Seeking Alpha

Joshua Hayes'  Instablog

Joshua Hayes
Send Message
Joshua "MauiTrader" Hayes is CEO, President and founder of Big Wave Trading Inc., a Maui, Hawaii-based stock market advisory service. Hayes is a well-respected stock trader who combines fundamentals, technicals, psychology and money management to trade professionally for his personal,... More
My company:
Big Wave Trading
My blog:
Big Wave Trading
  • Big Wave Trading Portfolio Update And Top Current Holdings 0 comments
    Oct 22, 2012 1:24 AM | about stocks: AVD, NTE, CAMP, CLGX, SVNTQ, VRNM, CSU, MAGS, RBGPF, HEB, ASTM, KBE, XHB, JPM, BAC, GS, TOL, HOV, PHM, BZH, MTH, MHO, LEN, KBH, AAPL, BIIB, GOOG, AMZN, PCLN, LULU, IBM, INTC, MSFT, SBUX, MCD, GE, ALXN, VRTX, PCYC

    THE COLUMN BELOW WAS A PREMIUM MEMBERSHIP COLUMN PUBLISHED ON FRIDAY FOR BIG WAVE TRADING MEMBERS. ANALYSIS SPECIFIC TO TRADING POSITIONS HAS BEEN REMOVED.

    Happy anniversary of the October 19, 1987 crash everyone!!

    Well, well, well. It sure was an interesting day to say the least. Today's option expiration was nothing short of exciting as stocks sold off on heavy above-average higher-than-the-day-before volume. Stocks and stock indexes didn't just sell off, they cratered.

    The weakness in the Nasdaq and Russell 2000 finally spread over today into the SP 500 and DJIA thrusting all four major indexes into a SELL signal on our market trending model. The Nasdaq and Russell 2000 were currently under a NEUTRAL signal and the SP 500 and DJIA were under a BUY signal but today's sell off was confirmed everyone thus switching everything into a SELL. It doesn't matter where you look. The indexes, futures, the options chain, ETFs, or inverse ETFs. Wherever you look, volume exploded higher.

    What didn't explode higher but finally moved was VIX. VIX has finally begun moving in the direction those of us at Big Wave Trading believed it should have started moving in on 9/25. While the move came on convincing volume, and the CBOE reported the highest weekly trading volume ever in VIX futures, a BUY signal was not triggered in VXX/UVXY/TVIX.

    [MEMBERS CONTENT ONLY].

    [MEMBERS CONTENT ONLY].

    Getting back to the overall market, it was the fifth time this year that the Nasdaq has closed lower for the week on above average 50-week volume. As just mentioned, this now makes it five times that this has happened versus 0 times the Nasdaq has closed higher on above average 50-week volume. 5 - 0. For the year, the NYSE is actually up 1 vs. 0 times down. But the NYSE is not where you find your dynamic exciting technology based growth stocks. Those are found on the Nasdaq and Russell 2000. When you consider the volume pattern of the Nasdaq and then take a look at the recent slope of the Relative Strength line of the Nasdaq and Russell 2000 compared to the SP 500 you can see that we have a potential problem brewing here.

    The Relative Strength line of the Nasdaq is simply imploding here nearing the December 2011 levels. Meanwhile, price is nowhere near those lows. If this trend continues, watch out! The Nasdaq and Russell 2000, in healthy uptrends, lead the market. The Nasdaq and Russell 2000 start to lag the NYSE when a rally is on its last legs. The Nasdaq and Russell 2000 lead the market down when a downtrend is starting in the stock market. What stage are we in now? You are correct. This obviously means that now is the time to be cautious.

    This is especially the case when you look at the recent action in AAPL, GOOG, AMZN, PCLN, and LULU. After taking a look at those, take a look at the big giant bellweathers like IBM, INTC, MSFT, SBUX, MCD, and GE. Notice the same bearish action? Then take a look at your leading biotech stocks like ALXN, BIIB, VRTX, and PCYC. Is there anything surviving? Of course.

    The bank stocks like GS, BAC, and JPM are acting like there is nothing wrong and of course for the master criminals that run these banks and the USA there is not. On top of that, they need to make sure real estate prices go up so that all their real estate holdings continue to make them wealthier and wealthier (If these sociopaths CREATED their own businesses this would not be a problem. They didn't.) on the backs of the middle class. On that note the XHB is fine. HOV, TOL, PHM, BZH, MTH, MHO, LEN, KBH, etc. all look like they were completely oblivious to the carnage gripping the market today.

    If you see the big banks (KBE) and home builders (XHB) start to roll over, then you can be sure this uptrend is finished. To me, it already is, as I follow the Nasdaq/Russell 2000 as market leaders. However, if these stocks continue to rally, show no damage, and we begin to find a floor to this selling, I would expect that the uptrend could definitely continue. I mean, it is a Fed based QE driven stock market. When stocks sell off, they step up to make sure their jobs are safe for now. I am sure one day this will stop working. Until then, the theme don't fight the fed still rings loud and true.

    No one can predict the future in the stock market. I will not try to either. While it looks like we are about to crack wide open, we could easily find support and rally higher on no volume. Hell, we did it in 2009, we did it in 2010, we did it in 2011, and we did it earlier this year in 2012. Why not a fifth time?

    [MEMBERS CONTENT ONLY].

    [MEMBERS CONTENT ONLY].

    It looks ugly but it has looked ugly before. Let's see what happens next week. Have a great weekend everyone. Aloha.

    [MEMBERS CONTENT ONLY].

    Top Current Holdings - Percent Gain - Date of Signal

    AVD long - 139% - 1/10/12
    NTE long - 62% - 8/17/12
    CAMP long - 59% - 4/26/12
    CLGX long - 52% - 6/19/12
    SVNT long - 44% - 9/10/12
    VRNM short - 39% - 4/10/12
    CSU long - 32% - 9/4/12
    MAGS short - 31% - 4/18/12
    SHF long - 28% - 8/1/12
    ASTM short - 26% - 7/17/12
    HEB short - 25% - 9/24/12

Back To Joshua Hayes' Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.