WHAT TO DO NOW: The market tried to find support today, but as the hours have passed things continue to open up on the downside, with sharp losses in the indexes (especially the broad market). After last night’s sales we have a good-sized cash position, and today we’re going to sell a bit more, dumping our position in Uber (UBER), which is our weakest remaining stock and whose breakout has failed. Our cash level will now be around 57%. Details below.
After yesterday’s drubbing, the market is again lower today, though declines are more controlled as some financial stocks find support. As of 1:30 p.m. EST, the S&P is down 1.4% while the Nasdaq is down 1.7%, while broader indexes (small caps, etc.) are off around 3%.
As we wrote in last night’s issue, the evidence has taken a turn for the worse as things start to crack. Happily, there remain many (often growth-oriented) stocks and even sectors that are acting normally. We’re not ruling out that this week’s bank-oriented plunge could turn into something of a big shakeout if the damage is contained and if perception changes that the Fed will get off the market’s back.
That said, there’s also no doubt that things are beginning to open up on the downside—our Cabot Tides are clearly negative, the number of new lows is really picking up (174 on the NYSE and 470 on the Nasdaq today!) and, of course, more stocks are feeling the pressure of the market.
After last night’s sales, we’re up to around 47% in cash, but we’re going to do a bit more selling today—we’re going to cut our loss in Uber (UBER), a stock that looked totally normal two days ago but has plunged the past couple of days. We definitely still think the company is on the right track and the stock can have a good run in the next bull phase, but UBER is obviously getting hit hard as fears mount that the Fed has gone too far and the economy could see reverberations.
We’ll keep a distant eye on Uber to see if it’s ready to go when the market shapes up, but even though it’s a quick turnaround, we think it’s best to sell and hold the cash as the market weakens. Our cash position will be in the 57% range after this sell.
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