The market has made big moves for three days in a row, this time on the downside, with the Dow skidding 258 points and the Nasdaq losing 57 points. Interest rate fears were again behind the selling, with the 10-year Treasury yield spiking to a three-month high.
Today’s selling was enough to push our Cabot Tides to a sell signal, though our Cabot Trend Lines and Two-Second Indicator remain positive. We don’t advise panicking, but given the deterioration in the evidence, we are pulling in our horns tonight.
In the Model Portfolio, we came into today with 22% in cash. Tonight, we’re going to sell Amazon (AMZN), which doesn’t look awful but hasn’t been able to get going during the past couple of months. We’ll sell at about breakeven and hold the cash.
We’ll also place Abiomed (ABMD) on Hold tonight.
In total, the Model Portfolio will now have seven out of a possible 10 stocks, and a cash position of around 30%. We’ll keep Alibaba, Facebook, GrubHub and Veeva Systems rated BUY, but any new buying should be kept on the smaller side until the bulls re-take control of the market.
Stocks rated HOLD now include Abiomed, ProShares Ultra S&P 500 Fund and Ulta Beauty, all of which will be kept on tight leashes in case the market continues to fade.
While the past few days have been painful and we believe it’s best to raise some cash, it’s also important to take things day-by-day because many leading stocks are still holding their own and two of our indicators are clearly positive.