WHAT TO DO NOW: With the market remaining under intense pressure, you should remain cautious until the buyers show up. Today we’re selling one-third of our Facebook (FB) position, which will leave the Model Portfolio with nearly 60% in cash.
The market fell for the eighth straight session today as the buyers are still nowhere to be found. At day’s end, the Dow was off only 29 points but the Nasdaq sank 47 points.
Our market timing indicators continue to point to a weakening broad market, an intermediate-term downtrend in the major indexes and lots of stocks that have broken down on earnings.
Facebook joined that group today, as the stock fell a few percent after saying revenue growth would slow and spending would rise faster than expected next year. Given the state of the market, the stock’s downmove and our large position, we’re going to sell one-third of our shares and give the rest of our shares a little wiggle room.
Today’s move will leave the Model Portfolio with nearly 60% in cash. Of our four remaining stocks, our only Buy-rated name is PayPal, though you should keep new positions small until the market finds support. Alibaba, Facebook and ProShares Ultra S&P 500 Fund are all rated Hold.
With volatility sure to remain high in the days ahead, the key is to not only watch your stocks closely but to also keep your eyes open. There’s a possibility that the recent decline could turn out to be a Brexit-like shakeout, but the onus is clearly on the bulls to halt the decline and start a sustained uptrend. Until that happens, you should remain cautious.