Current Market Outlook


The day-to-day (and sometimes hour-by-hour) action remains very volatile, with headlines (both company-specific and economic) coming at investors quickly. But taking a step back, not much has changed—the intermediate-term trend is pointed down and the vast majority of leading stocks are in the same boat, with a good amount of damage on their charts that will likely take time to repair. That doesn’t mean you should stick your head in the sand; odds favor earnings season allowing some names to grab pole position for the next market uptrend. But right now, it’s best to remain defensive as we wait for the market to find some strong support and more stocks to build launching pads. Our Market Monitor remains at a level 4 today.

This week’s list includes a broad mix of stocks and sectors, including one very new IPO and a couple of special situations. Our Top Pick, though, is Ciena (CIEN), the mid-sized networking outfit that looks ready for a sustained upturn once the pressure comes off the market.

Stock Name	Price	Buy Range	Loss Limit
Ciena (CIEN)	44.25	29.5-31	27-28
Dine Brands (DIN)	93.05	80-83	74-76
Eli Lilly (LLY)	117.78	107-110	100-102
GasLog (GLOG)	21.39	20-20.7	18-18.5
Guardant Health (GH)	88.34	35-38	29-31
Intelsat (I)	25.46	32.5-35	28-29
Ollie’s Bargain Outlet (OLLI)	103.94	87-90	81-82.5
Spirit Airlines (SAVE)	57.03	49-51	43-45
Tabula Rasa Healthcare (TRHC)	76.14	75-78	67-70
United Continental Holdings (UAL)	96.76	86-89	79-81

The emerging market sector remains in a downtrend as we patiently await the buyers to arrive. When they do, we fully expect a profitable, sustained uptrend given the persistent decline this year, but until that happens, it’s best to stay mostly on the sideline.

There is one area in the EM world that’s doing well, though, and in tonight’s issue, our new recommendation is a mega-cap stock from that country. It’s a familiar name, is part of a resilient sector and has huge turnaround potential.

Wow! The Dow Jones Industrial Average saw a bumpy month the first couple of weeks in October, but made up for those doldrums yesterday, gaining 547 points—all in one day! The catalyst? Some important and very positive earnings news from Morgan Stanley, who pointed to the resurgence of its IPO business; Goldman Sachs, who also enjoyed increases in its underwriting area; and Johnson & Johnson, who cited some nice sales improvements.

Overall, it just seems like folks were ready for some good news. Sentiment remains bullish, as you’ll see from our Advisor Sentiment Barometer, which barely moved this month. However, some caution is being advised—at least in the short term—as reflected in our Market Views section of the newsletter.

The market’s broad rebound continued today, erasing a good part of the losses sustained in the recent two-week collapse. The major indexes still have a long way to go to return to their old highs, but I think they will do it, as our market timing studies tell us that the sharp pullback was likely simply a normal correction in the long-term uptrend.

Current Market Outlook


The market continued to unravel last week, with leading growth stocks getting battered again and the rest of the market joining the downturn. In the near-term, we have seen some signs of panic and also some support, so it’s certainly possible the market can get off its duff a bit in the days ahead. But given the severity of the selling and the fact that the intermediate-term is firmly down, the odds favor more correction and consolidation ahead. That means the main goal here is the preservation of your capital and your confidence, both of which will come in handy during the next upturn. Nibbling on a name or two if you already hold a lot of cash is fine (we have some intriguing resilient situations in today’s issue) and could prove profitable if we bounce. But the big money will be made in the next sustained uptrend, so it’s best to stay mostly safe until that arrives.

This week’s list is a hodgepodge of stocks and sectors, which isn’t surprising given the environment. Our Top Pick is Ulta Beauty (ULTA), which remains resilient and looks ready to be a steady leader once the market correction is over.

Stock Name	Price	Buy Range	Loss Limit
Advanced Micro Devices (AMD)	82.24	25-26.5	22-23
Amarin (AMRN)	14.06	18-20	15-16
Callaway Golf (ELY)	20.21	22.5-23.5	20.5-21.5
Ensco plc (ESV)	6.52	8.0-8.5	7.0-7.3
Kirkland Lake Gold (KL)	51.30	20-21	18.4-18.9
Match (MTCH)	0.00	51-54	47-48
The Mosaic Company (MOS)	29.22	31.5-33	29.5-30.5
PBF Energy (PBF)	38.93	47.5-49.5	45-46
Petrobras (PBR)	14.78	14.5-15.5	13.5-14
Ulta Beauty (ULTA)	331.95	275-280	258-261

Growth stocks have gone over the cliff during the past eight trading days, with many suffering waterfall-like declines. With our Tides negative and most growth stocks in tatters, we’ve turned defensive by quickly paring back on our names.

Since last Monday, we’ve sold three stocks and taken partial profits on three more. And tonight, we’re selling another (Autodesk) -- all told, boosting our cash position from 16% a week and a half ago to 61% after tonight’s sale. From here, we’re likely to give some stocks a little rope given the chance of a short-term snap back, and because, big picture, we’re still in a bull market. But right now it’s time to focus on capital preservation.

In tonight’s issue, we give you all our latest thoughts on the market, our stocks and some names we see holding up so far (one of our favorites is written about starting on page 6). And we also talk a bit about what to do when everything falls apart at once, offering some pointers about differentiating what to hold and what to dump.

The leaves are rapidly falling here in Tennessee, but thankfully, the markets continue to hold their own, with the Dow Jones Industrial Average picking up about 500 points since our last issue. As you’ll see in our Market Views, our advisors are a bit cautious in the short-term, but overall, market sentiment remains very bullish.

The market’s intermediate-trend has turned decidedly down, so taking steps to minimize the risk from your most aggressive stocks is critical. But don’t throw the baby out with the bathwater! The market’s long-term trend is still up, and I’m confident there is still more upside potential for a well-diversified portfolio of carefully-chosen stocks.

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.

Coverage of the shares of this biotech were recently initiated at HC Wainwright with a ‘Buy’ rating.

We have three rating changes today.

Here’s an emerging markets stock that beat analysts’ earnings by $0.08 last quarter.

This boating manufacturer’s shares were just upgraded by BMO Capital to ‘Outperform’.

Here’s an update on the stock which rating has been upped to BUY.

Here’s an update on a few of our stocks.

Wall Street analysts are expecting 50% annual growth over the next five years for this IoT company.

Loop Capital and SunTrust Robinson Humphrey just upgraded the shares of this mega-tech company to ‘Buy’.

Today brought a wave of selling that took the major market indexes (and most of the stock in our portfolio) down a peg or two. Despite the selloff, most of our stocks remain in their recent trading ranges and look like they will do just fine unless the market takes another leap off the end of the dock tomorrow.

The market and especially leading growth stocks were trounced today. In response, we’re selling half our shares in two stocks.

Shares of one of our stocks have been under pressure since Friday due to a short attack from a Seeking Alpha author. His article was published this morning, but I suspect a group of investors knew about it on Friday and got the action going early.

This tech stock’s relative strength was just upgraded by IBD. The company beat analysts’ EPS estimates by $0.04 in its latest quarter.

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.