The market opened higher yesterday thanks to good news on the trade front, but sellers were active after the open, especially with growth stocks. At day’s end, the Dow had risen 193 points, but the Nasdaq was actually down 9 points and many growth stocks suffered another round of distribution.
As for our indicators, the longer-term trend of the market and most leading stocks are still up, and we continue to think the odds strongly favor higher prices in the months down the road for this bull market.
But, intermediate-term, our Cabot Tides are effectively on the fence and we’ve now seen a month’s worth of sloppy, rotational action among growth stocks.
That doesn’t guarantee a major decline in the market or growth stocks, but there’s no question the evidence has slowly worsened in recent weeks, so we’re trimming our sails just a bit today while remaining flexible depending on what the market does from here.
In the Model Portfolio today, we’re going to sell PayPal (PYPL), which is a fine company but hasn’t really been a leader for most of this year and has suffered many waves of big-volume selling in recent weeks. We’ll take our solid profit and hold the cash.
We’re also going to place Dexcom (DXCM) on Hold as the stock stalled out a bit last month and suffered a big-volume selloff yesterday on some news from the competition. Overall, the stock is still fine, but given the wobbly environment we think it’s prudent to go to Hold and see how it acts from here.
In the Model Portfolio, we now have eight stocks and a cash position of around 23%. We’ll keep Autodesk (ADSK), Five Below (FIVE), Ligand Pharmaceuticals (LGND), Okta (OKTA) and Teladoc (TDOC) rated Buy. We now have Dexcom (DXCM), Grubhub (GRUB), and Neurocrine (NBIX) rated Hold.
Your next scheduled message is tomorrow, Wednesday, October 3 at 5 p.m.