The major indexes were mixed on Friday, with the Dow rising 119 points and the Nasdaq falling 20 points, though many growth stocks took it on the chin as money rotated toward beaten-down names.
Overall, nothing has changed with our market timing indicators, with both trend-following measures positive but the Two-Second Indicator unhealthy. More important to us is that, after a solid run for a few weeks that included jubilant sentiment, many growth stocks are starting to show wear and tear, with some cracking intermediate-term support.
At this point, most names are still in good shape, simply consolidating or pulling back after solid runs. But it’s important to take action as necessary.
In the Model Portfolio, many of our stocks were hit hard on Friday. In response, we’re going to sell half our shares of Splunk (SPLK), while placing both Grubhub (GRUB) and Nutanix (NTNX) on Hold. That will raise our cash position to around 25%.
Going forward, we’ll simply follow the market’s lead. If any more of our stocks break down, we’ll do some more selling, but our watch list is still full of solid ideas if attractive entry points appear in the days or weeks ahead.
All told, the Model Portfolio still has nine stocks, with a cash position of 25%. We have four stocks still rated Buy—Alibaba, Five Below, PayPal and Shake Shack. Stocks now rated Hold include Grubhub, Nutanix, Okta, Proofpoint and our remaining shares of Splunk.