The market rallied briskly yesterday, though it was mainly a big-cap affair. At day’s end, the Dow surged 399 points and the Nasdaq gained 84 points.
The recent rally has been enough to turn our Cabot Tides positive, as three of the five indexes we track are clearly above their 50-day lines. That’s certainly a positive and tells us to put some money back to work.
That said, historically V-shaped recoveries like the one we’ve seen during the past three weeks often don’t provide the sturdiest launching pads, and relatively few stocks are hitting new highs. Both of those are reasons to go slow.
Thus, today, we’ll add a 10% position in one new stock to the Model Portfolio and average up on another. The new addition is HubSpot (HUBS), a leading provider of a cloud-based inbound marketing platform and services that mid-sized businesses are gobbling up. Sales and earnings growth is strong, and while the stock is a bit extended here, its recent liftoff on huge volume bodes well.
We’re also going to buy an extra 3% position in Shopify (SHOP), which looks like it’s a leading stock once again.
Lastly, we’re placing ProShares Ultra S&P 500 Fund (SSO) back on Buy given our positive trend-following indicators.
These moves will give us nine stocks and a cash position of around 27%. Stocks rated BUY now include Grubhub, HubSpot, ProShares Ultra S&P 500 Fund, Shopify and Splunk. We’ll keep Alibaba, Facebook, Five Below and PayPal rated HOLD for now.
Should the market and growth stocks remain resilient, we’ll likely put some more cash to work in the near future—in fact, there are a handful of stocks that are reporting earnings this week that we’re interested in. But we’ll start with these initial moves today and see how things progress.