Stocks Reverse Morning Gains on Increased Volume
April 20, 2012 | Comments Off
Disappointing jobless claim and existing home sales put a damper on the market at the open. Buyers did show up pushing the market higher with volume on the rise. However, buyers were exhausted and it was sellers who took over and dominated for the remainder of the session. AAPL dropped below the $600 mark a key psychology area ahead of OPEX. There were plenty of stocks like RAX who had a great morning only to see sellers take over reversing gains. Volume rose on the day and given the close there isn’t much question institutions continue to dump stock on the market. Big Wave Trading market model is once again in SELL mode.
Removing the second half of the session and this market would have been sitting pretty to push higher. Strong reversals like we saw today are indicative of a very weak market. Of course when AAPL takes a dive on big volume is never helpful for the entire market. Sure, you have outliers like MLNX on the day and certainly saw great gains. On balance, unfortunately, majority of the market saw weakness and is foreshadowing things ahead.
Stocks Settle Lower after a Whipsaw Like Day
April 19, 2012 | Comments Off
The market had a void to fill with the lack of economic data and turned its attention to the current European situation. Unfortunately for us the European Debt Crisis will stay with us as long as Euro Politicians kick the proverbial can down the road. Volume rose slightly on the day as the market adjusts for OPEX. Volume wasn’t overly exciting to give the indication institutions were dumping stock left and right like they were on Monday. Using the NASDAQ today was Day two of another rally attempt. While today wasn’t overly bullish at least we held within Tuesday’s range.
Today was technically a day of distribution in the markets. It isn’t until after confirmation where we worry about a day of distribution. If on day one following a follow-through day is distribution the odds are well over 90% the rally will fail. While we really don’t want to see a distribution day tucked in prior to a follow-through day the correlation to failure isn’t as tremendous if it occurred after confirmation. Keep on your toes as this market may decide to go one way or another here.
The intraday action today was quite volatile, but the action is to be expected in front of OPEX. Continue to keep an eye on AAPL as the stock trades around $600 a key psychological level for traders. If there is a battle to wage, it will be done here as market makers and option holders will adjust heading into Friday. Price is everything to us, but we do need some sort of entertainment. Unless there is a signal from price everything else is just noise.
Stocks Rebound in a Big Way as Volume Slides
April 18, 2012 | Comments Off
AAPL reversed its course pushing higher bringing the rest of the technology sector and NASDAQ higher. Volume was lower on the day suggesting the appetite to get back into stocks was not a top priority for institutional traders. It is true High Frequency Trading (HFT), Federal Reserve, and the lack of retail investors has skewed volume. We simply look at relative volume and ignore the noise. At the end of the trading session sellers took to INTC who was reporting after the close. The selling took some nice gains off the table. It would have been bullish if the market would have been able to close at the highs with volume surging. We’ll need to see the market confirm a new rally here shortly if we have any chance of notching new highs.
Economic news was somewhat mixed this morning. Housing starts dropped disappointing the market, but building permits jumped. Economic figures do make for good discussion points during cocktail parties or at the office water cooler. They should not be used for trading. Price is the ultimate indicator followed by volume. If you want to have an argument about the current state of the economy, go right ahead and pull the most recent jobless claims figure. However, it should be left aside when you are trading.
AAPL PCLN GOOG AMZN Weigh Down the Market as Volume ends Mixed
April 17, 2012 | Comments Off
The story of the day was certainly the big guns falling from grace sending the NASDAQ lower on increased trade. Advanced retail sales came in better than expected as a warm March helped lure buyers out of their homes. Empire manufacturing disappointed as the index failed to meet expectations. The NYSE held up considerably well despite the sell-off in some big technology names. NASDAQ undercut last week’s low and we are now searching for Day 1 of an attempted rally and with the recent moves in some names it appears we’ll be waiting some time for a new rally. Big Wave Trading’s market model is now in sell mode and we’ll trade accordingly.
All the talk about Facebook (FB) coming to market in May and that it would help reduce the risk of a market sell-off. As it stands now AAPL and GOOG appear they continue want to push lower forgetting about who will win the race to $1000. Not to be outdone PCLN is also in a race to $1000, but has come under some serious selling pressure along with AAPL and GOG. These big name technology stocks are signaling institutions are selling their holdings sending a clear message of caution ahead.
Big Wave Trading Portfolio Update And Top Current Holdings
April 14, 2012 | Comments Off
“Don’t spend your time and energy chasing mediocre trades and investment opportunities. Only move when the odds are overwhelmingly in your favor.” -Brian Hunt
“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the man of inferior emotional balance, nor for the get-rich-quick adventurer. They will die poor.” – Jesse Livermore
The Big Wave Trading Portfolio remains under a NEUTRAL condition but is near switching to a SELL signal. Had volume come in above average on Friday or had price dropped 2% on the SP, Russell, or Nasdaq, it would have switched. Our internal indicators that measure price, volume, and time on many different levels are all in confirmation of the short-term downtrends that are starting to appear on the indexes. At the same time, every single ETF is in full confirmation with their short-term downtrends and every single inverse index ETF is in full confirmation with their short-term uptrends. This action along with the constant non-stop poor action in individual stocks outside of the biotech and monster leading stocks (AAPL PCLN CMG SBUX) universe does not bode well for current bulls. Everything points to our model switching to SELL next week. However, there is one caveat that our model can not price in and has no way of knowing when or where it will come from. That is Ben Bernanke. As long as the government interferes with free markets price and volume is going to generate more false signals than we ever would have seen pre-2008. Since they can simply inject liquidity to a market that has no buyers, we have to respect that many high volume breakdowns are simply not going to work like they used to. If you are a big seller and you know the Fed is going to magically lift stocks higher why would you keep selling? You wouldn’t. You let them lift it higher then unload more and wash, rinse, repeat. The good news is, just like in July to August, you get a real break where sellers simply overwhelm whatever in the hell the Fed is doing. Looking at any long-term arithmetic daily, weekly, or monthly chart it is clear to see the big-cap monster leading stocks are going from extended to parabolic territory. Google finally announced a split. It staged a late-stage-base-failure breakdown on heavy volume. Now all we need is for Apple and Priceline to split and we can start to get a sense of what 2000 felt like before it ended. I will make it very very very clear that this is in no way like 1999. Trust me! However, the fact that so many CANSLIM high-quality stocks are acting so strange, volatile, and some with no rhyme or reason towards price and volume, can not overall be healthy for the market. If these leading stocks continue to hold up relatively well to the overall market, it is always possible that following a correction we could blast off higher. As of now, whether this is just a correction or the start of a new downtrend, it is pure speculation. All we need to know now is that stocks look extremely vulnerable here, the indexes carry a lot of distribution days in them, the internal momentum price, volume, and time indicators are all very bearish, recent longs failed, and new shorts are working. Those are the facts. It does not bode well, short-term, for the market. However, these facts do not matter in a world of quantitative easing. Anything can and will happen. In this stock market you are either patient and wait till all the ducks line up before you move or you must be very quick to change. If you are not quick to change in this market environment you will be dead.
Top Current Holdings – Percent Return – Date of Signal
Volume Slips but Stocks Jump as European Fears Calm
April 13, 2012 | Comments Off
Disappointing economic news did not help the market in the early going, but sellers weren’t around to mount a defense. Steadily throughout the morning buyers pushed the market higher. European fears calmed as CDS spreads tightened. Volume slid on the day as institutions simply weren’t putting any money to work. Well below average volume has been quite pathetic on this rebound despite the extreme oversold conditions. The past two days do not instill confidence this market can go higher from here.
There were a few stocks pushing higher today like LNKD that can give you some hope this market can push higher. FIO is another, but the stock is real loosey goosey. It is quite possible that volume comes in later like we have seen in the past fooling market participants. Volume has been real pathetic and today’s volume highlighted the lack of involvement by institutions. Is there something wrong, perhaps but price will be our guide.
Sentiment figures have come down a bit week over week showing the recent decline has pushed out some weak bulls. AAII Bulls and Bears did a flip flop with Bulls finishing this week at 28% while the bears jumped to 41%. II survey remained in the bull camp, but this doesn’t come as a surprise. Perhaps this recent bounce has bulls jumping back aboard, but it is quite difficult to be overly excited over the recent rally.
Stocks Bounce as Volume Lags; AAPL and PCLN Close Lower
April 12, 2012 | Comments Off
It was interesting to see the market have the ability to close in the green without the help of AAPL and PCLN. These market generals have been helping the NASDAQ to push higher. Coming off extreme oversold levels today’s bounce was quite unimpressive with the market unable to close near the highs of the session. The release of the Federal Reserve’s beige book did not help as it lacked any tantalizing news about the United States economy. Not quite the oomph you would like to see from a market trying to bounce from the most recent sell-off.
Volume was lower on the day, but that is to be expected after such a drastic uptick in volume from Tuesday’s market session. Institutions were certainly dumping stock yesterday, but weren’t eager enough to hope back into the market. AA kicked off the earnings season and tomorrow GOOG reports after the market close. The last few earnings reports have been kind to GOOG, but I wouldn’t be taking a risk betting on a positive earnings surprise.
Today’s market did a bit to remove the oversold conditions, but it didn’t clear a lot. The weakness today showed this market may see lower prices before these conditions are completely cleared. AAPL and PCLN do make up quite a bit of the NASDAQ. Toss in MSFT weakness and you may be spelling trouble for the NASDAQ. If these generals aren’t able to withstand selling pressure this market will have a very tough time gaining any sort of traction.
Stocks Fall Hard on European Fears; AA Jumps in After-Hours
April 11, 2012 | Comments Off
European fears helped send stocks lower as Spain and Italy fears continue to gain traction. The big deal with Spain and Italy is simply the size of their economies and it is the size striking fear in the market. Sellers dominated the entire session as volume sky rocketed in panic like fashion. VIX jumped to its highest level since early March. Not a good day for those who were long the market as there isn’t much to point to as a positive. The lone positive was in after-hours as Alcoa posts better than expected earnings and the stock jumping more than 5%. A very bearish day for the markets as the Big Wave Trading model goes into Sell Mode.
The difficulty here will be whether or not the market will continue to sell off here. If it does look out below as it could get really nasty. However, there is enough evidence we’ll see a bounce we can short into. As of today’s close the McClellan Oscillator was sitting at -377 a very extreme level. We can certainly see the market get even more oversold, but with today’s reading it is hard to believe we’ll fall much further.
Markets Close in the Red After a Disappointing March Jobs Report
April 10, 2012 | Comments Off
The March jobs report released on Friday was quite disappointing as just over 100,000 jobs were created. A record number of people leaving the labor force helped unemployment drop to 8.2%. Futures indicated the market wasn’t about to respond well to a poor jobs report and today’s market certainly indicated weakness. The lone positive on the day was a few leading stocks finished in the green and in the short-term we are oversold. Big Wave Trading’s market model remains in neutral mode while this market is in correction.
Only 23% of stocks remain above their 20 day moving average and 40% above their 50 day moving average. These numbers are showing the market is quite oversold at these levels and the market is due for a bounce. The last time the market saw these figures was back in early March as well as the week of Thanksgiving. While there is no guarantee we will see this market rebound to new highs we can be certain some sort of bounce may occur. Piling onto the oversold bandwagon the McClellan Oscillator now stands at -287. An extreme oversold reading giving credence to a possible market rebound ahead of earnings season.
Earnings season is upon us and AA is set to report earnings after tomorrow’s bell. Every quarter we get to experience the blow-ups and melt-ups. This earnings season should be no different! If you are carrying a sizeable position in a stock it is wise to lighten up ahead of earnings. While you may miss out on some gains you’ll miss out on some big time blow ups. Pre-announcements are unavoidable like PMTC even though it failed a pocket pivot. You can avoid stocks blowing up by simply reducing the size of your position ahead of earnings.
Big Wave Trading Portfolio Update And Top Current Holdings
April 8, 2012 | Comments Off
The Big Wave Trading market model went through a serious of changes this week turning from a full BUY signal to a cautious BUY signal to a NEUTRAL signal by Thursday. This NEUTRAL signal means that there is no statistical edge one way or the other as measured by all of our internal indicators. While under a NEUTRAL signal, BWT will only go long the highest quality leading stocks with the strongest chart patterns, will operate from the short side on the best topping patterns, and will eliminate all losers immediately. This means that if we go long or short a stock and it does not move in our favor on day one we are out some of it to all of it. Even if that loss is only $1. No questions asked. It is still not a stock pickers market. That is unless, of course, you are long PCLN CMG or AAPL. If that is the case then it is a stock pickers market. If the action in these leading stocks doesn’t confirm the mantra “focus on the leaders” I do not know what does. One particularly scary aspect of this recent rally is the drawdown in the BWT accounts from mid-February highs to Friday. BWT was working on some solid gains when all of a sudden March hit. March has given quite a few long signals in high quality leading stocks that have led to consistently cutting losses. This isn’t happening every once in a while. It is happening on virtually every trade since mid-February. This pattern is following the same pattern of January 2011-May 2011 where the methodology we use diverged very negatively from the overall market. For the bulls sake, we can only hope this is not going to end up as a repeat of that year. The truth of the matter is that March was brutal for Big Wave Trading. In fact, it was a shocker. Watching large gains slip away (just like the gains from September 2010 to January 2011 being destroyed from Jan 11 to May 11) is always a humbling experience. Yet it is also a chance to learn and grow. And that is what we have done. It is clear the market model timing methodology is far superior to stock picking currently. Due to this, more capital will be put to work on the model signals than before. Also, playing speculative stocks with unsustainable run-ups and criminal pump-and-dumps on the short side will become a bigger play in our portfolios. Stock picking using the chart patterns that helped create vast wealth from 1996-2000, 2003-2007, somewhat in 2009, and in late-2010 for me will come back in fashion. However, right now, clearly, it is not in style. During any other rally in the past the top percent gainers below would be nearly doubled. Outside of three stocks, the returns have been paltry. As long as this methodology remains out of style, our portfolios will adjust accordingly. I hope everyone is enjoying their long weekend. Aloha.
Top Current Holdings – Percent Return (non-margin) – Date of Signal
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