The Big Wave Trading Portfolio remains under a BUY condition across the board but following Friday’s session there are some negative factors weighing on the model. While the uptrend remains on track, three issues on Friday that raised some very-short-term caution flags.

Issue number one was the velocity of the reversal and the volume that came with it. The sell off was a bit much in the time frame to simply just write-off. It is definitely something that has to be monitored. Especially considering the fact that volume increased on that swoon and that the volume during the following recovery was lighter until the final minute.

Issue number two was the reversal in the leading Biotech stocks. The reversal in Biotech stocks has come with some strong volume in some of the individual names that have led this uptrend higher. The sell off also came with some strong volume in the Biotech related ETFs with BIS (ultrashort Biotech) having its largest trading volume ever. On top of that, many recent speculative small Biotech positions gave immediate ‘fail’ signals on Friday. Pretty much an across the board confirmation of the sector’s weakness. However, we must remember that one day does not make a trend and that this is nothing more than a shot across the bow warning us of more possible cannon fire.

The last issue is an issue that I have noticed since the end of January. This is the recent Relative Strength in defensive industries like REITs. While it is not a big issue it is something to take notice of as this is a sign that the market might be trying to transition into a more defensive measure. It could also be a case of a rising tide lifting all boats but I simply find that hard to believe so this too must be monitored.

REITs rallying by themselves does not state trouble for the economy. In fact it is more than likely due to the monopoly the rich have on real estate forcing poor individuals to rent instead of own. Since everyone is renting, the market favors those that own the rentals. So this is more than likely just market forces at work, if we do not see the market sell off. Still it is something to take notice as these stocks were not leading during the 2013 healthier market rally.

Still, despite these talking points, the trend is still clearly up for the SP-500, Russell 2000, and Nasdaq. As long as we are trending above the 50 day moving averages it is impossible for us to be anything more than very short term concerned here. Overall, our portfolio remains extremely healthy and outside of more stocks failing lately compared to 2013 things still are not that troublesome. We have some cash on hand to put to work if more actionable buy signals show up so we feel we are in good position here for any outcome. If the selling does pick up, at the same token, we have cash to put into some leveraged put/bearish positions.

All in all, everything continues to hold up well. Until it changes, I am not. Aloha from a PUMPING north shore of Maui.

TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – DATE OF SIGNAL

CAMP long – 470% – 4/26/12
VIPS long – 267% – 7/17/13
POWR long – 251% – 12/11/12
WAGE long – 227% – 1/8/13
HEES long – 172% – 9/4/12
AER long – 148% – 6/27/13
FLDM long – 132% – 8/28/13
DDD long – 98% – 4/30/13
WDC long – 98% – 1/9/13
LOCK long – 97% – 5/20/13
CMGE long – 94% – 12/16/13
CLFD long – 94% – 9/24/13
USCR long – 93% – 4/12/13
V long – 76% – 8/31/12
FB long – 68% – 8/23/13
JAZZ long – 67% – 10/22/13
TPL long – 60% – 10/21/13
GOMO long – 59% – 12/13/13
ARC long – 50% – 10/16/13
SCTY long – 49% – 12/19/13
ICLR long – 45% – 4/30/13
ALXN long – 42% – 11/15/13
INO long – 37% – 12/23/13
TSLA long – 31% – 2/7/14
VRX long – 30% – 12/16/13