The market had another volatile day, with a big dip early but then with buyers showing up in the afternoon. At day’s end, the Dow was down 66 points, but the Nasdaq was up a solid 64 points.
While the major indexes are still above their year-to-date lows from February and late March, the buyers haven’t been able to take control, as our Cabot Tides and Two-Second Indicator remain negative. A couple of good days could actually flip the intermediate-term trend to positive, but right now we’re more focused on individual stocks, with some of the recently resilient growth stocks getting hit on earnings.
The Model Portfolio has been holding a good-sized cash position recently, and came into this week with a cash position of 44%. And tonight we’re making a couple more moves that will boost our cash position further.
Tonight, we’re going to sell our remaining shares of Shopify (SHOP). While the stock hasn’t broken its recent lows, today’s adverse earnings reaction and its prior long run tell us there will be better stocks to own once the market gets going on the upside.
We’re also going to sell another half of Grubhub (GRUB), which got hit on earnings today. We’re still optimistic about the company’s long-term potential, but the action of the market and the stock tell us to pare back.
Tonight’s moves will boost our cash position to around 52%. We’re not necessarily looking to raise more cash going forward, but as always, we’ll prune stocks that break down, and we could add new buys if the right setups emerge.
Following tonight, the Model Portfolio will have six stocks. We’ll keep Five Below and Nutanix rated Buy, but all new positions should be kept small given the weak market. Our other four stocks are rated Hold--they are our remaining shares of Grubhub, PayPal, Splunk and Proofpoint, which is being flipped to Hold because of its recent weakness.