A year ago, college kids laid out the case for a Trump’s victory. And they did it with a mess of disparate data in just 20 hours, using a data prep platform by the little-known company that I’m recommending today.

Despite some nervous-making weakness last week, the Cabot Emerging Markets Timer has bounced back to regain its green-light status. And with our stocks acting well, the situation looks excellent, although we’re issuing the usual bull-market warnings that this can’t go on forever.

The market remains in a strong uptrend, and thus I continue to recommend that you be heavily invested in stocks that will help you meet your investment goals. At the same time, however, you need to manage risk, and it’s worth noting that the higher the market climbs, the greater the potential for loss once the uptrend ends.

Today’s featured stocks include two new additions to the portfolios, and there are a couple of rating changes after recent price run-ups.

Current Market Outlook


The market rebounded very nicely from last Monday’s big decline, with all of the major indexes shooting ahead and most notching new all-time highs. Thus, from a top-down perspective, the picture remains bright, with the intermediate- and longer-term trend of the market (and most stocks) pointed up. That said, it’s tricky out there—below the surface, the rotation is still vicious on a day-to-day basis, and many leading growth stocks remain stagnant. We’re still mostly bullish (we’re nudging the Monitor back up to 8 this week) and advise you to hold your strong stocks and look for new buys as they come. With the crosscurrents and earnings season (which is set to begin in a couple of weeks), it’s best to be selective and keep your feet on the ground.

This week’s list has a ton of very strong charts, with many showing persistent advances during the past few weeks. Our Top Pick is AbbVie (ABBV), which has come under extreme accumulation and looks like a new big-cap leader in the medical space.

Stock Name	Price	Buy Range	Loss Limit
AbbVie Inc. (ABBV)	93.53	85-89.5	77-79
Carpenter Technology (CRS)	53.25	46.5-49	42-43.5
E*Trade Financial (ETFC)	0.00	42-44	39.5-41
Eagle Materials Inc. (EXP)	0.00	103.5-106.5	97-99
Loxo Oncology (LOXO)	186.59	87-91	78-80
MKS Instruments (MKSI)	109.43	90-94	83.5-85
Meritor (MTOR)	21.46	24-26	21.5-22.5
Valero Energy (VLO)	97.40	74-77	69.5-71.5
Winnebago (WGO)	48.56	42.5-45	38.5-39.5
YY Inc. (YY)	0.00	86-89	78-80

In tonight’s issue, we details our recent moves and our thinking, as well as update the track record of our most reliable market timing indicator. We also talk about one of our favorite growth stocks we don’t own which, after a four-year (!) consolidation, looks like it could be ready to turn.

In today’s issue, we’re adding a unique play on financial markets to the Dividend Growth tier. I also have a write-up on interest rates—the driving force behind many of this month’s sector rotations—at the end of the issue.

Today’s selection is a company you’ve probably not heard of, but it provides a valuable medical technology that should see increased use in the years ahead. Also, it’s growing by acquisition.

It’s the same basic market story as it has been for the last four months. Technology is floundering while other sectors are killing it. But a couple of events occurring this week could potentially change the dynamic.

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.

==

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.

Before the opening bell today, one of our stocks issued preliminary Q4 2016 results that came in below expectations.

Applied Materials (AMAT) moves from the Growth & Income Portfolio to the Growth Portfolio, and I suggest three semiconductor stocks for your consideration.

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.