The Big Wave Trading Portfolio remains under a strong BUY signal generated at the start of the year. There continues to be absolutely no sign that the market is finished with its steady and unusual move higher. Trying to guess when the move will end is futile and until we see real cracks in the price/volume armor there is nothing to do but to continue to ride the trend higher until it shows signs of reversing.
Those signs that we will be looking for include: 3 to 5 distribution days in 2 to 3 week time span on the indexes, climax runs in leading stocks, new highs in leading stocks on higher volume, huge volume reversals below the 50 DMA, a lack of new breakouts in quality names, and/or breakouts in quality names immediately reversing on heavier volume.
Until we start to see a variety of the list above, we will continue to hunt for new long positions as they setup and breakout from sound consolidation patterns. However, we will continue to remain cautious on our purchases as the markets uptrend is without a doubt the most strange steady move higher I have ever seen or I believe studied in my career.
While I have not backtested the data, the price pattern the past month and a half has been beyond unusual. To rally almost every day without having an up session above 1.25% is just the strangest thing I have seen to a start of a sustained uptrend. If you want to see how a real powerful rally looks that allows us to get 100-200% invested very quickly take the time to study the Nasdaq March 2003 low or the recent Shanghai SE Composite December 2012 low. That is what the start of real lasting powerful bull markets look like. They do not look like what we currently have in our indexes.
I continue to refuse to increase the size of any new long position to the normal pre-2009 levels as long as we continue this strange wedging pattern higher. The longer we go without a normal correction or the longer we go without producing another powerful up day (I am looking for at least 1.5% and would really like to see a 2% move) on strong volume the higher our chances become of some sort of flash or quick crash that could easily wipe out our post 1/2/13 gains in a couple to a few trading sessions. The longer we wedge like this, without a powerful up day, the more concerned I will become and the more careful we will be of adding new long positions.
This continues to be a pure-QE fueled uptrend and that is evident in the volume patterns on the indexes, ETFs, and leveraged ETFs. Volume is simply not confirming the move as it should if the uptrend was "normal."
So that is what we are "worried" about here. While it is something we are concerned about, we will continue to take signals as they are generated making sure that our opinions have nothing to do with the actual execution of our methodologies.
A quick reminder to new investors. Big Wave Trading always and I mean always removes risk when we are wrong on any and all positions. Losses are never held. If we take a position and it violates our clear stop level, the position is liquidated immediately. Losses are never justified or held. Ever. Period. Big Wave Trading also employes historically sound profit taking methodologies created and proven by some of the best traders and managed futures funds since the dawn of time.
If you are not familiar with these methodologies, we recommend going to the book section (which has not been updated in a few years-we will be doing that soon) on our website and purchasing these books to understand the methodologies that we incorporate in our portfolios.
Aloha from a very cold, windy, and shockingly rainy west side of Maui. Have a great and profitable upcoming week. Once again, aloha.
Top Current Holdings - Percent Return - Date of Signal
CSU long - 77% - 9/4/12
CAMP long - 72% - 9/4/12
HEES long - 64% - 9/4/12
EAC long - 61% - 12/17/12
FLT long - 54% - 9/6/12
AXLL long - 40% - 1/4/13
ASTM short - 36% - 7/17/12
POWR long - 35% - 12/11/12
CPSS long - 33% - 1/31/13
MNTX long - 31% - 1/17/13