The evidence continues to improve for the overall market. At the close last Friday, our longer-term Cabot Trend Lines returned to bullish territory, joining the intermediate-term Cabot Tides. Given that they use 35-week moving averages, the Trend Lines aren’t a precise timing tool, but even so, this clearly raises the odds that the month-long rally is the real McCoy.
As earnings season has progressed, we’ve also seen improvement among growth stocks—it’s not a wild bull market, but more leadership has appeared, especially among the big, liquid leaders we like.
Clearly, there are still crosscurrents and potholes out there. Believe it or not, as of yesterday’s close, nearly 60% of all stocks were still below their longer-term 200-day moving averages. Things have shown signs of broadening out a bit, but this remains a narrow rally.Throw in the fact that the market could easily pull back some after its recent straight-up run, and it’s reasonable to be selective on the buy side.
Last night, we made some moves in the Model Portfolio, selling one stock and buying two new stocks. That gives us seven stocks out of a possible 12 and a cash position just under 40%. Should the market continue to act well, we’ll continue to extend our line, but we advise going slow.
This is an excerpt from Cabot Top Ten Trader, which features the best trades to make every week. Designed for experienced investors who want even more great growth stock ideas, this advisory recommends the best 10 stocks each month for short-term investment by aggressive growth investors.
Michael Cintolo is Cabot's Vice President of Investments and Chief Analyst of Cabot Growth Investor and Cabot Top Ten Trader. To read customer reviews of Cabot Top Ten Trader, click here. To read reviews of Cabot Growth Investor, click here.