Last week, we began to see selling begin to appear in some leaders, either through stalling action (selling on the way up) or, more importantly, via some selling on good news—Workday (WDAY) on Friday was an example, as were Autodesk (ADSK) and Splunk (SPLK) after earnings.
And today we saw the sellers really come out of the woodwork, with many leading growth stocks taking big hits on volume. On the day, the Dow was down 207 points while the Nasdaq was off 18 points.
In the big picture, this remains a bull market—as we wrote in last week’s Growth Investor, we remain quite bullish on the intermediate- to longer-term given our still-bullish trend-following indicators, the blastoff signals and the overall action of the past couple of months.
Shorter-term, though, the big run off the market bottom, some stalling out in a few leaders and today’s selling raises the prospect that—at least for the “hot” growth stocks that have been running for a couple of months—we could see further selling, consolidation and base-building. We’re not saying a multi-week downturn is at all a sure thing, but just one day of selling following the recent run would be unusual, too.
In the Model Portfolio, we have no sells tonight, but we are going to place Five Below (FIVE), Okta (OKTA) and Workday (WDAY) on Hold. None have broken down, but all have shown some iffy action.
Should the pressure persist, we’ll follow our usual plan, selling anything that breaks down while sticking with the stocks that hold up the best. Right now, though, we’re hanging with our stocks, most of appear to be real leaders of this advance, and will watch to see if logical support holds—and if so, how well these stocks can bounce.
All told, we still have nine stocks and a cash position of around 10%. We’ll have further Special Bulletins as needed in the days ahead (along with our regularly scheduled Thursday email update, March 7).