WHAT TO DO NOW: The Model Portfolio is holding its own in this storm thus far, but we continue to pare back as needed given the selling wave. This morning, we’re cutting our loss on our half position of Dynatrace (DT), which will give us a bit over 55% on the sideline. Details below.
The market is imploding this morning on a combination of virus fears and a collapse in the energy markets, where oil is trading down more than 20%. That has caused the major indexes to crater, with most down more than 5.5% to 6% as of 10:45 am.
Today’s meltdown obviously keeps our Cabot Tides clearly negative and prompts us to stay in a cautious stance. To be fair, many short- to intermediate-term measures are now extremely stretched (more than 1,000 new lows on both the NYSE and Nasdaq this morning!), which tell us a decent rebound can get underway at any time. Throw in our still-positive Cabot Trend Lines, and we’re not eager to sell wholesale at this point.
However, the bottom line is most stocks and indexes are in downtrends, so we’re holding onto plenty of cash and limiting new buying.
Thankfully, the Model Portfolio came into today just over half in cash; in fact, we were still up healthily on the year (we’ll see how things look after today), even though the S&P came into today down 8% year to date.
This morning, though, we’re going to boost our cash a bit more by selling our half position in Dynatrace (DT), which gapped below our mental stop this morning. Of course, we never like to sell into emotional market meltdowns, but we also don’t like having a growing loss in a horrid market. As with many stocks being taken apart, we still like the story, and if the stock (and market) can shape up, we could revisit DT down the road. But right now it’s about capital preservation and following the rules, so we’ll cut bait. SELL DT.
Lastly, for those of you that still own Sea Ltd (SE), we’d still be holding on, albeit with a mental stop in the 44 area. It’s taking a hit today of course, but is actually still north of its 50-day line for the moment, which is rarefied air these days.
As always, we’ll be on the horn with any further changes if need be. Don’t hesitate to email (mike@cabotwealth.com) with any questions; we’re here to help in these crazy times. Your next scheduled message is Thursday’s (March 12) issue, but of course we’ll send special bulletins as needed.