On the one hand, emerging market stocks are extending their bottom-building structure. On the other hand, there aren’t many stocks making huge, “buy me!” runs. But on balance, the news is hopeful, as the October low for EM stocks is proving durable despite continuing trade-war talks and Brexit suspense. There are plenty of hopeful signs, but they haven’t revealed a change of heart on investors part. Read on for some good news and the return of an old friend to the portfolio.

Throughout days of incredible highs and lows, the markets have managed to end up just about where they started at the beginning of this year. Nevertheless, the volatility has created some tremendous opportunities to make money in the markets—and we can never be sorry about that!

Last week I told you that we’d received a new buy signal from our intermediate-term market-timing indicator—but it didn’t last long. The market’s widespread selling on Wednesday and Thursday quickly turned it negative again.

So capital preservation is once again of primary importance—though the charts say the time is ripe for at least a modest bounce.

Current Market Outlook


The market had put together a few small positive steps heading into last week, but after a solid G20-induced rally on Monday, it’s been all selling, all the time—the intermediate-term trend has rejoined the longer-term trend in bearish territory, with some indexes (including the S&P 500 today) hitting new correction lows. Because of that, we’re moving our Market Monitor back down a notch to a level 4 and advise remaining in a defensive stance. That said, it’s not all bad news; we’re seeing more stocks that are resisting the market’s pull (forming significantly higher lows), and many indexes are still being defended at their October/November lows. Bottom line, it’s best to take things day-by-day and go with the evidence—which, today, means holding plenty of cash.

This week’s list, though, is a good place to start building a watch list if you’ve yet to do so, as many of these stocks look like they want to move higher if the market gets going. Our Top Pick is MongoDB (MDB), a stock that actually nosed to new highs after earnings before pulling back in.

Stock Name	Price	Buy Range	Loss Limit
Guardant Health (GH)	88.34	42-44.5	36.5-38
Kirkland Lake Gold (KL)	51.30	22-23.5	20-21
LHC Group (LHCG)	103.10	97.5-100	89-91
MongoDB (MDB)	156.56	80-84	70-72.5
Okta, Inc. (OKTA)	148.41	61-64.5	54-56
RH Inc. (RH)	252.93	132-138	119-123
Shopify (SHOP)	585.00	143-150	130-134
Spirit Airlines (SAVE)	57.03	57.5-60.5	52-53.5
Vanda Pharmaceuticals (VNDA)	31.04	26-28	22.5-23.5
Zscaler (ZS)	126.22	38.5-41	33.5-35.5

Today’s new addition is, like last month’s, a stock that has bucked the broad market’s trend and gone up!
It’s an industrial biotechnology stock. And the secret to its success lies in a proprietary technology platform that uses artificial intelligence and machine learning to create new proteins for use in various industries.

The action of the past few weeks looks like a solid bottoming attempt by the market, and we received a Cabot Tides buy signal late last week. But yesterday’s huge decline is a good indication that sellers are still lurking, which along with our still-bearish longer-term Cabot Trend Lines, is a reason to remain mostly defensive and go slow on new buying.

These few companies found in today’s issue are newsworthy, and lots of people are pondering buying and selling these stocks, so let’s get a firm grasp on whether the stocks warrant your attention.

The good news is that we have a new intermediate-term market-timing buy signal. The bad news is that our long-term market-timing indicator remains negative—and that markets as a whole remain in disarray, with no clear leaders.
Thus, some caution is still warranted, at least until the end of the year, as tax-selling forces will hold some stocks down.
But today’s recommendation is not one of those. Instead, it’s a little-known biotechnology stocks with big connections and great growth prospects.

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.

Our first idea today is a Chinese internet company and our second recommendation is a sale of a previous idea with recent mediocre numbers.

Our second recommendation is a sale of a previous idea with recent mediocre numbers.

Three of our stocks have reached their target price and should be sold. Another of our stocks rose 10% in after-hours trading on Friday as news stories cited merger talks.

A better economy is boosting the prospects of this food company, with analysts forecasting double-digit annual growth for the next five years.

Earnings reports from three of our stocks and ratings changes on two stocks.

This fund has returned 32.28% to its investors so far this year, according to Morningstar.

One of our stocks moves from Buy to Hold, plus earnings reports from four of our stocks.

Our first recommendation is a tool company who is being feted on Wall Street, with upgrades (Zelman, to ‘Buy’, and Morgan Stanley, to ‘Overweight’; earnings beat ($0.12), and 21 analysts raising their earnings forecasts in the past 30 days.

Our second recommendation is a sale of a previous idea.

This cyclical company has beaten analysts’ estimates for the past four quarters, and four analysts have raised their 2017 earnings estimates for the company in the past 30 days.

Two third-quarter earnings beats and news on two other stocks.

This hardware company topped analysts’ EPS estimates by ten cents in its latest quarter, and seven analysts have raised their earnings forecasts for the company in the past 30 days.

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.