A Mixed Bag

by Michael Cintolo on April 01, 2015

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.

Consider this scenario: You’re watching a playoff football game and the team you’re rooting for gets going on a drive and gets a few first downs. But then, around the opponents’ 40 yard line, the drive stalls out after an agonizing dropped pass on third down. A missed opportunity to be sure.

Then, after a good punt, your team’s defense gives up a few long pass plays, and it seems certain they’re going to give up the first score … but the opposing team tosses an interception to kill the drive. Back and forth this goes, with lots of big plays for each team, but with few points put on the board.

That’s been the story of the market since December—lots of big moves, lots of big headlines, and lots of emotional high and low points … but little in the way of progress, either up or down. At the end of March, the Dow and S&P 500 were flat over the prior four months, while the Nasdaq was up a mere 2.3%.

So what does all of this portend?  Well, as one (in)famous football coach around here would say, it is what it is. We’ve seen plenty of instances where choppy environments are actually distributional tops that lead to meaningful market declines. To be honest, the current mix of complacent investor sentiment (bolstered by the Nasdaq 5,000 hoopla) and last Wednesday’s obvious, all-out institutional selling, tells us that a real correction is certainly possible.  In fact, we wonder if some panic (via a market decline) is needed to “clear the decks” before a sustained advance can get going.

Still, as we often preach, an investor is nothing without his system, and right now, despite the recent pullback, our market timing system is still positive. Granted, our Cabot Tides are on the fence and leading growth stocks are a mixed bag (some are in good shape, some are looking ragged), but our dependable Cabot Trend Lines are still bullish, and even our Two-Second Indicator has turned positive, an encouraging sign of broad market resilience.

With the weight of the evidence remaining slightly bullish, we’re still positioned that way in the Model Portfolio. The key is having a plan for whatever the market throws at us. Right now, we have a couple of stocks on tight leashes (we’re actually taking partial profits on one stock in tonight’s issue) in case the sellers take control, but we’re holding on tightly to our top performers and keeping our watch list fresh with plenty of good ideas.

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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