The market took another big hit today as the selling pressures intensified. When the closing the bell rang the Dow was down 105 points and the Nasdaq fell 36 points.
The market has headed straight down during the past six days, and today just about every index broke to new multi-month lows, which keeps our Cabot Tides bearish. Our Two-Second Indicator is also unhealthy, as we’ve seen five straight days of greater than 40 new lows. Throw in the fact that many stocks have broken down with the market and it’s clear you should remain cautious.
Longer-term, the trend is still tilting up for the major indexes and most leading stocks, and there are already many signs of panic emerging as investors fret about the uncertainty surrounding next week’s U.S. election. That could lead to a nice rally once the situation stabilizes.
But the bottom line is that the market remains weak, so you should be holding plenty of cash and limiting new buying to just small positions in resilient stocks.
We came into this week with 50% cash in the Model Portfolio, and tonight, we’re going to raise a little more cash by selling our remaining shares of Ulta Beauty (ULTA), which has been a long-time winner for us. We’ve already taken partial profits a couple of times in the stock, but after giving it a couple of months to find its footing, shares look toppy on a longer-term basis, so we’ll take the rest of our profit and move on.
The sale of Ulta will leave us with just four out of a possible 10 stocks and a cash position of around 55%. We’ll keep Alibaba, Facebook and PayPal rated Buy, though Alibaba and Facebook are reporting earnings this week, so their reactions will be important. We’ll keep Proshares Ultra S&P 500 Fund rated hold for now but it’s on a very tight leash as the S&P 500 tests major support.