The Big Wave Trading Portfolio switched from a BUY signal to a NEUTRAL signal during the past week, following an insane amount of Hindenburg Omen signals the past two weeks and a breakdown in the market on Thursday. 6 out of 8 Hindenburg Omens in such a short period of time, along with the 7 other H.O. signals since May, is something that has not happened since 2007. As we all know, what followed in 2008 was not pretty for the buy-and-hold crowd. On top of this, the previous time this many signals showed up was 2000. So obviously there is some interest in this indicator right now. Especially following a straight up rally off the November lows.
However, if we have to look at the current situation right now from a completely unbiased point of view, the situation still does not look too threatening. In other words, maybe this time the Hindenburg Omen has it wrong. Maybe it doesn’t. Still, it would be silly to base your view on the overall market ultimately based on this indicator alone.
The market averages, minus the DJIA, are still trending higher and are either above the 50 day moving average (Nasdaq and Russell 2000) or are on the average (SP-500). So from a perspective of the computer, we still have a market that is in solid conditions. That being said, the obvious weakness the past two market sessions can not be ignored. The observational point is that it is basically way too early to be trying to call a market top here. You might be right but what if there is another 20% left in the indexes. Do you really want to get out of your long-term long positions right here when most of them are trending above their 20 day moving averages? Of course not.
This is why, despite the recent weakness and definitely historically problematic Hindenburg Omens, everyone should remain NEUTRAL here and wait for either further selling in the overall market or a breakout to new highs before anyone decides to take a side here. As of now, this is just a normal pullback in a market that is way extended from the 200 day moving averages. For now, it is nothing more and nothing less. The bottom line is to stay neutral and open minded here.
Have a great upcoming week and enjoy the summer while it is still here. Aloha from the westside of Maui where everyday is summer 24/7 365.
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL – SIGNAL DATE
CAMP long – 174% – 4/26/12
WAGE long – 149% – 1/8/13
POWR long – 147% – 12/11/12
RVLT long – 130% – 3/26/13
FLT long – 119% – 9/6/12
HEES long – 86% – 9/4/12
ADUS long – 73% – 4/22/13
INSM long – 50% – 4/19/13
TRLA long – 48% – 6/28/13
WDC long – 47% – 1/9/13
CHUY long – 44% – 1/10/13
LGF long – 42% – 4/19/13
ADS long – 39% – 12/11/12
WST long – 35% – 1/22/13
TECUA long – 35% – 2/5/13
GMCR long – 35% – 4/23/13
V long – 34% – 8/31/12
OCN long – 29% – 5/8/13
MEI long – 29% – 4/24/13
BEAV long – 28% – 3/5/13
PFBI long – 27% – 11/19/12
