As the market correction continues, it’s important not to focus on the coronavirus news but to focus on the actions of your stocks instead.
Sure, the coronavirus news will be interesting, but it will be no help at all in determining how to manage your portfolio. For that, you need simply to watch your stocks carefully, and react accordingly.
Yesterday we told you that our intermediate-term market-timing indicator, the Cabot Tides, had turned negative, and it certainly remains that way today, with the broad market falling even more. A market bounce is possible at any time, of course, but until the Tides turns positive, you should assume any bounce is temporary; the correction needs to run its course.
How long that course will be, no one knows. What we do know is that when it is done, investor sentiment will be far less elevated than it was last week—and our goal is to get you there relatively unscathed, and with cash to use to buy after the bottom.
That said, the odds are against this being the end of the bull market. Our Cabot Trend Lines remain solidly positive, and while we’re seeing some abnormal selling, the larger, longer-term uptrends in almost all leaders remain up.
Long story short, we’re likely in some sort of market correction that will take time to play out and bring with it many sharp, news-driven moves (up and down). We’ll follow the usual game plan—hold some cash, keep losers and laggards on tight leashes and try to hold most of our relatively resilient winners, which we still think can head higher over time.
In the Model Portfolio, we came into today (after yesterday’s selling) with the portfolio 24% in cash, and now we’re going to raise more cash by selling the remainder of Inphi (IPHI), which continued lower today, and also selling 1/3 of our position in Vertex Pharmaceuticals (VRTX).
What to Do Now
Sell Inphi (IPHI)
Sell 1/3 Vertex Pharmaceuticals (VRTX).