The market soared on Friday in reaction to a better-than-expected jobs report, with the Dow finishing up 251 points and the Nasdaq leaping 80 points. Most major indexes closed just below multi-month highs.
The broad market showed terrific power on the day. On the NYSE, up volume swamped down volume by more than 15-to-1, the third day of overwhelming buying power in the past eight trading sessions. Plus, it was encouraging to see the number of stocks hitting new highs on the Nasdaq reach its highest total in nearly a year.
Friday’s move has pushed our Cabot Tides back into bullish territory, where it joins our Cabot Trend Lines and Two-Second Indicator. In general, the evidence continues to mount that the sharp-but-brief Brexit decline was possibly the final shakeout in the market’s long, tedious 19-month consolidation.
Of course, the market has had countless ups and downs since late 2014, and earnings season is set to get underway, so nothing would surprise us. But there’s no question the evidence has improved greatly in recent weeks, which prompts us to put some more cash to work.
We come into this week with a 37% cash position in the Model Portfolio and six stocks that are all acting well. Today we’re going to add two new stocks to the Model Portfolio.
The first is Abiomed (ABMD), whose stock is hitting new highs thanks to enthusiasm for the firm’s Impella heart pump. The company reports earnings in a couple of weeks, which is a risk. You can consider buying a smaller than normal position if you want to keep risk lower. But we’ll keep it simple and buy a normal-sized position today.
The second new addition is Dave & Buster’s (PLAY), whose unique retail concept has a long runway of growth. Shares gapped out of a big launching pad a few weeks ago and continue to act well today.
All told, the portfolio will now have eight stocks out of a possible 10 and a cash position near 19%. Of the eight stocks, seven will be rated BUY—they are Abiomed, Dave & Buster’s, Five Below, ProShares Ultra S&P 500 Fund, Ulta Beauty, Veeva Systems and Vulcan Materials. We’ll keep Facebook rated Hold for now.
Your next scheduled message is Wednesday, July 13.