From Cabot Market Letter
Not much has changed during the past week or two when it comes to the market’s intermediate-term outlook—the indexes are super-strong, and most stocks are participating on the upside, with hundreds of names hitting new highs most days. All of our indicators are still bullish, too.
The flip side of that is, of course, that a real pullback (one that lasts more than two or three days) could come at any time. Maybe it started today! We’re not predicting that, but it’s a good reason not to lean too far in front of your skis—if you really want to buy a stock that’s in nosebleed territory, that’s fine, but keep the position very small and try to build it up over time, on the way up.
Or you can just practice patience. If some of these moon shots are going to be long-term winners, they’ll set up again in the weeks or months ahead. And if they’re not going to continue higher, you don’t want to buy them in the first place! The good news is that there is so much rotation under the market’s hood that many stocks pause for a couple of weeks before revving up, while the extended stocks take a breather. We’re keeping our eyes open both for new buys, but also watching our own names closely should we need to pare back.
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