The Big Wave Trading portfolio remains under a BUY condition with strong confirmation of the original signal coming on Thursday when every single important stock market index we track broke out convincingly on enough volume to qualify the breakout as strong. The tight intraday action on Friday with a HOD close in the NYSE and SP500 confirm the move on Thursday.
This strong move is coming on the back of the NYSE short interest ratio hanging out at 5-year highs around 21.27. This breakout is also coming with bulls, bears, and those on the sidelines coming in at exactly 33% across the board. That means that NYSE short interest is very high, the crowd is not particularly bullish, and stocks are breaking out everywhere with some big names making clearly bullish moves. GS, BAC, CS, JPM, DB, GM, and many other corporate global behemoths are making very bullish moves.
If the crowd continues to stay bearish we could see a very powerful short covering rally released. The only odd thing about this move is that it is coming with bulls at 52% and bears at 24% on the Institutional Investor survey. However, bears crossed above the bulls way back in October where the market actually bottomed and it is still nowhere the 5-year bulls high of 62% and the bears low of 15%.
Our advice is to follow the price action. While it has been pretty shady for the past couple of years, in terms of trusting this price action, there have been times trends have developed. Let's hope this time it is for more than one or two months. The potential good news that this rally could last is that we received a lot of strong buy signals in high quality individual stocks last week and this week before the Thursday breakouts in all major important market averages. We shall see what the upcoming weeks and months leading into the election give us.
Remember, one or two distribution days is not reason to sell the market short. The key is to watch for 4 to 6 of these days showing up over a two or three week time frame. If you see that, then we can start to worry. However, if that happens I am sure buying unlimited bonds in the USA is not out of the question for the ugly monsters that are Congress and the Federal Reserve. Aloha and have a wonderful and fun weekend!
Top Current Holdings - Percent Gain - Date of Signal
AVD long - 114% - 1/10/12
BVSN short - 82% - 3/19/12
NTE long - 46% - 8/17/12
CLGX long - 46% - 6/19/12
VRNM short - 37% - 4/10/12
CAMP long - 35% - 4/26/12
PRXI short - 31% - 3/30/12
MAGS short - 29% - 4/18/12