Currently the Big Wave Trading Portfolio and the Big Wave Trading Retirement Portfolio are in cash. The regular account is currently 10% short 16 stocks (12 being initiated during July-August downtrend w/ half of profits taken on 8/8 on all positions). Big Wave Trading focuses heavily on the 3x bull and 3x bear ETFs, in the IRA, going fully long the inverse ETFs on a sell signal and long the regular ETFs on a buy signal. In the regular account, positions of 2% are taken on short signals that show up during downtrends until the past leaders of the previous bull market setup for a short signal. Then up to 20% of a short position would be taken in the ex-generals (AAPL AMZN CMG GMCR PCLN BIDU), when the time is right. During uptrends we focus on CANSLIM quality stocks.

The rally that started 10/4 which triggered a sell-to-neutral-to-partial-buy signal has produced a 39% return in TYH. Two days ago, however, a neutral signal was triggered from the partial long signal, leaving us with a 26% return and back to 100% cash. Oddly enough, but not surprising, the rally has continued for another two days. The current V-shaped no-volume short-covering rally is one of the most stunning low volume moves I have ever seen during a “busy” trading month. While there are a few bases in top quality stocks potentially setting up (LNKD BSFT) there simply is not enough charts that look like this to warrant the excessive level of short-term bullishness that current longs boast. If this move was on above average volume on this rally attempt, I would understand and participate. The rally attempt would have triggered a Follow-Through Day “buy” signal and we could have been on the hunt for CANSLIM quality longs. However, that has not happened (we use only the Nasdaq and SP-500 for FTD’s) and we await the next signal. The probabilities are very high, based on the history of V-shaped low-volume rallies, the next signal is going to be a sell signal.

Big Wave Trading always cuts its losses when wrong very fast. We know where we are going to get out before we enter a trade. Big short positions maximum drawdowns are 5%. Losses in 3x ETFs can be as much as 10-15%. The gains these ETFs produce during trending markets more than make up for those rare big drawdowns. Most long positions cut losses happen before they are down 5%. We let winners run and cut our losses fast when wrong.

current top holdings – total returns (non-margin returns) – date of short sale

ANR – 57% – June 2nd
BKD – 34% – July 26th
BCS – 34% – June 6th
MTH – 28% – July 14th
HIG – 26% – July 14th
GBX – 25% – July 27th
BAK – 24% – September 1st
GES – 21% – July 12th
DOW – 21% – July 27th