WHAT TO DO NOW: The market remains weak, with our Cabot Tides and Two-Second Indicator clearly negative due to across-the-board selling (83% of stocks under their 50-day lines). October does have a history of bringing bottoms, and combined with some longer-term positives, we’re not sticking our heads in the sand, but we remain cautious and will cut back further if needed. Today, we’re going to trim a bit more of our ProShares S&P 500 position, selling one-third of what we have left. That should leave us with a cash position near 56%.
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After a very minor bounce Monday, the market got hit again yesterday and, despite a decent broad market, the major indexes are coming under pressure again today. As of 1:30 p.m. ET, both the S&P 500 and Nasdaq are down a bit over half a percent each.
Not much has really changed with the evidence in the past few days—intermediate term, there’s no doubt the trend is down for nearly all stocks, sectors and indexes, with last week’s upside breakout in interest rates the catalyst for the selling. If it feels intense, that’s because it is; today is just the fourth time since 1993 that the S&P has hit lower daily lows nine days in a row.
Beyond the here and now, though, we’ll simply see how it goes—our Cabot Trend Lines are still bullish, and many studies are still pointing to a strong year-end, which is encouraging. Plus, while damage is being done, we still see many leading and potential leading stocks acting “normally.” Said another way, it’s not 2008 or 2022 out there. That said, the interest rate story is dominating all else at this point, with even many “safe” areas getting gutted.
We always go with what’s in front of us, so the gameplan remains straightforward: Remain cautious now, holding plenty of cash and making sure stocks don’t run away on the downside, but we’re not putting our head in the sand, as a turn up over the next week or two (maybe in October, which regularly sees low areas) should lead to some high-odds entries.
Today’s bulletin has one minor change—we’re going to sell one-third of what we have left in ProShares S&P 500 Fund (SSO) to respect the weakness we’re seeing out there. (If you have 90 shares left after last week’s partial sale, sell 30, etc.). That will trim our position size further but leave us a modest position should the market rebound.
Our cash position will now be in the 56% range.
We’ll have more thoughts in Thursday’s (September 28) regular update, along with further special bulletins if needed. Don’t hesitate to email me directly at mike@cabotwealth.com with any questions.
