Current Market Outlook


The market has made a little upside push during the past week or two, but net-net, most indexes are up just a smidgen during the past seven weeks. That sideways trading has contained most stocks and sectors, too, as they chop around with a slight upward bias. Even so, the intermediate- and longer-term trends are up, so the odds continue to favor the next major move being up. And we’re encouraged by both the number of positive earnings reactions we’ve seen, as well as the action of those stocks after they gap up—most have traded constructively post-earnings with no selling pressures coming in even after they ramp. All told, we’re still mostly positive, but we’ll keep our Market Monitor at a level 7 (out of 10) until we see more than just the Nasdaq decisively push out of their recent trading ranges.

This week’s list has another batch of strong stocks, including many that have recently reacted well to earnings. Our Top Pick is a tough call, but we’ll go with Ally Financial (ALLY), which just exploded higher on earnings after years in the market’s doghouse. It looks to be just starting its run.

Stock Name	Price	Buy Range	Loss Limit
Ally Financial (ALLY)	30.44	21.5-23	20-21
Century Aluminum Co. (CENX)	17.24	14-15	12.5-13
Essent Group (ESNT)	0.00	34-36	31.5-32.5
Exelixis (EXEL)	27.35	18.5-19.5	17-17.5
Olin Corp. (OLN)	0.00	28.5-30	26-27
Symantec Corporation (SYMC)	0.00	26.5-28	25-25.5
Teradyne (TER)	82.83	27-28.5	25-26
Tesla, Inc. (TSLA)	818.87	247-256	225-229
Texas Capital Bancshares (TCBI)	0.00	82-86	76-78
Yandex (YNDX)	0.00	22-23	20-21

Current Market Outlook


Last week brought the long-awaited breakout by the major indexes, but after a couple of days at new high ground, most sank back into their prior five-plus-week ranges today; small-cap indexes even broke their 50-day lines. With that said, most indexes remain in good shape, and the same can be said about the vast majority of stocks (a bunch of which have gapped up on earnings) and sectors—in other words, the evidence remains far more positive than not. Because of that, it’s fine to take a swing at some strong stocks on pullbacks, especially those that have recently shown great accumulation. However, we’re going to leave our Market Monitor at level 7 today given the lack of progress in the indexes, and we’ll keep our eyes open should today’s selling persist.

The good news is that this week’s list is chock-full of earnings winners that should find support on weakness. Many look enticing, but our Top Pick is Skyworks (SWKS), which is one of many super-strong chip stocks that just enjoyed a big earnings gap as investors anticipate better results ahead.

Stock Name	Price	Buy Range	Loss Limit
Allegheny Technologies (ATI)	27.78	20-22	17.5-18.5
Broadcom Limited (AVGO)	266.26	196-202	182-185
Cheniere Energy (LNG)	63.82	46-48	42.5-43.5
Citizens Financial Group (CFG)	0.00	35-37	32-33
Eagle Materials Inc. (EXP)	0.00	103-106	96-98
International Paper Company (IP)	0.00	55-57	51.5-52.5
Micron Technology, Inc. (MU)	43.31	22.5-24	20.5-21
Royal Caribbean Cruises (RCL)	0.00	92-96	85-87
Seagate Technology (STX)	0.00	42.5-45	38-40
Skyworks Solutions (SWKS)	0.00	88-92.5	82-84

Current Market Outlook


Once again, nothing has changed in the market’s bigger picture health—the intermediate- and longer-term trends of all the major indexes are still up (though small-cap indexes are now testing their 50-day lines) and the broad market is healthy, with few stocks breaking down and even fewer hitting new lows. That said, we’re now entering the sixth week of no progress in most indexes, so it’s clear that the short-term trend is neutral, which has capped most stocks, too. We’re still overall optimistic, but we are going to nudge down our Market Monitor by one notch (to level 7 out of 10), so be sure to honor your stops, and be selective on the buy side or take smaller than normal positions until the bulls return. On the flip side, you should continue to give your strong stocks a chance to resume their rally.

The good news is that there are still many strong charts despite the market’s pause. Our Top Pick this week is Netflix (NFLX), which reacted well to earnings last week and looks like a big-cap leader if the market gets going from here.

Stock Name	Price	Buy Range	Loss Limit
ASML Holding (ASML)	350.01	117-121	109-111
Adient (ADNT)	0.00	60-63	55-56
Alcoa (AA)	0.00	34-36	31-32
Charter Communications (CHTR)	0.00	295-305	278-283
Hancock Holding (HBHC)	0.00	43.5-46	40-41.5
Netflix, Inc. (NFLX)	423.92	133.5-138	122-125
Southern Copper (SCCO)	0.00	34.5-36	32-33
T-Mobile US (TMUS)	0.00	57-59	53-54
TD Ameritrade (AMTD)	0.00	44.5-46	41-42.5
United Rentals, Inc. (URI)	0.00	107-110	100-102

Current Market Outlook


There’s little question the overall market environment remains bullish—the intermediate- and longer-term trends are up, most stocks and sectors are in the same boat and we’re spotting more set-ups (either pullbacks or longer bases) out there. Short-term, though, nothing would surprise us—most major indexes haven’t made any progress since mid-December, we’re entering the thick of earnings season and some sentiment measures have gotten extended, indicating investor complacency. We’re not advising any drastic change in stance; our Market Monitor remains in bullish territory at a level 8 out of 10, and we’re looking to latch on to any new leadership that lifts off. But just be sure to have your plan in place, both on the buy side and sell side, as earnings season revs up.

This week’s list is a mixed bag and includes a few stocks that are reporting earnings within a couple of weeks. Our Top Pick is Coherent (COHR), a little-known laser company that’s benefiting from an uptick in OLED demand and from a major acquisition that’s just closed. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Alaska Air Group (ALK)	0.00	90.5-93.5	84-85.5
Charles Schwab (SCHW)	0.00	39.5-41	36.5-37.5
Coherent, Inc. (COHR)	0.00	138-145	128-130
Glaukos Corp. (GKOS)	67.84	37.5-39.5	35-36
HealthEquity, Inc. (HQY)	70.70	45-48	40-42
Incyte Corporation (INCY)	76.98	112.5-118	102-104
MSC Industrial (MSM)	0.00	95-98	91-89
Rio Tinto plc (RIO)	57.05	40-42	37-38
Tesaro (TSRO)	0.00	148-153	134-137
Univar (UNVR)	0.00	27-28.5	25-26

Current Market Outlook


Beneath the market’s surface, there’s been lots of rotation and volatility, with buyers focusing on the laggards of late last year (especially the big-cap growth stocks), while the strong materials and transportation sectors continue to consolidate. (Even as the major indexes probe new high ground, the number of stocks hitting new highs is way down versus a few weeks ago.) That’s something to keep an eye on, but the trends of the major indexes and most stocks are still up, sellers have been unable to put much of a dent in the market despite the huge post-election run and few stocks have broken down. Until that changes, we’re keeping our Market Monitor in bullish territory, though it’s probably best to be a bit more discerning on the buy side, looking for tight setups and big volume breakouts.

Tonight’s list remains heavy on turnaround stocks, especially those in cyclical industries; the odds continue to favor higher prices as these stocks consolidate their strong post-election gains. Our Top Pick is AK Steel (AKS)—you can buy a little here and look to add shares on a powerful move to new highs.

Stock Name	Price	Buy Range	Loss Limit
AK Steel Holding (AKS)	0.00	9.9-10.4	9.0-9.3
Atwood Oceanics (ATW)	0.00	12.5-13.5	11-11.5
CF Industries (CF)	45.23	32-33	29-30
Clovis Oncology (CLVS)	0.00	45-48	41-43
Grand Canyon Education (LOPE)	121.03	57-59	54-55
Greenbrier (GBX)	57.73	44.5-47	40.5-42
Lions Gate Entertainment (LGF-A)	0.00	25-27	23-24
Oil States International (OIS)	0.00	39-41	36-37
Shopify (SHOP)	585.00	45-47	42-43
SVB Financial Group (SIVB)	0.00	170-175	157-160

Current Market Outlook


Early January is almost always a tricky time as big investors rotate and reposition their portfolios, leading to lots of crosscurrents and volatility. We saw some of that today and won’t be surprised to see more gyrations in the days ahead. Thus, we’re focusing mostly on the bigger picture, and on that front, the trend remains up, and we’re seeing a lot of pullback resumption set-ups (mostly from cyclical and financial stocks) and base-breakout set-ups (among some growth-oriented stocks). Now’s not the time to chase a stock’s every tick higher or lower, but you should remain bullish, and have a list of set-ups ready should the buying pressures resume after the modest late-December market retreat. We’re leaving our Market Monitor at a level 8 out of 10.

This week’s list has many stocks that have formed the aforementioned set-ups—should they resume their uptrends, many could have nice runs. For our Top Pick, we’re going with Micron Technology (MU), which gapped up strongly on earnings two weeks ago before pulling back. Dips look buyable to us.

Stock Name	Price	Buy Range	Loss Limit
Arista Networks (ANET)	0.00	95-98	90-92
Dave & Buster’s (PLAY)	57.01	54-56.5	51-52
HD Supply Holdings, Inc. (HDS)	0.00	41-43	37.5-38.5
Micron Technology, Inc. (MU)	43.31	21.5-23	19.5-20
Nabors Industries (NBR)	0.00	16-17	14.5-15
Oasis Petroleum (OAS)	12.57	14.5-16	13-13.5
Quanta Services (PWR)	91.45	34-36	31.5-32.5
Texas Capital Bancshares (TCBI)	0.00	76-78	71-72
United States Steel Corporation (X)	0.00	31.5-33	29.5-30.5
WellCare Health Plans, Inc. (WCG)	271.83	135-138	127-129

Two weeks ago we saw a tremendous number of stocks hit new highs, which usually indicates some short-term euphoria. Sure enough, the major indexes have generally hesitated in recent days, and under the market’s hood, some previously strong sectors (especially metals and transportation stocks) have come under pressure while a few growth stocks perk up. You should always watch your stops, especially if you have losses, but to this point, we’ve seen little in the way of abnormal action—a few stocks look ugly, but most are still holding key support, and many pullbacks are likely setting up solid entry points. Bottom line, while the short-term is likely to bring some bumps in the road, the odds continue to favor higher prices ahead for the market, so we’re OK putting some money to work in strong stocks during the current retreat.

This week’s list is heavy on the old world stocks that have been leading the rally, though there are a few growth names here, too. Our Top Pick is Berry Plastics (BERY)—it doesn’t have the most thrilling story, but the numbers are excellent and shares are in a solid uptrend.

Stock Name	Price	Buy Range	Loss Limit
Berry Global (BERY)	64.22	49.5-51.5	45.5-47
Chemours Company (CC)	0.00	23-24.5	21-22
Incyte Corporation (INCY)	76.98	98-103	91-93
KLX Inc. (KLXI)	0.00	43-45	38.5-40
MasTec, Inc. (MTZ)	66.65	36.5-38.5	33.5-34.5
MRC Global (MRC)	0.00	19.5-20.5	17.5-18
Netflix, Inc. (NFLX)	423.92	122-126	114-116
Square, Inc. (SQ)	91.04	13.5-14.5	12-13
Thor Industries (THO)	104.76	99-104	90-92.5
Zions Bancorporation (ZION)	0.00	40-42	37-38

Current Market Outlook


Not much has changed with the major indexes during the past week—all remain in intermediate- and longer-term uptrends, with small- and mid-cap indexes leading the way and the Nasdaq pulling up the rear. Below the surface, we have seen some profit taking in among many of the market’s top stocks and sectors (even the super-strong industrials, commodities and transports), and given the huge runs those names have seen during the past month, further retrenchment is certainly possible. But when we consider all of the evidence, the odds strongly favor dips being buyable, as pullbacks or shakeout-type action will probably lead to higher prices down the road. We’ll keep our Market Monitor in bullish territory at level 8.

This week’s list is heavy on turnaround stories, especially those in the industrial and commodity sectors. Our Top Pick is Steel Dynamics (STLD), a leader of the steel sector that’s starting to pull back after a big run. You can buy some here or (preferably) on further weakness.

Stock Name	Price	Buy Range	Loss Limit
Cavium (CAVM)	0.00	61-63.5	55-57
DeVry (DV)	0.00	29.5-32	27-28
Oshkosh (OSK)	95.04	67-69.5	61-62
PDC Energy (PDCE)	0.00	77-81	70-72
Signature Bank (SBNY)	0.00	147-151	136-138
Steel Dynamics (STLD)	0.00	35-37	31-32.5
SunCoke Energy (SXC)	0.00	11-12	10-10.5
Tailored Brands (TLRD)	0.00	24.5-27	22-23.5
Transocean Ltd. (RIG)	0.00	14-15	12-12.5
Western Digital Corporation (WDC)	0.00	63-67	56.5-58

Current Market Outlook


The market has turned into a case of the haves and have nots, as most major indexes and many cyclical sectors (materials, energy, industrials, transports) remaining in clear uptrends, while growth stocks and indexes either mark time or come under severe distribution. It’s not the healthiest situation—the market tends to do best when everything is in gear—but at this point, we’re not willing to make any broad statements. In other words, we’re just taking the evidence for what it is: The trends of the overall market are up and many stocks are acting well, so you should focus your attention on those strong sectors, while honoring stops and cutting losses in the areas that are under pressure. We’re keeping our Market Monitor at a level seven.
This week’s list is heavy on the market’s strongest areas, with materials, energy, financials and some retail represented. Our Top Pick is Freeport-McMoRan (FCX), the largest copper firm in the world, which appears to be just starting a new uptrend after a horrible bear phase. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Burlington Stores (BURL)	193.95	86-90	78-80
Children’s Place (PLCE)	0.00	100-105	94-95
Dave & Buster’s (PLAY)	57.01	51-55	45-48
Deere & Company (DE)	0.00	97-101	91-93
Freeport-McMoRan Inc. (FCX)	13.78	14.5-15.5	13-13.5
Halliburton (HAL)	0.00	52-55	48-50
Helmerich & Payne (HP)	63.68	77-80	70-72
iRobot (IRBT)	103.17	53-56	48-50
Jack in the Box (JACK)	0.00	103-107	87-99
Stifel Financial (SF)	56.32	48-50	44-45

Current Market Outlook


The market’s immediate post-election action was divergent and confusing, with some stocks soaring and others plunging, and most indexes still confined to sideways trends. But that’s changing—by our measures, the intermediate-term trend has turned up, joining the longer-term trend in positive territory. And we’re now seeing more solid set-ups (and a few breakouts) in growth stocks, which are joining many Old World stocks and sectors at new high ground. Even the S&P 500 and Nasdaq are getting in on the fun, as both tested virgin turf today. It’s not all peaches and cream, but after nudging up our Market Monitor one notch last week (to level 5), we’re pushing it up two more slots this week (to level 7), reflecting the more positive environment.

This week’s list goes along with the strength we’re seeing in the market, as financial, gaming construction/metals, biotech, cybersecurity and transportation stocks are all represented. Our Top Pick is MGM Resorts (MGM), a big-cap name that’s showing excellent power since its earnings report two weeks ago.

Stock Name	Price	Buy Range	Loss Limit
Charles Schwab (SCHW)	0.00	35.5-37.5	31.5-32.5
Commercial Metals (CMC)	0.00	19.5-20.5	17.5-18
Exelixis (EXEL)	27.35	15.5-16.5	13-13.5
Granite Construction (GVA)	0.00	55.5-57.5	51-52
Inphi (IPHI)	120.16	44-46	41-42
MGM Resorts (MGM)	0.00	27-28.5	25-26
Micron Technology, Inc. (MU)	43.31	18.5-19.5	16.5-17.5
Palo Alto Networks (PANW)	236.92	172-180	156-162
Terex (TEX)	0.00	26.5-28	24.5-25
United Continental Holdings (UAL)	96.76	64-67	57.5-59.5

Hello from sunny Florida!

I am on vacation with my family this week, taking a much-needed break from the harsh, snowy Vermont winter (and narrowly making it down here ahead of the latest blizzard to dump another foot or two of snow on the Northeast). But with so much going on in the market – tariffs rejected! GDP growth slowing! AI panic! – I wanted to provide an update on everything that’s going on with our stocks.

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.

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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 we’re going to add two new stocks to the Model Portfolio: Abiomed (ABMD) and Dave & Buster’s (PLAY)

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.