The major indexes finished deep in the red again today, with growth stocks taking another pounding. At day’s end, the Dow actually gained 40 points but the Nasdaq sank another 53 points despite a decent late-day rally.
Our Cabot Tides are now firmly negative, and we’ve been raising cash steadily during the past week. Short-term, a bounce wouldn’t be surprising, as we’re beginning to see a few signs of panicky selling, but at least among growth stocks, there’s enough evidence to be in a defensive stance as we wait for the selling to subside and some new launching pads to appear.
We wouldn’t assume the recent weakness is portending a long period of doom and gloom; indeed, our Cabot Trend Lines remain bullish, many cyclical stocks are still acting well as money rotates to those areas and a bunch of studies tell us the bull market is very likely to head higher in the months ahead.
Thus, we don’t advise sticking your head in the sand, but it’s best to hold plenty of cash and cut back on new buying until the environment improves.
In the Model Portfolio, our cash position rose from 16% to 40% just last week, and tonight we have two more moves—we’re going to dump our shares of Neurocrine Biosciences (NBIX) given our small loss and the stock’s break of support.
And we’re also going to sell one-third of our position in Okta (OKTA), which has been caught up in the growth stock selloff.
That will leave us with six stocks in the Model Portfolio and a cash position of around 52%. We’re going to keep Five Below (FIVE) rated Buy, as the stock, while declining, is still holding support. But we have the other five stocks rated Hold, including Autodesk (ADSK), Grubhub (GRUB), Ligand Pharmaceuticals (LGND), Teladoc (TDOC) and our remaining shares of Okta (OKTA).
Your next scheduled message is next Wednesday, October 10 at 5 pm, though we’ll be on the horn again if we have any further changes.