The Big Wave Trading Portfolio is in a very odd mix of signals currently with the Nasdaq and Russell 2000 still under a very strong SELL signal, the SP-500 and NYSE basically under a NEUTRAL/soft SELL signal condition, and the DJIA under a soft BUY signal. Due to this, we are long a basket of inverse leveraged ETF positions and put positions in the Russell 2000, Nasdaq, and a few other sector ETFs while also long a leveraged ETF position with some calls on the DJIA. We are also long quite a few Oil&Gas related names that overall leaves the portfolio very balanced and ready to move/switch to one side of this market or another depending on the resolution of the recent sideways phase this tape has been in the past month.
We continue to believe that we are seeing a topping process at Big Wave Trading. We will never marry this belief if price proves us wrong but mathematical evidence upon mathematical evidence is just starting to pile up that the recent action in the DJIA is not healthy and that the true state of the market is in the Russell 2000. Sentiment, volatility, valuations, margin debt, volume, and recent macro data simply do not support the current price move in the DJIA. While we understand why the DJIA stocks are in favor here on valuation and why Oil&Gas stocks are in favor (geopolitical), we know that this does not make for a sustainable healthy tape.
While we did expect a crashing moment for this market last month, it is becoming more obvious that this is going to be a long drawn out topping process with action that will more-than-likely mimic the 2011 and 2012 type of tape with less progress due to tapering. The key for this market will be when the 50 and 200 day moving averages of the major market indexes catch up with each other. If we are still range bound when this happens on the Russell 2000 and Nasdaq and then get a break one way or the other you can be sure we will push our positions. Unless, of course, it is not confirmed on volume. If that is the case, you must take precaution.
So it is possible that this is going to be a painfully boring summer for the EOD signal trend followers. While it is not guaranteed, if we do drift higher on lower volume it sure is going to make it hard to play the long side without volume. The good news is that there are always stocks in play in regards of earnings, press releases, contracts, or other news events that make it a good market for those investors that have the skill to daytrade or swing trade on a shorter time frame. If you can do it, do it! This is not the market for weekly charts. This is the market for stocks in play that act right intraday. If you are an experienced trader and you know how to find the stocks moving on a daily basis, you can generate income. Just don’t get greedy or forget to set stops. Cutting losses fast and protecting capital should always be #1 priority in a tape that is not trending. Hell, it should always be priority one.
Have a great upcoming profitable week everyone. I hope everyone had a nice Mother’s Day weekend. Thank you and aloha.
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – DATE OF SIGNAL
VIPS long – 282% – 7/17/13
HEES long – 188% – 9/4/12
AER long – 171% – 6/27/13
WDC long – 87% – 1/9/13
TPL long – 73% – 10/22/13
USCR long – 66% – 4/12/13
