WHAT TO DO NOW: Remain defensive. The market is getting hit again today, and while some stuff is putting up a fight, we’re forced to belatedly sell Floor & Décor (FND) to prevent a bad situation from getting much worse. Our cash position will now be in the high 60% range. Details below.
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The market is getting hit again today, though some stocks are trying to put up a fight. As of 12 am EST, the Dow is down 80 points and the Nasdaq is off another 134 points.
For the overall market, we don’t have much to add from yesterday’s commentary—clearly the selling is spreading, and in the process, we’re seeing increasing levels of oversold (already more than 1,000 new lows on the Nasdaq) and pessimistic sentiment readings.
Ideally, this flush (which is now catching up will soon create enough panic to put in a workable low that the market can build off of, allowing some stocks to start repairing the damage that’s been seen. But we’ll just have to see how it plays out—right now, we remain in a defensive stance.
Unfortunately, even with nearly 60% on the sideline, we still have four names, and those remain under pressure. As we mentioned yesterday, we frankly got “caught” with Floor & Décor (FND) during the past couple of weeks, and the stock, like the market, has been unable to bounce at all since then. It’s a bad situation, no doubt, and our goal has to be to make sure it doesn’t get much worse—and today’s break of the century mark is the final straw. If you want to sell some/hold some sort of thing to see if it really can bounce, that’s up to you, but we are forced to (belatedly) sell and hold the cash. SELL
Elsewhere, Arista Networks (ANET) is coming in but honestly doesn’t look that bad compared to everything else and is sitting near support. We’re holding.
Devon Energy (DVN) is getting whacked today as the sellers have come around for oil stocks; a downgrade is also hurting the cause. That said, so far, the pullback is acceptable, and it’s hard to ignore the fact that oil prices remain elevated—even if they come down $20 from here, Devon is still going to be yielding a lot and buying back a lot of shares, which should keep big investors interested. We’re holding, and are OK nibbling if you’re not yet in.
Finally, as for ProShares Ultra S&P 500 (SSO)—if you bought this higher, we’d be careful with it, but if you’re in our shoes—lots of cash, big profit, already taken partial profits a few times, etc.—we’d sit tight with SSO, especially as it’s testing its 200-day line here.
Don’t hesitate to email me mike@cabotwealth.com with any questions.