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Don't Judge a Month by its First Day

Investors can’t help but have visions of December 2018 dancing in their heads after the 2019 version started today with a selloff.

But let’s all just relax!

Remember, December is a very good month for stocks historically-speaking, which makes last year’s late massacre an anomaly.

Plus, the bulls are still in charge as we come off a strong month of November that saw the NASDAQ climb 4.5% and the other major indices jump over 3%.

So a little pullback could be considered long overdue, and today’s manufacturing data provided a nice excuse.

The ISM data for November slipped to 48.1, marking the fourth straight month below 50 (which signals contraction). It also missed expectations for a little over 49 and was less than October’s 48.3.

And the sentiment on Monday wasn't helped by President Trump tweeting that the U.S. would restore tariffs on steel and aluminum imports from Brazil and Argentina.

Of course, the market is always sensitive to any type of tariff news, but it’s all the more so right now as we near the Dec. 15 deadline for additional tariffs on China.

The two sides are still talking, thankfully, but there’s still no agreement on a Phase 1 deal.

So, the market decided that this post-holiday session was a good time to take a step back.

The NASDAQ got the worst of it with a slump of 1.12% (or more than 97 points) to 8567.99. Each of the FAANGs were off by 1% or more today.

The Dow slipped 0.96% (or around 268 points) to 27,783.04 and the S&P was off 0.86% to 3113.87.  

It wouldn’t be surprising to see even more pullback in the next few days or weeks after the run we’ve had over the past few months. But that certainly doesn’t mean we’re poised to repeat last year’s finale. In fact, December 2018 actually started with a more than 1% rally for each of the major indices! So let's not judge this month by its first day.

Instead, we should be focusing on the plethora of economic data scheduled for this week now that the month has turned. Some of the biggies include ADP employment and ISM non-manufacturing on Wednesday and, of course, the Government Employment Situation on Friday.

Today's Portfolio Highlights:

Healthcare Innovators:
After taking the second 30%+ gain in CRISPR Therapeutics (CRSP) this year in September, Kevin decided to jump back in the stock in October. The timing couldn’t have been better as the gene editing pioneer was about to release data on new clinical trials. And biotech investors loved what they heard, sending shares up over 50% in a few weeks. Now, with a big and unpredictable industry conference set to begin next week in Orlando, Kevin thinks the near-term odds are better for some volatility rather than more upside, especially since CRSP has already priced in a lot of good news and there are no immediate catalysts on the horizon. Therefore, the editor decided to sell the stock and take a “phenomenal” 83% gain on Monday. The portfolio still has plenty of CRISPR exposure through Editas Medicine Editas Medicine (EDIT) and Intellia Therapeutics (NTLA). 

Black Box Trader: The portfolio made six changes in this week's adjustment. The stocks that were sold today included:

• United Airlines (UAL)
• Builders FirstSource (BLDR)
• Target (TGT)
• KB Home (KBH)
• Navient Corp. (NAVI)
• Hewlett Packard Enterprise Co. (HPE)

The new buys that replaced these names are:

• Best Buy (BBY)
• D.R. Horton (DHI)
• DICK'S Sporting Goods (DKS)
• Newell Brands (NWL)
• Synaptics (SYNA)
• Vector Group (VGR)

Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing.

All the Best,
Jim Giaquinto

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