Stocks opened higher today on the backs of some good earnings reports, but the sellers have again come out of the woodwork and driven growth stocks lower. At around 2 pm, the Dow was up about 17 points but the Nasdaq had given up a 95-point gain and was now down 40 points.
We are seeing a couple of decent secondary indications that the market could be ready for a real bounce; our own Real Money Index has flashed a green light, which usually leads to above-average Nasdaq performance during the following month.
But looking at the primary evidence, our Cabot Tides remain negative, our Cabot Trend Lines could turn negative tonight depending on how the market closes and most important, stocks and the major indexes have been unable to mount much of a bounce in recent days. Overall, then, we believe it’s best to stay defensive until we see definitive signs of improvement.
Today’s afternoon Special Bulletin is in regards to Ligand Pharmaceuticals (LGND), which, like so many stocks, flashed heavy selling during the first two weeks of October, failed to bounce much and has now sunk to lower lows. We sold one-third of our shares at much higher prices, and while a bounce is certainly possible, we’re going to sell the rest this afternoon and hold the cash.
In the Model Portfolio, the sale of our remaining shares of Ligand leaves us with just four stocks and a cash position, with a cash position of around 68%. We’re going to keep Five Below (FIVE) rated Buy, though you should keep new positions small for now. We have the other three stocks rated Hold—they are Grubhub (GRUB), Okta (OKTA) and Teladoc (TDOC), all of which we’ve previously taken partial profits in.
Going forward, we could do a little buying if the market stabilizes given our large cash position. But the main goal now is to preserve capital until the next sustained advance gets underway.
Your next scheduled message is next Wednesday, October 24 at 5 pm, though we’ll be on the horn again if we have any further changes.