Following Friday’s meltdown, the market attempted to bounce this morning, but was overwhelmed with selling pressures again, resulting in another round of huge losses. At day’s end, the Dow was off 244 points and the Nasdaq fell 117 points.
Today’s message concerns Grubhub (GRUB), which reported a great third quarter last week, but also announced its intention to invest more money during the next quarter or two, which is likely to crimp earnings. In this environment, that news brought a big wave of selling, causing the stock to dive below long-term support on big volume.
Like many names, Grubhub could easily bounce at some point, but we can’t ignore the technical action in the stock. We’ll sell what’s left of our relatively small position tomorrow.
This sale will raise our cash position to around 78%, which is obviously a highly defensive stance. If the market can find its footing for a few days and we see some good setups from a few earnings winners, it’s possible we could add a small position or two in potential new leaders.
But so far there’s no been sign of buying support, so we’re content to remain defensive until our trend-following indicators return to health.
In the Model Portfolio, we now have just three stocks left. We’re keeping Five Below (FIVE) rated Buy, but only if you have plenty of cash and want to buy a small position on this dip. We’re keeping Okta (OKTA) and Teladoc (TDOC) rated Hold.
Your next scheduled message is next Wednesday, October 31 at 5 pm, though we’ll be on the horn again if we have any further changes.