Current Market Outlook


You can blame interest rates or the Chinese or the economic cycle or politicians or even the celestial bodies, but it when all is said and done, it doesn’t matter why stocks have been struggling; the fact is that they are. And if you simply recognize that fact and accept it, then you can turn to the next step, which is to protect the profits you’ve earned in the long bull market and be selective when it comes to venturing into new stocks. That’s what Cabot Top Ten Trader is all about. The Market Monitor falls one notch lower to 5, but the ten stocks in today’s issue are still—on their own—quite attractive, plus they come from a wide variety of industries.

Our Editor’s Choice is Clean Harbors (CLH), a stock that was last hot in 2011, after which it spent nearly seven years out of the limelight. But now it’s back and the chart risk looks low.

Stock Name	Price	Buy Range	Loss Limit
American Outdoor Brands (AOBC)	13.69	14-15	13-13.5
Canopy Growth (CGC)	38.82	46-50	40.5-43
Clean Harbors (CLH)	66.42	68.5-71	63-64.5
Endo International plc (ENDP)	13.32	16-17	14-14.7
EOG Resources, Inc. (EOG)	101.98	127-131	120-122
Exact Sciences (EXAS)	116.91	67-70	62-64
Glaukos Corp. (GKOS)	67.84	58-61.5	53-55
Novocure (NVCR)	0.00	47.5-49.5	43-44
Roku, Inc. (ROKU)	150.46	63-66	58-60
Square, Inc. (SQ)	91.04	83-86	76-78

Despite weakness in the broad market today’s addition is holding up very well. The company specializes in simulation software – programs that tell users what a physical object, or process, may or may not do.

The action of the last couple of days has been a smack in the face for all investors, U.S. and emerging markets alike. As always, the Cabot growth disciplines tell us not to panic, but also not just to sit there and let the market take away your money. While we don’t have any changes to the portfolio tonight, this issue of Cabot Emerging Markets Investor shows a distinctly defensive tone, with a very heavy cash position and just two stocks rated Buy. We also have a new stock this week that’s perfectly suited to conditions. It’s a commodity play with a generous dividend, attractive valuation and a simple story. Read on for all the details.

The latest issue of Cabot Marijuana Investor is now available, with my current advice on the twelve stocks in the portfolio, as well as one new addition and profit-taking advice on one of our early investments.

As the fastest-growing industry in America, marijuana presents many exciting investment opportunities.

But I do want to caution you, especially if you’re one of my newer readers; for all the potential, there is also substantial short-term risk in all these stocks, as they tend to be lower-priced and more volatile than our typical recommendations. So take care to understand the risks before you act.

My goal is to make you a successful long-term investor in the sector, and the best way to do that is to get off on the right foot.

Today I wrote about a company that announced a new CEO! I then went back and added to the story. My conclusion remains unchanged: I expect the stock to perform poorly through year-end and possibly quite a ways into 2019.

The market’s main trend remains up, but the crosscurrents are getting fierce! So today I’m selling four stocks (two for good profits and two for small losses), all in an effort to keep the portfolio full of stocks whose potential upside justifies their potential downside.
As to this week’s recommendation, I’m happy to say that it’s a company headquartered in India, which is relatively free of the political turmoil that’s gripped the U.S. recently. Furthermore, given that foreign stocks have underperformed dramatically this year, I’m optimistic about getting on board somewhere near the beginning of a renewed uptrend.

Current Market Outlook


The big-cap indexes started strong today on news of a new NAFTA deal, but under the surface, we’re seeing continued rotation and signs of degradation. Small- and mid-cap indexes took hits today and remain below their 50-day lines, while most growth stocks continue to act iffy. To be fair, the start of a new quarter often sees many crosscurrents, and most leading stocks, while choppy, remain in uptrends. But we’ve now seen funky action and lots of rotation for over a month, which has our antennae up. We’re moving our Market Monitor to a level 6 and feel the next few days will be telling—if leaders are OK, we expect to see support show up, but if not, the odds of a longer pullback will increase.

As for our screens, we’re still finding a good number of good charts, albeit in a variety of sectors. Our Top Pick today is Allegheny Technologies (ATI), a specialty metals firm that is showing signs of getting going after months of base-building.

Stock Name	Price	Buy Range	Loss Limit
Alarm.com (ALRM)	71.33	55.5-57	51-52
Allegheny Technologies (ATI)	27.78	28.5-30	26-27
Ecopetrol (EC)	22.17	25.5-27	22.5-23.5
Intelsat (I)	25.46	27-29	24-25
Paycom Software (PAYC)	0.00	145-150	136-139
PetIQ (PETQ)	30.82	36-38	33-34
Teladoc, Inc. (TDOC)	127.95	79-83	70-73
Vale S.A. (VALE)	15.40	14.5-15	13.2-13.6
WPX Energy (WPX)	0.00	19.3-20.2	17.4-17.9
Zendesk (ZEN)	82.19	67-70	61.5-63.5

September has been tricky and tedious for growth stocks, with lots of volatility and some high-volume selloffs. It’s fair to say the evidence has worsened a bit, and we’ve placed a couple of stocks on hold and raised some mental stops.

That said, the majority of evidence is still bullish, very few growth stocks have actually broken down and the market’s trends are still positive. Net-net, then, we’re still mostly bullish, but are keeping our eyes open should things change.

In tonight’s issue, we introduce our new Real Money Index, which is replacing the Two-Second Indicator on page 8; we think it will help us lean against the wind in many circumstances. (We’ll still be following the Two-Second Indicator in house.) And we also take a deep dive into all of our stocks, letting you know what we’re thinking as many have consolidated of late.

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 healthcare stock beat analysts’ estimates by six cents last quarter, and analysts are forecasting double-digit growth for the company for the next five years.

Trade suggestion for Chevron (CVX) shareholders, and additional news and price changes on six other stocks.

This solar company was just upgraded to ‘Buy’ by Cabot and by Deutsche Bank, and Deutsche raised its price target for the stock to $65 per share (from $50).

This energy company’s shares just crossed above their 50-day moving average, a bullish sign.

Here’s the update on one of our stocks. The company’s earnings outlook changed after I recommended it.

This tech company issued a great quarterly earnings report and the stock price has edged up. Watch for brief dips before buying.

Here is a special update on two of our stocks.

Our first idea is a semiconductor company that beat analysts’ earnings by $0.15 last quarter.

. Our second recommendation is profit-taking on a previous recommendation.

We’re moving this stock to Hold today, after Credit Suisse downgraded the stock to neutral.

This business services company beat earnings estimates by $0.17 last quarter. The shares just crossed over their 50-day moving average in August, a bullish indicator.

This cosmetics company beat analysts’ estimates by $0.08 last quarter and 22 analysts have increased the company’s earnings forecasts for this year.

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.