The Emerging Markets Timer held and slightly improved its position and is sitting right at its 50-day moving average, which is both constructive and bullish.

We would like to see a stronger uptrend before moving ahead to put much more cash to work but we do have a new recommendation from Brazil—a market that has moved up 20% in the last month.

Last week I mentioned that two of our trend-following indicators had turned positive (the Cabot Emerging Markets Timer and the Cabot Tides), and now we can add one more indicator, the Blastoff Signal—a rare but powerful signal that occurs when the NYSE daily advance-decline line averages twice as many advancers as decliners over a 10-day span. As a result, I continue to advise you to get more heavily and aggressively invested. Months from now, the market will be higher.

Current Market Outlook


We’ve now seen four constructive weeks in a row for the overall market, not just because the major indexes are rallying, but also due to the amazing breadth during the advance (a good longer-term sign and indicative of a vacuum of selling pressure) and the action of individual stocks, a ton of which are setting up good-looking launching pads. That said, it’s not all peaches and cream—the intermediate-term trend is still on the fence (could turn up this week, but hasn’t quite yet), most indexes and stocks are below longer-term moving averages and, after four good weeks, some shakeouts and potholes (possibly on earnings) could emerge. Overall, we’re optimistic and are bumping up our Market Monitor to a level 6, but it’s best to step (not plunge) into stocks and keep looking for lower-risk entry points.

This week’s list contains another batch of great stories, with a variety of strong charts (some coming off lows, others at new highs, others setting up). Our Top Pick is Coupa Software (COUP), which is in a strong group and has seen superb buying volume in recent days.

Stock Name	Price	Buy Range	Loss Limit
Alarm.com (ALRM)	71.33	57-59	51.5-53
Bilibili (BILI)	28.71	15.5-17	13.5-14.5
Coupa Software (COUP)	262.20	73-77	64-67.5
Cronos Group (CRON)	17.62	13-14.5	10-11
HubSpot (HUBS)	582.89	148-153	135-138
Lending Tree (TREE)	411.51	275-285	253-259
LPL Financial Holdings (LPLA)	85.22	67.5-70	62-64
Novocure (NVCR)	0.00	43-46	38-39.5
Pinduoduo (PDD)	87.53	23.5-25.5	21-22
Veeva Systems (VEEV)	180.23	103-107	93-95

The rally off the climactic Christmas Eve low has been very impressive, triggering our 2-to-1 Blastoff Indicator that prompted us to put some money back to work last week. Since then, the action has been encouraging, and our Cabot Tides are close to a new Buy signal. If it comes, we’ll put more of our cash into potential leading names.

Change in weather and change in markets seem to be the norm today. We certainly had an extreme case of market volatility last year, with the Dow Jones Industrial Average ending up with a loss of 7.36%, the S&P 500 declined by 7.6% and the Nasdaq dropped by 5.57%.

The good news today is that both our intermediate-term market timing tool, Cabot Tides, and our emerging markets timing tool, Cabot Emerging Markets Timer, have both flashed buy signals, telling us that we should work to get more heavily invested, by buying attractive stocks at sensible entry points.

Current Market Outlook


Stocks had another great week, with the major indexes posting solid gains, many potential leaders approaching new highs and market breadth being so positive that it flashed a rare “blastoff” green light. Thus, our confidence is growing that the worst has passed—though that doesn’t mean the market doesn’t face many weeks of bottom building, either. Long story short, the evidence has improved, though it’s worth remembering that the intermediate-term trend of the indexes and most stocks remains down. All in all, we’re OK extending your line a bit, doing some new buying in high-potential stocks, but we’re also still keeping a good chunk of cash on the sideline and waiting for more strength to develop (maybe after a retrenchment) before turning bullish. Our Market Monitor moves to a level 5 this week.

As for the list, today is another batch of good-looking stocks from a variety of sectors, albeit with a heavier emphasis on medical. Our Top Pick is old favorite Dexcom (DXCM)—start small and build if the recent strength continues.

Stock Name	Price	Buy Range	Loss Limit
Array Biopharma (ARRY)	46.35	16.5-17.5	15-15.5
Cree, Inc. (CREE)	67.96	44.5-46.5	41-42
Dexcom (DXCM)	421.36	137-144	122-126
Everbridge (EVBG)	107.90	53-56	49-50.5
Five Below (FIVE)	134.58	112-117	100-103
Ionis Pharmaceuticals (IONS)	73.34	55.5-57.5	51-52
Keysight Technologies, Inc. (KEYS)	97.20	64-66.5	58.5-60.5
LGI Homes (LGIH)	86.04	54-57	49-51
Tandem Diabetes (TNDM)	74.77	39.5-42.5	33.5-35.5
Vertex Pharmaceuticals (VRTX)	230.36	180-187	165-169

For value-focused investors, this year’s prologue has been a welcome change from the turmoil experienced in early 2025.

In just the past few weeks, some of last year’s most ignored or underappreciated laggards have posted outsized gains, with rallies that have made even momentum-driven tech stock traders envious. Even more remarkable is the fact that much of that strength has been concentrated in ultra-defensive areas of the market like consumer staples, utilities and healthcare.

The market rotation continues to be the main story out there this week, though rumblings of a potential strike on Iran, an update from the January FOMC meeting, and a slew of earnings reports and economic data releases have been giving investors plenty to think about.

In terms of the rotation, the equal‑weight S&P 500 ETF (RSP) is up 5.5% so far this year, illustrating that leadership is broadening beyond the narrow group of mega‑cap stocks that drove much of last year’s performance.

Year to date, the S&P 600 SmallCap Index is up 8.3% and the S&P 400 Mid‑Cap Index is up 7.9%. Both are comfortably outperforming the S&P 500, which is up just 0.1%, and the Nasdaq, which is down 2.1%.

Happy Chinese New Year! The year of the horse is upon us.

China is expecting an incredible 9.5 billion trips to be made during the 40-day Lunar New Year travel period. Chinese automakers are also on the move as the country’s numerous brands sold nearly 200,000 vehicles in Britain last year, doubling their market share to almost 10%.

As U.S. investors have shifted from risk-on to risk-off mode in recent months, a clear disparity between the “haves” and the “have-nots” has materialized.

Let’s start with the “have-nots.” Financials have fared the worst so far this year (-4.7%), followed by technology (-3.1%), communication services and consumer discretionary (-2.8% each). The downturn in the two tech-related sectors in particular is a stark departure from recent years, when technology led the charge of the current bull market.

Cyclical stocks are soaring and technology is floundering in the transformed market.

The bull market is turned upside down. For most of the first three years, technology, and particularly AI stocks, soared while most other stocks did very little. Now, previously meandering stocks are killing it while technology sinks.

Strong fourth-quarter earnings are confirming what the market was already doing.

Current estimates based on earnings reported so far are for 13.2% overall S&P earnings growth for the quarter. It’s a solid quarter and the fifth straight quarter of double-digit earnings growth. In terms of sector performance, cyclical companies are killing it, and technology is floundering, just like before earnings.

Like many coffee aficionados, I have something of a love/hate relationship with Starbucks (SBUX). My main gripe is that the company’s food and beverage offerings have always been pricey compared to the fare served in most fast-food restaurants and run-of-the-mill coffee houses.

The outperformance of small caps continues.

Through Tuesday’s close, the S&P 600 is up 10% year to date versus just 1.6% for the S&P 500.

All but three small-cap sectors are outperforming their large-cap counterpart. The strongest small-cap sectors are materials (+20%), energy (+23%), industrials (+17%), and tech (+11.4%).

Let’s talk about the power of staying invested.

Sure, when the market turns south – and I’m not even sure last week’s mini-dip qualifies – it makes sense to pare back on your weakest stocks and put a larger portion of your portfolio in cash. But taking your ball and going home – selling out of all of your stocks when times are tough – is not a winning strategy. Here’s why.

NOTE: We’re sending this a day early as I’m soon to embark on a trip with the kiddos over the next week. I will be working a good amount from the road, though, and will have updates if need be. Also, next week’s issue will be published as scheduled.

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WHAT TO DO NOW: The market remains very mixed, with growth measures still generally pointed sideways to down, while the broad market remains in solid shape. What’s interesting, though, is that we’re seeing more growth stocks kick into gear, along with some huge buying action in a few “cyclical growth” names. Tonight we’re making one move—adding a half-sized stake in Macom Tech (MTSI)—but are keeping our eyes open for a broader character change among growth stocks. Our cash position will be around 53%.

Today could be a big day for cannabis stocks.

The reason: We may get an important update on the rescheduling timeline.

Cannabis investors will be watching closely today to see whether Attorney General Pam Bondi offers a rescheduling update when she appears before the House Judiciary Committee. Upbeat comments could spark a sharp cannabis sector rally. The hearing starts at 10 a.m. EST.

I’m excited to share a couple of enhancements to Cabot Early Opportunities —improvements designed to sharpen our focus and better help you stay on top of the stocks we own.

This medical equipment company beat analysts’ estimates by $0.19 last quarter, and Wall Street is forecasting an annual growth rate of more than 27% for the company for the next five years.

One of our stocks reported a third-quarter earnings beat, and steel stocks are up.

These two ideas are a bet on a better year for natural gas—whether you are a conservative or aggressive trader.

Our first idea is an auto parts supplier that pummeled analysts’ earnings estimates by $0.09 last quarter. We also include two sell recommendations today.

Our first idea is an auto parts supplier that pummeled analysts’ earnings estimates by $0.09 last quarter. We also include two sell recommendations today.

Our first idea is an auto parts supplier that pummeled analysts’ earnings estimates by $0.09 last quarter. We also include two sell recommendations today.

Tonight, we’re selling one stock that broke down today, and booking partial profits in another. We’re also putting one stock on Hold because it’s been correcting sharply, though it’s still in an overall uptrend.

Three stocks move from Strong Buy to Hold, and two stocks are good buys here.

This financial services company beat analysts’ estimates by $0.18 last quarter, and 23 analysts have recently increased their EPS forecasts for the company.

Here’s an opportunity to pick up shares of a growing media company at a discount.

This multinational is facing several challenges, but our contributor believes the shares offer potential as its turnaround ensues.

A wave of selling took a bite out of growth stocks today, including every stock in the Cabot China and Emerging Market Investor’s portfolio. I am taking two actions in response to today’s weakness.

Our Cabot Top Ten Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Top Ten features.