Joshua Hayes'  Instablog

"I did not for one moment consider abandoning my chief defensive weapon-the stop-loss order. No matter how well built your house is, you would not think of forgetting to insure it against fire." -Nicolas Darvas

"Remember, the market is designed to fool most of the people most of the time. Sometimes, the market will go contrary to what speculators have predicted. At these times, speculators must abandon their predictions and follow the action of the market. Never argue with the tape. Markets are never wrong, but opinions often are. I only try to react to what the market is telling me by its behavior." -Jesse Livermore

The Big Wave Trading Portfolio model remains under a SELL signal generated on 5/4/12. The SELL signal was very strong but four false signals (3 SELL, 1 BUY-first time that has happened in the model since 1979) left us gun shy from going 100% all-in on the most recent strong signal. While this is unfortunate in the IRA/Retirement account (since it can not go short), as we are under-investing in inverse ETFs that are doing very well for us, it has worked itself out in the Aggressive/Margin account. Tons of stocks have produced very strong short signals for us since 5/4/12 and almost everything we are touching is working immediately. A far departure from the past two months. We realize that the market is very oversold here and thus it would be very dangerous pushing new short positions. If the market does not get a bounce on continues to selloff, we will continue to reduce the exposure in each new short signal that we receive. If the market can manage a bounce here and the charts stay broken with no real sign of accumulation in the market or leading stocks, we will look to fully press our bets on the inverse ETFs in the Retirement account and on shorts/ETFs in the Margin account. If the market does bounce, we get some good accumulation in leading stocks, and our current shorts start giving us cover signals, we will be more than happy to get exposure to the long side. However, we believe the fact that Facebook came public in such an environment and the fact that insiders sold over 50% of their personal holdings on the first day tells us everything we need to know as it relates to the 3-year bull"shit" market. I will redirect everyone to this post on April 23rd that I wrote for Seeking Alpha. It was denied publication because of its "technical analysis" content. That sure was unfortunate for their readers as the level of bullish articles that day was extremely intense. Aloha and have a great weekend.

Current Top Holdings - Percent Return - Date of Signal

BVSN short - 69% - 3/16/12
AVD - 65% - 1/10/12
UVXY - 63% - 5/9/12
LQDT - 62% - 2/1/12
SINO short - 37% - 4/12/12
MNST - 36% - 1/13/12
VRNM short - 34% - 4/10/12
PRXI short - 28% - 3/30/12
WZE short - 25% - 4/10/12

Disclosure: I am short VRNM, BVSN, SINO, WZE, PRXI.

Additional disclosure: I am long UVXY, LQDT, MNST, AVD

Disappointing Philadelphia Fed and jobless claims figures help set a negative tone for the day. Europe continues to dominate the fear index and FB continues to dominate CNBC's content lineup. The true story of the day was at the end of the day with sellers taking it to the market. AAPL was a large part of the NASDAQ decline of 2.1%. The market is now in a real danger zone with the lack of buyers willing to step up could make it very difficult for this market to regain its footing. Big Wave Trading continues to operate under a sell signal and we continue to look for this market to continue lower.

Sentiment continues to be negative, but the Investors Intelligence survey continues to lack the negative bearish sentiment. AAII survey certainly saw bears jump in terms of percentage and its bull ratio near lows, but the lack of bears responding to the II survey is somewhat concerning if you are bullish. The NASDAQ has corrected roughly 10% from its March highs which should be ushering in a bearish view point. However, we continue to see the neutral camp dominate the II survey. Given our current situation nothing that happens from here on out will not surprise us.

FB will be an entertaining IPO and will likely be a wild ride given the current market situation. We are oversold and a bounce would not be out of the ordinary for a quick snap rally to occur. Tomorrow's options expiry will certainly provide the morning with fireworks. The oversold nature of this market tomorrow would be as good of a time as any for this market to push higher to work off the current oversold conditions. Cash is king here and we are looking forward to the weekend.

Get out and enjoy the weekend!

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Once again stocks were able to find footing in the middle part of the day, but fail to hold the highs. A few more FOMC members are open to more quantitative easing it wasn't enough to help the market push back into the highs. Of course we still have the mess going on in Europe, but the market was looking for QE3 to hit the market. The Fed knows any further QE will result in very high commodity prices squeezing the poor even further. We cannot have this situation and given the situation in the Europe and here at home puts the United States Central Bank in a precarious situation. The market remains weak and while we may see a one or two day bounce the trend is still down.

If one had to guess just by looking at a chart of the NASDAQ it is quite easy to see the 200 day moving average is a logical next step for the index. Yes, we are oversold and sentiment is getting quite negative we have yet to see any real panic set into the market. The VIX, a measure of fear has yet to signal real fear in this market. Perhaps a move above 30 would signal enough fear, but it has yet to eclipse the 30 level. Talk of another flash crash is always imminent given the even happened only two years ago. For now we have a market creeping lower and lower and even with FB coming public on Thursday there is very little that can save this market from the inevitable.

The United States has been on a war path regarding spending. Wars, social security, medicare, prescription drug coverage, etc are a big drag on the government budget. Unfortunately, Washington DC will not tell the American public the truth. Spending needs to be lowered end of story. The Buffett tax is only estimated to bring in a few billion dollars a year extra! We have a 1.5T yearly hole at the moment that Obama feels quite comfortable with. This is nuts! The only fix is to overhaul the tax code into a one page simple code and reduce spending. However, the media and Obama administration do a great job distracting the public from the facts. If anything, the United States fiscal cliff is far more dangerous than a Greece leaving the EURO.

As a reminder, this week is options expiry and Friday should be a fun day. Tomorrow will more than likely be a bit more entertaining with FB coming public. We are not planning on participating in the IPO nor trading it on the first day. We'll sit back and wait for it to base much like EBAY and GOOG did after their debuts. We'll be patient.

Execute you trading plan and cut those losses short.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.