The market was mixed today, as the Dow rose 94 points, but the Nasdaq dropped 54 points and many growth stocks were hit hard.
Overall, today’s retreat isn’t a total surprise given the sharp run-up in many growth stocks and some complacent sentiment. Our market timing indicators are still generally in good shape, and even after today’s retreat, most stocks are in firm uptrends.
However, today’s action did raise a couple of yellow flags with two of our stocks. One was Okta (OKTA), which initially gapped up on earnings but ended up closing sharply lower on huge volume, while many cloud software peers also got nailed. We’ll put OKTA on Hold tonight.
While not as dramatic, Grubhub (GRUB) is also being switched to Hold, as the stock’s breakout attempt has failed. The major trend is still up but the recent action indicates the stock probably needs more time to consolidate.
We remain optimistic that the path of least resistance remains up, but as always, we’ll watch the progress of the market and leading growth stocks and make changes as necessary.
The Model Portfolio has nine stocks, but now just four are rated Buy—Alibaba (BABA), Nutanix (NTNX), Shake Shack (SHAK) and Splunk (SPLK). We have Hold ratings on Five Below (FIVE), Grubhub (GRUB), Okta (OKTA), PayPal (PYPL) and Proofpoint (PFPT). And we’re still holding about 20% in cash.