WHAT TO DO NOW: The weakness in the market and growth stocks is continuing this morning. One of our stocks, Seagen (SGEN), reported a sour quarter and is gapping below support today—the action is abnormal and we advise selling. The Model Portfolio will now be around 46% in cash.
The market is again in the red this morning, continuing the correction that began nearly three weeks ago. As of 10:45 a.m. ET, the Dow is down 487 points and the Nasdaq is off 310 points after a bunch of negative earnings reactions.
One of those reaction is from our own Seagen (SGEN), which, frankly, reported a sour quarter—the outlook was cut a bit due to slow sales in its largest selling drug. The big-picture outlook isn’t worse, but the stock is showing abnormal action, first giving up all of its breakout gains from September/early October and today gapping below its 50-day line on heavy volume.
We don’t think the stock is going to necessarily implode from here, but given the very weak environment and the stock’s breakdown we’re pulling the plug today—selling SGEN from the Model Portfolio. SELL.
We have no other changes right now, but are definitely keeping a close eye on our other names and will be in touch if need be.
That will leave us with a lot of cash (46% or so), which is probably too high given the evidence. We continue to think that a couple of good, big-volume days on the upside could change the landscape as, stepping back, many stocks and indexes are in wide consolidations following huge March-August upmoves. But right now, the onus is definitely on the bulls to step up—the situation is very weak, so we advise playing some defense.
Your next scheduled message will come next Thursday (November 5), but we’ll be on the horn with any changes before then. Don’t hesitate to email (mike@cabotwealth.com) me any questions you have in the meantime.