The major indexes suffered another huge wave of selling today, with the Dow cascading 1175 points and the Nasdaq losing 273 points.
Right now, our longer-term Cabot Trend Lines remain positive but today’s drop was enough to turn our intermediate-term Cabot Tides negative, where they join our Two-Second Indicator.
In the short-term, it wouldn’t be surprising to see the market bounce soon, and with the overall bull market still intact, we don’t advise panicking out of most of your stocks. But there’s no question the evidence has changed for the worse, so it’s best to honor your loss limits and pare back on your weakest stocks.
On a Special Bulletin this morning, we sold one third of our shares in PayPal and Five Below, which boosted our cash position to around 18%. Tonight, we’re going to sell Diamondback Energy—we still like the story, but the stock is showing us a loss, which we want to cut short in an intermediate-term downtrend.
That sale will bring our cash level up to around 27%, and going forward, we could raise more cash if the market remains in rough shape. But we’re also not throwing in the towel, as many stocks are still in surprisingly decent shape.
In the Model Portfolio, we’ll keep Shopify and Splunk rated Buy, but it’s best to keep new positions on the small side until the market stabilizes. We now have Hold ratings on Alibaba, E*Trade, Facebook, Grubhub, ProShares Ultra S&P 500 Fund and our remaining shares of Five Below and PayPal.