WHAT TO DO NOW: The story remains the same, with the primary evidence in good shape, though many leaders are extended and more are starting to wobble. Last Friday, we sold half of Elastic (ESTC), which got walloped on earnings, and today we’ll sell the rest, as the stock has continued to show weakness. That will leave us with 37% in cash, which is more than we’d prefer—we’ll hold on to it for the moment but could re-deploy some in the very near future.
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The major indexes wobbly today, as some mega-cap names like Apple (AAPL) break down and many leaders are again getting hit. As of 11 am EST, the S&P 500 is down 0.9% and the Nasdaq is off 1.7%.
Overall, the primary evidence remains in solid shape, with our key market timing indicators positive and with most leading stocks still acting well. That said, there’s little doubt many leading names are extended and some are now beginning to stall out a bit—though we are seeing some earlier-stage names (including a growing number of non-tech plays) that are perking up.
Thus, we’re sticking with our stance of mostly riding our strongest performers but pruning weak names and being selective on the buy side.
In the Model Portfolio, most stocks are acting well, but Elastic (ESTC) had a poor reaction to earnings last Friday, causing us to sell half our position. A bit of follow-through weakness after that would have been normal—but instead, the stock slid sharply on Monday and is down further today, albeit with the overall market.
We’re not predicting doom, but given the breakdown and our loss on our remaining position, we’ll sell our remaining portion of ESTC here. SELL ESTC
That move will boost our cash position to around 37%, which is higher than we’d prefer. Thus, we could put a bit of that back to work in the very near future assuming the market and leaders hold up—but for the moment we’ll hang on to the cash and see how things play out as more and more names continue to gyrate.
Don’t hesitate to email me directly at mike@cabotwealth.com with any questions.
