Tides Are Back on the Fence

by Michael Cintolo on April 23, 2014

This is an excerpt from Cabot Market Letter, where we’ve been picking the best growth stocks since 1970. Cabot’s flagship advisory combines expert stock selection and award-winning market timing. This is the most complete, and most helpful, growth-oriented investing advisory available at any price.

The market eased somewhat today, with the Dow losing 13 points but the Nasdaq retreating a more severe 34 points.

The market staged a short-term capitulation day last Tuesday (April 15), with the Nasdaq falling sharply during the day (and coming within a whisker of a 10% correction from its highs) before rebounding in the afternoon on huge volume. That was the first of six straight up days, which brought many stocks and indexes back toward their 50-day moving averages.

Because of the recent upmove, our Cabot Tides are back on the fence; further strength could produce a new buy signal, which would be encouraging. That said, to this point, not much has changed under the market’s hood—we’re seeing plenty of leadership among commodity-related stocks (especially in the energy group), but growth stocks are still repairing the damage suffered during the downturn.

If we had to guess, we’d say that the market (and lots of growth stocks) needs more time to back-and-fill, which would in turn allow more time for sentiment to cool off. But we don’t have to guess! Instead, we’ll just go with the flow—if our Tides turn positive, we’ll take a step or two back into the water and see how things progress. If not, we’ll remain in a defensive stance.

However, a defensive stance doesn’t mean we’re going to completely sit on our hands. While we still believe less is generally more in this environment, there’s nothing that says we can’t make a move or two depending on how our stocks (or some we’re watching) react to their earnings reports.  

And with energy stocks acting like real leaders, we’re going ahead and adding one to our Model Portfolio tonight which will leave us with a still-hefty 50% cash position.

Michael Cintolo is Vice President of Investments at Cabot Heritage Corporation, and Chief Analyst of Cabot Market Letter and Cabot Top Ten Trader. A growth stock and market timing expert, Mike is a true student of the market and a technical analysis specialist.

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