The Big Wave Trading market directional models all remain under a mixed bag of signals with the RUT, COMPQ, and NDX under operational BUY conditions, the SPX, NYA, and DJIA under an operational NEUTRAL condition, and the DJT still under an operational SELL condition thanks to the Airline sector. Despite the mixed signals, we remain fully invested rotating out of laggards into new potential leaders. We received a new long signal each day last week, further confirming the strength in leading individual stocks that we are not quite seeing in the broader general market.
We continue to see the recent action in our current holdings and new long positions as a positive for the overall market. We believe we would not be receiving so many actionable long signals that work immediately after we go long if the market was ready to fall apart and enter a major sell off. Another pattern that continues is that any partial or full sell we receive in any holding seems to come back within 1-2 weeks.
If the broad market was really week, we would see our longs fail and keep failing. Instead, stocks like CNC, EPAM, KIRK, and UTHR have all hit full sell signals lately and have all come racing back higher. As long as this pattern continues it seems like the path of least resistance for this market is higher. When new long signals fail and keep failing then we know we are looking at a potential trend change. However, based on the current action it appears higher prices are more than likely.
On top of all of the positive action we see in individual leading stocks, along with the overall markets nearing new all-time highs, we have sentiment turning less bullish. Investors Intelligence bullishness hit new 2015 lows this past week and AAII bullishness hit new 2-year lows. On top of this bears ticked up in the Investors Intelligence survey and in the AAII survey 40% are registering as neutral which is the 10th week in a row. This is the longest period since 1988. Along with this, in the AAII survey the % of assets allocated to stocks fell by the most on a month-to-month basis in 9 years. The % of assets allocated to cash rose by the most on a month-to-month basis in 6 years.
The action we are seeing in our current holdings and evening EOD scans, along with the current sentiment, is not typical of what you see at a market top or right before a major sell off. If we had more longs failing, less long signals showing up in our evening scans, our holdings that did fail would keep on failing, and sentiment was extremely bullish then I would be looking for a top. Especially if we just went parabolic on the indexes. However, none of this is occurring or has occurred. Until it does, it pays to follow the trend of high quality leading stocks.
Have a great rest of your weekend and we wish you all the best during the upcoming trading week. If you are not seeing the type of results in your personal trading that we are experiencing this year, feel free to give us a trial. It’s free. Aloha.
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – DATE OF SIGNAL
VIPS long – +608% – 7/17/13
AGIO long – +119% – 9/24/14
CBPO long – +95% – 10/24/14
ANAC long – +101% – 1/20/15
PAYC long – +106% – 10/30/14
VDSI long – +112% – 8/4/14
BLUE long – +87% – 2/25/15
SWKS long – +88% – 10/28/14
SKX long – +84% – 1/26/15
GIMO long – +78% – 2/2/15
VRX long – +67% – 11/17/14
AVGO long – +66% – 10/28/14
DRRX long – +44% – 4/8/15
RUBI long – +46% – 10/29/14
PANW long – +61% – 11/10/14
EGRX long – +53% – 4/9/15
EA long – +52% – 11/10/14
CVTI long – +42% – 11/3/14
AMBA long – +55% – 5/14/15
SERV long – +39% – 11/7/14
RCPT long – +42% – 2/20/15
SUPN long – +34% – 5/22/15
ADPT long – +30% – 5/18/15
FIX long – +25% – 3/11/15
