The major indexes were crushed today, with the Dow losing 328 points, the Nasdaq sinking 161 points and most growth stocks falling 4% to 8% on the day.
From a top-down perspective, our trend-following indicators are still positive, so we’re not panicking at this stage, especially as many growth stocks are still in overall uptrends.
But as we noted in last week’s issue and this morning’s bulletin, we have seen some yellow flags during the past couple of weeks, including growing divergences among the major indexes and complacent sentiment as many speculative stocks went vertical.
Given all that, we think it’s best to be vigilant with your portfolio, taking action as necessary.
On a Special Bulletin this morning, we sold half our shares of Splunk (SPLK), and placed both Grubhub (GRUB) and Nutanix (NTNX) on Hold.
Tonight, we’re going to sell our position in Alibaba (BABA), as the stock has tripped our mental stop and we have a small loss.
Going forward, we’ll simply follow the market’s lead. If more of our stocks break down, we’ll do 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 will now have eight stocks, with a cash position of around 35%. We have three stocks still rated Buy—Five Below (FIVE), PayPal (PYPL) and Shake Shack (SHAK). Stocks now rated Hold include Grubhub (GRUB), Nutanix (NTNX), Okta (OKTA), Proofpoint (PFPT) and our remaining shares of Splunk (SPLK).