Joshua Hayes'  Instablog

Every single disaster is due to traders not cutting their losses and letting them grow into huge losses. -Dennis Gartman

"If you have an edge and if you keep making good bets as opposed to bet on chance over time you will come out ahead." -Larry Hite

The Big Wave Trading Portfolio remains under a SELL signal generated on 5/4/12. We expected that an oversold bounce was coming this past week and indeed it did begin. We expect the rally to retrace back to at least the downtrending 50 day moving average. If it does not make it back to that key technical level before beginning to sell off again, we will see that as quite bearish. Big Wave Trading will not be interested in any new BUY signal generated, if in fact the indexes do retake the 50 day moving average, as there is too much technical damage to individual stocks and the accumulation/distribution on the major market indexes are really out of whack. The only kind of rally that would change our mind would be a powerful 2%+ move higher on volume well above (25%+) above the 50 day volume average. The technical landscape of the overall market indicates further price deterioration ahead. However, as always, we do not have free markets and that means the Federal Reserve can start QE3 whenever they feel enough fear that they have to act. This, obviously, makes it tough for trend following and is thus why we continue to recommend smaller position sizes when trading stocks here. Another big volume move lower, with our current shorts all doing well, would be our signal to increase our short positions. For now, we are being cautious holding high levels of cash. As always cutting losses immediately when wrong is the smartest thing you can do in this trendless 2011-2012 environment or any other environment for that matter. By doing that you can get the one or two moves a year to pay off for all the small losses (like July-August 2011). Enjoy the rest of your Memorial Day weekend. Aloha.

Top Current Holdings - Percent Return - Date of Purchase

AVD - 78% - 1/10/12
LQDT - 74% - 2/1/12
BVSN short - 71% - 3/16/12
MNST - 42% - 1/13/12
PRXI short - 36% - 3/30/12
UVXY - 32% - 5/9/12
VRNM short - 30% - 4/10/12
SINO short - 27% - 4/12/12

Disclosure: I am long MNST, AVD, LQDT, UVXY.

Additional disclosure: I am short VRNM, SINO, BVSN, PRXI