Joshua Hayes'  Instablog

The Big Wave Trading portfolio remains under a NEUTRAL signal. However, we did switch to a BUY signal for 2 days before switching back to NEUTRAL. Fortunately for us, we have already closed shop on our model for the year. After the final and barely successful SELL signal it was decided that with the current price/volume pattern in the overall market, the upcoming Fiscal Cliff drama, and the news driven nature of the current market that shutting it down for 2012 was the right thing to do. This past week proves that point.

The past week saw a very noisy intraday nature to the market with a ton of stocks showing erratic to abnormal price action. Rather it was stocks like GMCR, FB, FSLR, AMCC, or RIMM going up almost every day non-stop or the reversal in price breakouts lower in stocks like SWHC, ARIA, QCOM, CNC, or ASPS that scripted what was an odd overall market. Even the big boys like PCLN and GOOG are showing erratic trading. This is a clear sign to us that trend following and stock picking the U.S. markets remain a very futile effort for anything other than a very short-term time frame. If your time frame is going to be weeks to months, on a position, we recommend waiting for better price and volume relationship to develop in this market. At this point for us we are very happy being heavily invested in cash and on the sidelines in our top systems.

Short-term daytrading methodologies and very long-term methodologies in world ETFs with wide volatility/ATR stops are the only two systems working for us now. The world ETF market has been the one very bright spot in all of this. The moves in VNM, DXJ, EWH, EWS, and EWA have been very welcome during a time when the U.S. markets are behaving so poorly. We continue to believe that over the longer-term more capital and bigger position sizes are going to be needed in these markets to return outside normal returns in the future.

We are sure one day the stock market will trend in one direction or another for a period of time that will allow old trend following momentum methodologies in high quality stocks to work very well again. Until then, however, other markets should be where investors continue to look to into the future. That is unless we can get a change in the zero-interest-rate-policy, the Quantitative Easing environment, and extremely divided electorate some time soon. I wouldn't place on hard bets on that happening for a while.

Aloha and have a wonderful weekend!

Current Top Holdings - Percent Return - Date of Signal

NTE long - 118% - 8/17/12
VRNM short - 54% - 4/10/12
CAMP long - 48% - 4/26/12
CSU long - 37% - 9/4/12
ASTM short - 25% - 8/2/12