new growth industries.
Therefore, we are NEUTRAL in our model but we are leaning to the bear side on the very short-term. Despite this, we are still heavily long positions that are still trending above their key 20 and 50 day moving averages and trailing ATRs. When these lines are violated we will sell these positions and move on. However, until they are violated we will continue to ride the trend higher. It is very possible that after testing the 50 day moving averages we could continue to run and soon be hitting new 52-week highs. If that is the case, the last thing I want to do is lose my position.
So, we will continue to ride the trend higher until we get sell signals but as we sell off from these elevated levels we will continue to add to our short positions in the Russell 2000 and Nasdaq. We are still near the upper range of the year-plus channel these indexes have been riding up all year. As we continue to fail around here, we will add to our hedges until either we crack wide open or have to cut our losses due to the market hitting new highs.
So for now we will wait and see what the market wants to do. We are ready for both outcomes. It’s too mixed to be committed one way or the other. Whichever way the market resolves from this trading range will indicate if we need to add to our shorts or longs. Have a great upcoming week. Aloha!
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – DATE OF SIGNAL
THIS SECTION WILL BE UPDATED SUNDAY EVENING.
