I’ve been aggressively invested in many leading growth stocks since the two follow-through days and the Zweig Breadth Thrust we saw in early November 2023. I discussed three of the stocks on the IBD Podcast on November 1, 2023, and they have seen very strong gains since that date: NVDA +112.1% , UBER +75.8% , MSFT +21.7%. I also wrote about the bullish factors in these two blog posts in early November 2023: Four Reasons for a Year-End Rally and Another Thing Going for the Bulls.

I reduced my exposure this week for the following reasons:

1) After a strong run, there’s nothing wrong with locking in some profits.
2) There’s been 5 distribution days (days of institutional selling) on the Nasdaq Composite over the past two weeks.
3) Many sentiment measures are showing extremely high levels of bullishness.
4) The end of the quarter tends to see all sorts of shenanigans such as window dressing, profit taking, index rebalancing, portfolio rebalancing, and just overall volatility.
5) The S&P 500 hasn’t visited its 10-week moving average in a while. Who knows? Maybe some hawkish comments from the Fed might be an excuse for the market to pull back.

Please keep in mind that I still have core positions in stocks that I like until year-end and that I’m not turning bearish, just defensive. If the market grinds higher, I still have plenty of exposure, and if the market pulls back, I will look to put cash back to work in some of the relative strength growth leaders. In other words, I am bullish over the long-term, but defensive over the near-term until we shake out some of the excess bullishness. As always, have your own plan, know your timeframe, and stick to your own investment objectives.

I can be reached at: jfahmy@zorcapital.com.

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