The market suffered its worst day in months today, with the Dow down 238 points and the Nasdaq finished down 108 points.
One bad day in the market doesn’t worry us, but as we’ve been writing, we’ve seen a few areas of concern pop up in recent weeks, and today’s selling pressure cracked a handful of leading stocks. Our Cabot Trend Lines are clearly positive, but the Cabot Tides are now on the fence and our Two-Second Indicator continues to tell us the broad market is unhealthy.
We don’t advise wholesale selling, but now’s a good time to make sure you have some cash on the sideline and that you’re keeping any losers and laggards on tight leashes.
In the Model Portfolio, we’re making four moves tonight. First, we’re going to sell Texas Capital Bancshares, which has decisively broken down due to the sudden weakness in financial stocks.
We’re also going to place Charles Schwab, Netflix and XPO Logistics on Hold, as all three stocks haven’t made much progress in recent weeks.
Tonight’s sale of Texas Capital leaves the Model Portfolio with seven stocks and a cash position of around 28%. We’ll keep, Facebook, Lumentum, ProShares Ultra S&P 500 Fund and Shopify rated BUY, while Charles Schwab, Netflix and XPO Logistics are rated HOLD.
Going forward, we’ll let the market tell us what to do—should the uptrend reassert itself, there are a ton of growth stocks that are still acting well. Conversely, a sell signal from our Cabot Tides would have us raising more cash and cutting back on new buying. For now, though, we think our current stance makes sense.