The Big Wave Trading Portfolio is under an across-the-board operational BUY mode. Despite the short-term overbought conditions on the three momentum oscillators I track, there is no real pressure on the overall current uptrend. All systems are normal. We will continue to ride our winners and cut our losses fast on our losers, until this uptrend comes under some sort of pressure.

Not much happened this week to change anything in regards to our overall market analysis from last week. We continue to be fully invested rotating from laggards into new winners/leaders. This past Friday was the first session where we had multiple sells but did not receive any new long signals. This could be further confirmation to the week tape on Friday that the market needs to continue to digest its recent gains.

The three momentum oscillators I track (TSV, Stochastics, and MACD) are all trending convincingly lower having rolled over recently from overbought conditions. The slope of their trend makes it clear that it will not be smooth sailing for longs here. While markets can and do rise (the strongest always do) in overbought conditions, new long positions are obviously more risky and therefore tighter Sell Stops should be maintained on the books. If this market can hold up as we work off these overbought conditions and then our oscillators turn higher, we could be in for an explosive move going into the end of the year.

One area of our trading that we are very thankful for this Thanksgiving holiday weekend is our Sell Stops. Having hard Sell Stops on the books were not necessarily required by us in our EOD trading (we used mental stops) until it became clear after 2011 that the market had definitely changed. It has continued to be the same since. Before 2008 we could be comfortable knowing that our win/loss pain/gain ratios were well in our favor and that only a few stocks would “blow up” on us if we were wrong. The winners also took much greater care of us compared to the damages in these occasional disappointments.

Enter the post-2008 market where we rally on no volume, where there is no liquidity underneath the NBBO on L1, and our winning positions no longer produce the huge gains we were once accustomed to before the lower interest rate and lower volatility markets took hold. With the added issues in the overall market, having hard Sell Stops became a must. The smart use of these trades can be seen in a few oil stocks we were long going into Friday.

GBX, ERA, and EQM all produced some horrific single day losses that were much greater than their ATRs. Without Sell Stops the gains in ERA would have been erased, the tiny losses in GBX would have been sizable, and EQM would have been an utter disaster as we had a larger than normal position in that one. Thanks to the Sell Stops, there was hardly any harm and barely a foul.

We hope you all had a wonderful Thanksgiving with friends and family. Our bellies are full and we are ready for the upcoming trading week. We have a lot of new Buy Stops ready to trigger. If we can get the market to rally, we should have some decent winners on hand pretty soon and more stocks in that list of Top Current Holdings. Thank you. Aloha from the beautiful island of Maui.

Top Current Holdings – Percent Gain since Signal – Signal Date

VIPS long – +538% – 7/17/13
OVAS long – +150% – 8/8/14
VDSI long – +109% – 8/4/14
AGIO long – +100% – 9/24/14
PAYC long – +62% – 10/30/14
RENT long – +48% – 9/24/14
CVTI long – +25% – 11/3/14