The major indexes did well on Friday, with the Dow up 136 points and the Nasdaq up 9 points. But growth stocks were once again hit relatively hard with another few breaking intermediate-term support.
Not much has changed with our view of the market. Overall, the bull market remains intact, with the longer-term trend pointed up, though the intermediate-term trend is more neutral than positive.
But while some growth stocks have found their footing, the complex as a whole remains under pressure. We continue to take things a stock-by-stock basis, cutting loose any that break down or crack on earnings, while holding those that are standing firm.
On that note, this Special Bulletin is in regards to Shake Shack (SHAK), which released a good-not-great quarterly report last Thursday, which, combined with Friday’s sour market for growth stocks, pushed shares back below our buy price. One of our rules is to not let a decent gain turn into a meaningful loss, so we’re selling the stock from the Model Portfolio today.
This sale will push our cash position to just over 50%, which is obviously an elevated level given the stance of the overall market. Thus, we’re not opposed to doing a little new buying, but first we want to see growth stocks find support and some decent setups appear.
All told, we now have six stocks in the Model Portfolio and a cash position of around 52%. We still have Grubhub (GRUB) and Ligand Pharmaceuticals (LGND) rated Buy, but we advise keeping new positions on the small side.
Stocks rated Hold are Five Below (FIVE), PayPal (PYPL), Teladoc (TDOC) and Okta (OKTA), which slid sharply today but remains a bit above its prior low and our stop. We’ll be on the horn if we have any changes—buy or sell—in the days ahead.
If not, your next scheduled message is next Wednesday, August 8 at 5 pm.