WHAT TO DO NOW: Four days doesn’t guarantee success, but the sharp broad market rally during the past few sessions has turned our Cabot Tides positive and improved our Two-Second Indicator; growth stocks remain choppy, but some names are perking up there, too. All told, we’re going to put a little money to work today, adding half-sized stakes (5% of the portfolio) in Robinhood (HOOD) and ProShares Ultra Russell 2000 Fund (UWM). That will leave us with around 30% in cash. Details below.
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The indexes are up today with the broad market again leading the way. As of noon EST, the Nasdaq is up 0.8% and the S&P 500 is up around 0.6%.
As we wrote in last week’s issue, it’s been unusual times in the market, but now we’re starting to see some of the recent, dramatic action affect the overall evidence—ever since last week’s inflation report, the broad market has kicked into gear, which has been enough to flip our Cabot Tides back into a bullish stance, with the broader indexes we track moving to (or very close to) new highs. Our Two-Second Indicator has also improved (new lows in the single digits today and last Friday), though it’s too soon to call that positive.
Interestingly, breadth has been so strong that it’s triggered a “mini-thrust” that usually leads to good things.
To be fair, at this point, the rally has been four days, and given the news-driven nature (based on economic reports) and the fact that earnings season is revving up, things can certainly change. We’d also say that growth stocks are still mostly chopping around, with some perking up but some selling off as rotation sets in.
Given it all, we’re going to put some money to work today—though we’ll go in steps given the crosscurrents that are still out there and the wave of upcoming reports.
Today, we’re going to add two half-sized positions (5% of the portfolio).
The first is in Robinhood (HOOD), the glamour Bull Market stock that has seen business pick up in a big way this year—and should continue to if the market continues higher and sentiment improves. Shares lifted above some resistance today, and while the stock does move around sometimes with crypto (which bounced sharply today) and can be very volatile (we’ll likely use a stop under 20), we like the overall trend. BUY A HALF
We’re also going to buy a stake in ProShares Ultra Russell 2000 Fund (UWM), thinking that if the broad market really is moving, it could go far. As we wrote above, four up days don’t guarantee a major uptrend, but there’s no question the setup (three and a half years of no net progress!) is there and the upside breadth of late has been encouraging. We’ll add a half-sized position and use an initial loss limit in the 36 to 37 range. BUY A HALF
That will bring our cash position down to 30%, and as usual, we’ll take it as it comes—aiming to put more money to work should more stocks join the party but holding cash (or paring back on names) if the rally stalls out.
Don’t hesitate to email me directly at mike@cabotwealth.com with any questions.
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