Current Market Outlook


The market’s story has remained the same since the new year began—the major indexes and most leading stocks are in firm uptrends, with many longer-term indicators and studies pointing to higher prices in the months ahead. That said, most stocks are extended to the upside (and, now, earnings season is getting underway), so be sure to keep your feet on the ground and look for good entry points. Right now, we’re mostly looking for pullback entries; if the market does relax, the odds are good that there will be opportunities in stocks that have recently gotten going. All in all, we remain bullish and heavily invested.

This week’s list again contains a wide mix of stocks (big, small, growth, commodity, turnarounds, etc.), which isn’t surprising given the market’s broad advance. Our Top Pick is ASML Holding (ASML), which was one of the first chip stocks to re-emerge following a great earnings report.

Stock Name	Price	Buy Range	Loss Limit
ASML Holding (ASML)	350.01	197-203	184-187
Canada Goose Holdings (GOOS)	46.21	30.5-32.5	27.5-28.5
Continental Resources (CLR)	66.19	53-56	49-50.5
Corcept Therapeutics (CORT)	16.06	22.5-24	20-210
Global Blood Therapeutics (GBT)	0.00	51-55	44-46
Kohl’s (KSS)	70.62	60.5-64.5	55.5-57.5
Lowe’s Companies (LOW)	98.15	99-103	91.5-94
ON Semiconductor (ON)	24.07	23.5-25	21.5-22.5
Teck Resources Limited (TECK)	26.07	27.5-29.5	24.5-26.
Wynn Resorts (WYNN)	121.08	184-192	168-172

While the broad market returns were fantastic in 2017, there was no stopping our contributors, whose Top 5 Picks gained an average of 72.83%! And in today’s 2018 Top Picks issue, you’ll find a great selection of investments, distributed among almost every sector and investing style.

The market continues to zoom higher amid a vacuum of selling pressure. In the short-term, though, we’re not seeing a lot of stocks at great entry points and earnings season is coming up, both of which could lead to some pullback or retrenchment, at least on a stock-by-stock basis. But longer-term, there are many positives that tell us the odds strongly favor higher prices down the road.

The market has been hot as a pistol in recent days, and today, after a hot open, stocks rolled over and finished down. Odds are that this downward movement could turn into a real correction. But it’s important not to predict; it’s much more profitable to simply observe the trends and invest in sync with them. Today’s recommendation is a hot little medical stock with a great service.

Current Market Outlook


Stocks had another great week, with the major indexes and most leading stocks levitating higher amidst a vacuum of selling pressure. There’s no question things are a bit bubbly here, with most things trading miles above support and moving averages, and as investor sentiment shifts toward greed. Still, more important to us are the intermediate-term trend (clearly up) and the fact that momentum like we’re seeing generally leads to higher prices down the road. Thus, overall, you should remain bullish, but (a) we still favor being choosy on the buy side, looking for pullbacks and shakeouts in stocks that have shown excellent strength and persistency, and (b) having a plan as we enter earnings season, including looking for new leadership that emerges.

This week’s list has something for everyone, from hot growth stocks to news-driven moves to some turnaround situations. Our Top Pick is Red Rock Resorts (RRR), which is part of the strong gaming group and has began to take a breather after a persistent advance.

Stock Name	Price	Buy Range	Loss Limit
Abercrombie & Fitch (ANF)	15.37	18-19	16-16.8
Arch Coal (ARCH)	82.27	92-95	85.5-87.5
Express Scripts Holding Company (ESRX)	79.25	76.5-79.5	70-72
Heron Therapeutics (HRTX)	35.25	19.5-21	17.5-18.5
Matador Resources Company (MTDR)	27.89	30.5-32	28-29
Nucor Corporation (NUE)	66.20	66-69	61.5-63
Red Rock Resorts (RRR)	34.70	32.5-34	30-31
Stifel Financial (SF)	56.32	63-66	58-59.5
Universal Display (OLED)	187.54	188-198	167-175
Wingstop (WING)	121.52	42.5-44	39.5-40.5

The year began with five straight days of advances for emerging market stocks, which was pleasant. And the little rap on the knuckles from the market on Tuesday and Wednesday brought us back to reality without doing much damage. So the bottom line is that our stock universe is still in an uptrend and the prospects for 2018 looks just fine.

2017 was a great year for investing in stocks. In this issue, I briefly review my recommendations and market performance in the past year. I also introduce a new stock in the retail space, move one stock to Hold and another stock to Sell.

Our contributors are stock-picking experts, utilizing their various investment styles to offer investors a wide range of strategies through up and down markets. And their track records are impressive. While the market’s double-digit gains of 2017 were fantastic, our contributors did even better.
Now, we move ahead to 2018, and this issue is packed full of exciting opportunities among very diversified sectors and investing styles.

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.

Canaccord Genuity recently upgraded this social media stock to ‘Buy’.

I changed a number in yesterday’s Special Bulletin discussion about the S&P 500, and I failed to subsequently adjust the percentages, so I wanted to issue an update with the correct percentages as they pertain to increases in the S&P’s value.

Our first pick today is a tech fund whose five largest holdings are: Apple Inc (AAPL, 17.47% of assets); Microsoft Corp (MSFT, 11.90%); Facebook Inc A (FB, 7.59%); Alphabet Inc A (GOOGL, 5.98%) and Alphabet Inc C (GOOG, 5.84%).

I don’t think oil prices are going to revisit the lows of the bear market, but the recovery likely has stalled for a year or more. The fund returned 15.95% over the last 12 months.

There’s nothing abnormal happening in the market. Stocks don’t go straight up, rather, they bounce around, whether the general trend is up, down or sideways. That said, it’s a little premature to buy low now because most stocks that are having pullbacks have not bottomed yet.

I’m closely watching our newest position, which recently reported results and is now trading right around the 9.5 to 10 level. The current trading range should represent a nice entry point to add to existing positions, but we’ll need a little support from the broad market to prevent a drop into the low 9s.

Guggenheim just raised the rating of this retailer’s shares to ‘Buy’. In the past 30 days, 19 analysts have increased their earnings forecasts for the company for 2017 and 14 for 2018.

We are downgrading this stock from the Buy and Long-Term Buy lists after the company posted a disappointing December quarter and gave mixed guidance for 2017.

The market suffered its worst day in months today, with the Dow down 238 points and the Nasdaq finished down 108 points.

This semiconductor company is forecast to grow at a 66.7% rate in 2017 and 80% next year.

The shares of this electronics company just crossed its 50-day moving average—a bullish indicator.

Adobe Systems (ADBE) reported first-quarter 2017 earnings yesterday (November year-end), after the market closed. The company outperformed analysts’ estimates by a good margin, and also increased second-quarter expectations.

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.