WHAT TO DO NOW: The market got off to an ugly start to the week yesterday, though really not much has changed—the Tides are positive, but not much else is, while individual growth stocks remain hit or miss. We’re cautiously optimistic, but continue to hold plenty of cash and are picking our spots carefully. In the Model Portfolio, we’re going to cut bait with our half-sized position in Albemarle (ALB), as the stock hasn’t been able to bounce much at all even after its recent decline. That will leave us with 75% in cash, which we’ll hold onto now, though we could have another nibble or two going forward if the market continues to hold together.
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The market fell yesterday after a Fed insider suggested rates would rise more than expected next year (basically taking back what the Chairman said last week), as well as some worries hitting various financial stocks. The Dow lost 1.4% yesterday while the Nasdaq sunk 1.9%.
The story remains mostly the same with the market: Our Cabot Tides are holding onto their green light, which is a plus, but our other indicators (Cabot Trend Lines, Two-Second Indicator, Aggression Index) are still negative and growth stocks remain iffy, with even the best-looking names in three-steps-forward, two-steps-back sort of advances—and with plenty of potholes still out there.
Thus, we remain mostly cautious; as the evidence has slowly improved, we’ve nibbled here or there, trying to start or build positions in potential leaders of the next bull move, but we’ve held more cash than stocks as less has generally been more in this environment, especially with growth titles.
One name that looked poised to help lead the next charge higher was Albemarle (ALB), as it was one of the first names to surge to new highs when the pressure came off the market in November. But not only has its breakout failed, there was downside follow through and ALB has been unable to really get off its knees for more than a day at a time since. We’re going to throw our half-sized position overboard today and look for greener pastures. SELL ALB
The move will leave us with 75%; we’re not opposed to putting a little to work if opportunities arise, but as has been the case for a while, we’re not in a rush as less has generally been more with growth stocks. Today we’ll hold the cash and see how things play out over the next couple of days.
Don’t hesitate to email me directly at mike@cabotwealth.com with any questions in the meantime.
