Current Market Outlook


Last week, the market took another step on the road to health, as the intermediate-term trend of the major indexes began to turn up and many potential growth leaders showed strong accumulation. That’s enough for us to nudge up our Market Monitor another notch and, assuming you’ve been in a relatively defensive stance, you should begin to put some money to work. That said, we also think it’s best to go slow—the longer-term trend remains sideways-to-down, very few stocks have hit new highs (as many new lows as new highs on the Nasdaq today) and there’s still a bunch of overhead for most indexes, stocks and sectors to chew through. Still, despite the potential issues, we’re growing more positive as the market’s action has improved in recent weeks.

This week’s list is full of stocks from a variety of sectors that look poised to do well if the market’s recent strength continues. Our Top Pick is Workday (WDAY), which, while it could pull back a bit, is acting like a liquid leader of any sustained advance that develops.

Stock Name	Price	Buy Range	Loss Limit
Amedisys (AMED)	174.06	133-138	120-123
Delta Air Lines (DAL)	54.28	58.5-60.5	54.5-55.5
Glaukos Corp. (GKOS)	67.84	65-68	57.5-59.5
Omnicell (OMCL)	81.03	72.5-75	67-69
PRA Health Sciences Inc. (PRAH)	96.08	114-118	105-107
Tesla, Inc. (TSLA)	818.87	350-360	323-318
Trade Desk (TTD)	468.02	142-147	123-126
Veeva Systems (VEEV)	180.23	97-100	89-91
Workday (WDAY)	194.88	160-166	145-148
Xilinx (XLNX)	134.50	89.5-93	82-84

In today’s issue, there are no new buy and sell recommendations, but you’ll find updates on all the stocks. And as we head toward the last of 2018, I’m very optimistic that the sector will have another great run in 2019—just when most investors least expect it!

Well, things are looking up in the emerging markets world! The Cabot Emerging Markets Timer has given us a new buy signal and we’re taking advantage by moving two stocks from the Watch column, one from the Hold column and one brand new stock all to Buy ratings. All told, it’s an early holiday present for all of us. Read on for details of the good news!

In today’s issue, I’m adding one more utility to the Safe Income tier. The Fed wants to keep the conversation about rate hikes going—four Fed members are giving speeches this week, including Chair Jerome Powell later today—but markets believe that rates are rapidly approaching “neutral.” In a speech on Tuesday, Vice Chair Richard Clarida said the Fed needs to be even more data dependent as the benchmark rate nears its “ultimate destination,” rather than committing to a certain number of rate hikes.
Elsewhere, our Safe Income stocks are all doing well, and most of our Dividend Growth and High Yield holdings are looking healthy as well. And at the end of today’s issue, I’ve provided a watch list of some stocks on my radar for addition to the portfolio.

As we head into December, there are several major factors at work on the market, and most of them are negative: interest rates are rising, global trade is at risk of slowing, and the major trend of the market is now down. But not all factors are bleak. On the positive side, the deep correction has made stocks cheaper, and as stocks have fallen, investors have become more fearful, which eventually becomes a good thing.

So while caution is clearly warranted, it’s important not to stick your head in the sand.

The market’s decline has intensified in recent days, driving the Nasdaq back to its October low, hammering most growth stocks and keeping our trend-following indicators firmly bearish. There are a couple of encouraging signs among secondary measures, but until the buyers show up, we advise a defensive stance.

Yesterday, we were forced out of two of our three remaining stocks as they plunged through support. That leaves us with just one position remaining and a huge cash position near 90%. We could put a bit of money to work if the market stabilizes, but tonight we’re sitting tight.

In tonight’s issue, we dive into some sentiment measures which are offering a ray of hope, expand our watch list and write about one type of investment that could be a good way to get a foot in the door of the next uptrend.

Current Market Outlook


While the major indexes remain above their October lows and a good number of recent earnings winners (many of which have been featured in Top Ten) are still holding up well, the fact is that the intermediate-term trend for the market remains down and, even if you own the best stocks, no money is being made. Thus, we continue to recommend a defensive stance—preserving capital and confidence will pay off in spades when the next sustained advance gets underway. On a scheduling note, there will be no Friday update this week (holiday), and there is no issue next week (one of our two weeks off all year). But I do plan to send a brief update Monday, November 26 just to keep in touch.

Back to this week’s list, we have another batch of resilient stocks, which are providing a ray of light. Our Top Pick is Canada Goose (GOOS), which we think can be an institutional favorite once this market downturn ends.

Stock Name	Price	Buy Range	Loss Limit
Acacia Communications (ACIA)	51.83	41-43	37-38
Amedisys (AMED)	174.06	115-120	105-108
Canada Goose Holdings (GOOS)	46.21	63-67	55-57
Crocs (CROX)	0.00	24.5-26	22.5-23.5
Elastic (ESTC)	86.17	65-69	58-60
Planet Fitness (PLNT)	0.00	49.5-51.5	47-45.5
Repligen (RGEN)	91.34	60-64	56-58
Tableau Software (DATA)	126.42	108.5-110.5	99-101
TripAdvisor (TRIP)	55.14	57-60	52-54
Zebra Technologies (ZBRA)	154.94	167-172	158-161

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.

Three ratings changes and one stock looks strong.

The top five investments in this German fund are Bayer AG (BAYZF.DE, 7.97% of assets); Siemens AG (SMAWF.DE, 7.63%); SAP SE (SAPGF.DE, 7.62%); Allianz SE (ALIZF.DE, 7.26%) and Basf SE (BFFAF.DE, 6.92%).

Three of our stocks reported earnings.

This big tech company beat analysts’ estimates by $0.10 last quarter, and Wall Street now expects the stock to rise between $177 and $213.

Quarterly earnings beats from three of our stocks, and an earnings miss from another.

Needham just initiated coverage of this big data company’s shares with a ‘Buy’ rating. The company is expected to grow at more than 42% per year over the next five years.

Alexion Pharmaceuticals (ALXN) receives drug approval, Ameriprise (AMP) and XL Group (XL) report third-quarter results, and ratings changes on two of our stocks.

This consulting firm beat analysts’ estimates by $0.05 in the past quarter and Wall Street is expecting double-digit growth for the company over the next five years.

Five analysts have raised their EPS estimates for this inbound marketing company in the past 30 days. And Zacks has rated it a ‘Strong Buy’, based on EPS growth, in the near- and long-term.

This supplier to the construction industry beat Wall Street’s earnings forecasts by $0.06 per share last quarter. Analysts are expecting 40%+ growth from the company this year.

One of our stocks reported third-quarter results that met Wall Street’s estimates, two stocks move from Buy to Hold, and there’s new price action on another.

This mega-bank beat analysts’ earnings projections by $0.03 last quarter, leading Wall Street to beat its drums. In the past 30 days, 21 analysts have increased their 2017 forecasts for the company and 13 have boosted their earnings outlook for 2018.

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.