WHAT TO DO NOW: : We’re selling Blackstone (BX) today as the stock has broken down and is approaching our entry point. Our cash position will now be in the 48% range. Details below.
The market looks set to open down relatively sharply this morning, with the futures indicating opening losses in the 0.7% to 1% range for the major indexes. However, our focus is really on the overall evidence, which is clearly worsening.
First, our Cabot Tides buy signal from last month is on the fence, and depending on how today goes, could get wiped out. Second, stepping back, the major indexes have now made no net progress for five months or so. Third, growth stocks remain under pressure, with any stock that pops its head up for a week or two meeting with sellers. And fourth, very few stocks are hitting new highs.
To be clear, most of these facts are descriptive and not predictive, so we’re open to anything going forward. But as we wrote above, there’s no question the evidence is worsening, and with air pockets appearing under many stocks, it’s important to be in a cautious stance until the buyers show up for more than a few hours.
Our instincts (and the fact that few growth stocks were set up properly) proved helpful in recent weeks, as we’ve kept more than one-third of the Model Portfolio in cash (around 39% coming into today) despite the strength of the indexes.
And today we’re going to build on that cash position—we’re selling our stake in Blackstone (BX), which, as a Bull Market stock, has broken its near-term uptrend and knifed back toward our entry point. That will leave us with a cash position in the 48% range, give or take.
Again, going forward, we really are open to anything, and still believe there are a fair number of stocks holding up well. But the onus is on the bulls to step up in a sustained way before we put much money back to work, especially if the Cabot Tides flip back to red.
We’ll be sending a fuller update per usual tomorrow (Thursday), October 3. Don’t hesitate to email (mike@cabotwealth.com) with any questions.