The market fell sharply on Friday on no particular news, with growth stocks again taking the hardest hits. At day’s end the Dow had lost 76 points while the Nasdaq plunged 115 points and growth stocks were again hit hard.
Our trend-following market timing indicators are still positive, and that is a good reason not to get overly pessimistic. Even so, there’s no denying that, ever since mid-June, the action in growth stocks has been lackluster, and last week’s selling was intense.
We’re not selling wholesale here, but it’s important to take things on a stock-by-stock basis, pruning stocks that are showing abnormal action.
This morning, then, we’re going to sell Proofpoint (PFPT), which dropped after earnings on Friday. The stock hasn’t tripped our stop, but we have no profit after holding for a few months and the big-volume decline after hitting resistance multiple times tells us the buyers aren’t in the building.
The sale of Proofpoint will leave the Model Portfolio with around 32% in cash. From here, we’ll just take it day to day—we’re not afraid to raise more cash if growth stocks weaken further, but we’re not going to anticipate anything as many stocks still look fine overall.
We now have eight stocks in the Model Portfolio, four of which are rated BUY. They are Grubhub (GRUB), Ligand Pharmaceuticals (LGND), PayPal (PYPL), and Teladoc (TDOC).
Stocks rated Hold are Nutanix (NTNX), Okta (OKTA), Shake Shack (SHAK) and our remaining shares of Five Below (FIVE).
Your next scheduled message is next Wednesday, August 1 at 5 p.m., though as always, we’ll send a Special Bulletin if we have any more changes. Thank you very much.