The major indexes took a hit today, with the Dow losing 179 points and the Nasdaq sinking 121 points.
From a top-down perspective, the market is still positive, with both the intermediate-term (Cabot Tides) and longer-term trends (Cabot Trend Lines) bullish and with many signs indicating that investors remain hesitant (our Real Money Index remains positive), which is a plus.
That said, the rally’s upside follow-through last week has been quickly erased in most indexes, and looking at individual stocks over the past few trading days, money has been coming out of many strong (and often extended) growth leaders and into other areas of the market.
In the Model Portfolio, two of our retail stocks are looking ragged. The first is Planet Fitness (PLNT), which lost some momentum over the past month, and in the past couple of days that has caught up with it—today was PLNT’s fourth-straight decline on above-average volume, taking it decisively below its 50-day line for the first time all year. We’re going to sell half our shares here and hold the rest with a mental stop in the mid- to upper-60s (our entry point was 58).
The other stock that’s under pressure is Five Below (FIVE), which showed some life after a shakeout earlier this month, but now it’s back in the soup—today, in fact, it closed below its long-term 200-day line. There is some support under here, but we’ve been more than patient with the stock, which hasn’t been able to get going for months. Tonight, we’re going to sell our remaining shares and book the rest of our long-term profit.
These two moves will leave us with around 33% in cash in the Model Portfolio—which, frankly, is probably too much given the overall environment. But we’ll hold that cash position tonight and see how things progress; we could do some more profit taking if growth stocks remain under pressure, but there are still many names we’re watching for entry points if things firm up.
Bigger picture, we’re still OK nibbling on some of our buy-rated stocks, but we’ll be watching the action of everything closely in the days ahead.
Your next scheduled message is Thursday’s update (June 27), though we’ll be on the horn before then if we have any further changes.