From Cabot Market Letter
Our thoughts remain generally the same as they were a week ago—the major trends of the market remain up, but there are a few warning signs cropping up across the market, whether it’s our Two-Second Indicator (which continues to show plus-40 readings nearly every day) or the fact that sentiment remains very giddy (which tells us many investors have already bought into the market).
On a positive note, we’ve seen a subtle shift toward growth stocks in recent days—it’s nothing to celebrate yet, but while the indexes haven’t done much during the past couple of weeks, we’ve seen a few growth and glamour stocks find support, and a few more perk up on good volume. To be fair, the indexes and RP lines we wrote about on page 5 of last week’s Letter (the IBD 85-85 vs. the Consumer Staples fund) haven’t improved enough to conclude a major shift has occurred, but it’s a nice first step after two months of not much action. Further bullish action would be very encouraging.
Altogether, our stance is unchanged. We’re leaning bullish and are practicing patience with our winners as they consolidate their big year-to-date advances. We’re not opposed to new buying, but we’re picking our spots and focusing on low-risk entries. And we’re still holding some cash until the growth stock universe really kicks back into gear.
Tonight, we’re tempted to do a little buying, but we’re going to stand pat a little longer. If the recent growth stock improvement continues, we could put money to work, either in new names or by averaging up in one or two of our current holdings (or both). Tonight, though, there are no changes in the Model Portfolio.
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