The market showed another sharp round of rotation again today, with growth stocks getting hit and cyclical stocks ratcheting higher. At day’s end, the Dow was up 58 points but the Nasdaq cascaded 72 points.
The overall bull market remains intact, as the intermediate- and longer-term trends of the major indexes are still pointed up. And even among growth stocks, more than a few are holding up well or pulling back normally.
But there’s no question that, after prolonged runs in recent months, many leading growth stocks have shown abnormal weakness on heavy volume during the past week, including a few that have broken down completely. Last week we sold our position in Autodesk and took partial profits in PayPal.
Tonight, we’re going to do some more selling, first by dumping our entire position in ServiceNow, which broke down today. And second, we’re going to book partial profits in Exact Sciences by selling one-third of our shares.
We’re also going to place Universal Display on Hold, as that stock has been correcting sharply, though it’s still in an overall uptrend.
Now that we’ve seen a few days of vicious rotation, the question is what happens from here—some strong support would be encouraging, especially as we are seeing some new leadership emerge in retail and financial stocks. But further distribution would warrant a more defensive stance.
All together, the portfolio will now have 9 stocks with three rated BUY: Five Below, Grubhub and ProShares Ultra S&P 500 Fund. Alibaba, Exact Sciences, Facebook, PayPal, Shopify and Universal Display are rated Hold. Our cash position will be around 29%.