WHAT TO DO NOW: The market had another solid day today, which was enough to flip our Cabot Tides back to a bullish signal. There are still lots of crosscurrents and news-driven action out there among individual stocks, so we don’t think diving into the market with both feet is the right move, but we are going to put another chunk of money to work tonight by adding half-sized positions in both Palo Alto Networks (PANW) and CarGurus (CARG), leaving us with around 45% in cash.
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Reports that some sort of settlement was growing more likely in Ukraine helped stocks head higher today—at the close, the Dow was up 338 points and the Nasdaq was in the black by 265 points.
The market as a whole continues to act excellently after the Four Day Frenzy signal, and the good news today is that our Cabot Tides have returned to positive territory, telling us the intermediate-term trend of the major indexes has turned up. Our Growth Tides (made up of growth funds) are lagging a bit behind, but it shouldn’t take much for them to flash a green light, either.
Of course, it’s not all sunshine out there. Our long-term Cabot Trend Lines are still solidly negative, and among individual stocks, we’re seeing a lot of news-driven action and, more importantly, selling or hesitating on strength—many stocks that looked great a week ago have sold off, while others that had pulled in (or never bounced) have raced higher, including some junk stocks. Indeed, the number of stocks hitting new highs has leveled out in recent days even as the indexes have rallied.
We don’t consider these crosscurrents to be red flags—some choppy, confusing action isn’t unusual at all after the type of decline we saw—but we do think it’s best to put money back to work at a measured pace.
In the past month, we’ve put 20% of the portfolio back to work by adding four partial positions, and given the Tides, we’ll continue on that track: Tonight we’ll add a half-sized (5% of the portfolio) stake in Palo Alto Networks (PANW), a leader in the cybersecurity field that held up terrifically during the market’s decline; and CarGurus (CARG), which is very volatile but has held most of its giant February earnings gap thanks to its new CarOffers dealer-to-dealer business.
These moves will leave us with around 45% in cash—from here, we want to see some of our current holdings push higher, allowing us to average up and become more heavily invested. Right now, though, we think we’re in the right position, having put a good slug of money to work of late as things have improved, but still holding enough cash for both downside cushion and future buying power as new leadership emerges.
We’ll have a full update come Thursday—don’t hesitate to email me directly at mike@cabotwealth.com with any questions.