The Big Wave Trading Portfolio remains under an odd mix of signals currently, with the Nasdaq and Russell 2000 under SELL signals and the NYSE, DJIA, and SP-500 under BUY signals. The current nature of the tape is one where cash is clearly king for EOD trend following signals as the long and short side continue to make very little headway and/or fail outright. This market continues to be one where short term daytrading in earnings winners, story stocks, and pump&dumps remains our primary focus.
Despite the high valuation levels, lack of fear, and the overall bullish investor sentiment, the market is not giving up its uptrend in the DJIA, NYSE, and SP-500. The biggest reason for this is obviously the fact that the yield on government debt is so small that investing in low growth, high dividend yield, low valuation big-cap stocks makes sense financially. However, no one is for sure how long this can last. If we continue to get this slow growth in GDP, it could last a very long time as long as the Fed keeps interest rates at these historically depressed levels.
This means that as long as we have this slow growth and valuations do not get too out of hand we could see this last longer than you or I would like. Since we did not get our crash–we were setup for one, for sure–this more than likely means more of the same sloppy chop higher. When will we know when we have topped? Nobody knows but if we do not ever get a crash and quick reset I will be looking for an inverted yield curve. This is the only ingredient we do not have yet. As long as the yield curve looks like it does currently, there is no reason to think this slow choppy uptrend is going to end any time soon.
So, for now, it is more of the same thing we saw in 2011 and 2012. This will not change until we see rates rise or a flash-crash reset. This summer is surely to be a trying time for new investors that crave big action. For the wisest of new investors, cash is your king. I suggest you serve it well, until the market is in a clear trend with all major averages in confirmation.
Have a great rest of your weekend, I wish you the best in the upcoming week, thank you, and aloha from a very warm west Maui where our summer shores are finally alive with summer surf. Ahhhhhhh.
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – DATE OF SIGNAL
VIPS long – 346% – 7/17/13
HEES long – 195% – 9/4/12
AER long – 163% – 6/27/13
WDC long – 96% – 1/9/13
TPL long – 79% – 10/22/13
USCR long – 68% – 4/12/13
