Current Market Outlook


Wow! After a surprise U.S. election result last week, we got a surprise market reaction—straight up, at least when it comes to “old world” and small- and mid-cap stocks. That’s a good sign, and if the major indexes can hold their ground (or build on their advances) from here, the intermediate-term trend should turn up, which will tell us to become more aggressive. That said, there are huge cross-currents out there; the market is very divergent with tons of stocks hitting new highs and new lows, and growth stocks have actually come under pressure in recent days. Right now, then, we still advise being cautious—we’re nudging our Market Monitor up to a level 5 (out of 10), but won’t go further than that until the trend turns up.

The good news is there are many newly-powerful charts. This week’s list is chock full of construction, infrastructure and financial stocks that have solid growth outlooks and whose stocks look great, too. Our Top Pick is XPO Logistics (XPO), a new leader in the strong transportation group that’s just burst to new highs.

Stock Name	Price	Buy Range	Loss Limit
BHP Billiton (BHP)	0.00	35.5-37.5	33-34
Eagle Materials Inc. (EXP)	0.00	90-94	84-86
HealthEquity, Inc. (HQY)	70.70	38.5-41	34-35.5
MasTec, Inc. (MTZ)	66.65	33.5-35.5	30.5-31.5
Nucor Corporation (NUE)	66.20	55-57	51-52
Proofpoint (PFPT)	113.79	79-82	74-75.5
Texas Capital Bancshares (TCBI)	0.00	63-66	56.5-58
Vulcan Materials Company (VMC)	137.10	129-133	119-121
Western Alliance (WAL)	0.00	42-44	39.5-40.5
XPO Logistics (XPO)	0.00	39-41	36-37

Current Market Outlook


After nine straight down days and some signs of investor panic, the market enjoyed a much-needed rebound today (right off key support) ahead of tomorrow’s election. Ideally, the past two weeks were the final leg of the market’s two-plus-month correction and stocks kite higher into year-end; such a scenario is certainly possible. However, the fact is that all we’ve seen is one strong up day—all the major indexes remain below their intermediate-term moving averages, as do most stocks. Thus, on the sell side, you can consider letting go of any broken stocks you’ve been holding on to, and on the buy side, you should continue to keep new positions small until the market confirms a new, sustained uptrend. We’re keeping our Market Monitor at level 4 until that happens.
This week’s list has a bunch of resilient stocks, including another batch that’s recently reacted well to earnings. Our Top Pick is Gigamon (GIMO), which, after a quick shakeout, snapped right back on earnings and lifted to new highs today.

Stock Name	Price	Buy Range	Loss Limit
Archer Daniels (ADM)	0.00	45-47	42-43
AveXis (AVXS)	0.00	58-62	51-53
Clayton Williams Energy (CWEI)	0.00	94-98	85-87
Eagle Pharmaceuticals Inc. (EGRX)	0.00	72-74	66-67
Gigamon (GIMO)	0.00	54-57	48-50
Las Vegas Sands Corp. (LVS)	0.00	57-59	53-54
Martin Marietta Materials (MLM)	261.52	190-195	180-183
Melco Crown (MPEL)	0.00	16.5-17.5	15-16
Spirit AeroSystems (SPR)	92.54	51.5-53	48-49
Take-Two Interactive (TTWO)	123.32	47-49	44-45

Current Market Outlook


From a top-down perspective (looking at the major indexes and overall trends), last week wasn’t a big deal—most indexes remain in their three-month trading ranges, and all of them are above their longer-term moving averages. But there’s no question that the sellers pulled out the bazooka on many high relative performance stocks, cracking many uptrends in the process. So, combined with the tedious trading during the past few weeks, we’re pulling in our horns a bit more by moving our Market Monitor down two notches to a level 4 out of 10. It’s still best to hold your resilient stocks, especially those that have reacted well to earnings (of which there are many). But you should also limit new buying and be holding plenty of cash until the market firms up.
This week’s list has another batch of earnings winners from last week; if the market can find its footing, many should do well going forward. If you’re looking to nibble on something, our Top Pick is ServiceNow (NOW), an emerging blue chip in the cloud software sector that has a huge runway of growth ahead of it.

Stock Name	Price	Buy Range	Loss Limit
Arch Coal (ARCH)	82.27	74-70	63-61
Cirrus Logic Inc. (CRUS)	0.00	54.5-52.5	50.5-49.5
Ellie Mae (ELLI)	0.00	105-102	98-97
Expedia Group (EXPE)	0.00	130-125	116-115
Mastercard Incorporated (MA)	0.00	107-105	101-100
New Oriental Education (EDU)	113.97	50-48	46-45
ServiceNow (NOW)	341.86	86.5-83.5	79-77.5
Tesaro (TSRO)	0.00	120-116	108-106
US Silica Holdings, Inc. (SLCA)	0.00	46-44	41-40
Western Digital Corporation (WDC)	0.00	59-56.5	52-51

Current Market Outlook


Not much changed with the market last week, as the major indexes finished up a fraction of a percent, remaining in the trading range of the past three months. That said, there’s no doubt that individual stocks are acting better, especially the liquid leaders that are generally a good barometer of institutional sentiment. Not only are most well-traded growth stocks holding firm, some have actually emerged to new highs on earnings. We’re not ready to change our Market Monitor yet (the intermediate-term trend remains slightly negative and there are tons of earnings reports this week), so it’s best to pick your spots on the buy side, hold some cash and practice patience with your resilient performers.

This week’s list has a bunch of good-looking charts from a variety of industries. For our Top Pick, we’ll go one of the liquid leaders that’s just emerged.PayPal (PYPL) exploded out of a 15-month base last Friday on its heaviest volume since the day of its IPO. We think it’s buyable here or on dips.

Stock Name	Price	Buy Range	Loss Limit
Copa Holdings (CPA)	0.00	93-89	85-84
Domino’s Pizza (DPZ)	339.47	165-160	151-148
FMC Technologies, Inc. (FTI)	0.00	32.5-31	29.5-29
HDFC Bank Limited (HDB)	0.00	75-72	68-67
ICON plc (ICLR)	0.00	84-82	77-76
Match (MTCH)	0.00	19.5-18.5	17-16.5
Netflix, Inc. (NFLX)	423.92	127-123	112-110
PayPal (PYPL)	147.00	44-42	40.5-39.5
Steel Dynamics (STLD)	0.00	26.5-25.5	23.5-23
Zayo Group (ZAYO)	0.00	31.5-30.5	29-28.5

Current Market Outlook


In the big picture, we still have yet to see much abnormal action from the market—the long-term trend is up, the broad market is relatively healthy and, while many leading stocks have been dented, plenty are still acting well. Because of that, the odds still favor the next big move being up. But the short-term is trickier to game—it looks to us as if the market topped out for a few weeks starting in early September, with last Tuesday’s breakdown and last Friday’s rally rejection signs that big investors are liquidating some positions. With the major indexes just 2% to 3% off their highs, now is not a time to panic, but it is time to prudently manage your risk by cutting losses short, holding some cash and keeping new buys on the smaller side. We’re nudging our Market Monitor down to level 6 (out of 10) and believe the onus is on the bulls to reignite a new uptrend.

This week’s list has a wide variety of stocks and sectors to choose from. Our Top Pick is Paterson-UTI Energy (PTEN), which has been in rough shape during the energy bust, but the stock is now forecasting better times ahead.

Stock Name	Price	Buy Range	Loss Limit
Aerie Pharmaceuticals (AERI)	0.00	37-34	29.5-28
Diamondback Energy (FANG)	0.00	100-97	93-92
GoDaddy (GDDY)	0.00	35-34	32-31.5
ICU Medical (ICUI)	0.00	147-142	130-128
Las Vegas Sands Corp. (LVS)	0.00	58-56	50.5-49.5
Momo Inc. (MOMO)	44.65	24-22.5	21.5-20
Patterson-UTI Energy (PTEN)	0.00	24-22.5	21-20.5
PRA Health Sciences Inc. (PRAH)	96.08	54-52	49-48
RPC Inc. (RES)	0.00	18-17	16-15.5
TAL Education (XRS)	0.00	69.5-67.5	65-64

Current Market Outlook


There’s no shortage of things to worry about today, with everything from the Presidential election to Syria to Russia to interest rates seemingly hanging in the balance. And as all good investors know, bull markets climb a wall of worry! So it’s no surprise that the market continues to lean bullish. Leading the group in the U.S. are small-cap stocks (while the major indexes lag), and leading the way internationally are the Chinese stocks, a couple of which appear in this issue—and not for the first time.

The Chinese stocks, however, may be due for a correction, so our Top Pick is Yelp (YELP), which combines a great growth story with a chart that’s in a good buying range.

Stock Name	Price	Buy Range	Loss Limit
MercadoLibre, Inc. (MELI)	980.83	191-185	175-174
NetEase, Inc. (NTES)	0.00	255-245	235-234
Nintendo Co., Ltd. (NTDOY)	0.00	34-32	30-29
Parsley Energy (PE)	0.00	35.5-34	32-31
TD Ameritrade (AMTD)	0.00	35.5-35	32.5-32
Twilio (TWLO)	183.39	60-55	53-50
US Silica Holdings, Inc. (SLCA)	0.00	47-44	40-37.5
Weibo (WB)	98.16	53-49	46-45
Williams Companies (WMB)	0.00	31-29	27.5-27
Yelp (YELP)	41.30	41-39	37-36

Current Market Outlook


October is an infamous month in market history, with many huge dips and crashes taking place at this time of year. This time around, the major evidence is much more positive than when the market experienced those prior wipeouts—the longer-term trend is up and we remain impressed with the resilience of the broad market and growth stocks. Of course, the intermediate-term trend remains neutral, and with so many uncertainties out there (U.S. election, Deutsche Bank, etc.), we can’t rule out a leg down in the near-term to scare out many investors. As always, we advise going with the flow—today, that means leaning bullish, but not flooring the accelerator until the bulls decisively retake control.

This week’s list has more of a mix of stocks and sectors than previous weeks, but that’s fine with us. Our Top Pick is Inphi (IPHI), a fast-growing networker that looks ready to get going after a few weeks of rest.

Stock Name	Price	Buy Range	Loss Limit
Apache (APA)	0.00	64-61.5	55.5-54
Autodesk (ADSK)	229.00	72-70	65-64
Carrizo Oil & Gas (CRZO)	24.03	41-39	36-35
Inphi (IPHI)	120.16	43-41.5	39.5-38.5
Line Corporation (LN)	0.00	48-46	43-42
Micron Technology, Inc. (MU)	43.31	18.5-17	16-15.5
Quanta Services (PWR)	91.45	28-26.5	25-24
Symantec Corporation (SYMC)	0.00	25-24	23-22.5
Thor Industries (THO)	104.76	85-83	77-76
XPO Logistics (XPO)	0.00	37.5-35.5	34-33

Current Market Outlook


The action of the past couple of days indicates that the market’s recent pullback likely isn’t through yet—while the Nasdaq hit new highs last week, no other index did, and that divergence (and negativity surrounding Deutsche Bank) brought out more sellers. In the short-term, then, the trend is mainly neutral, as most indexes haven’t made much progress during the past two months and are gyrating around their 50-day lines. Longer-term, though, we remain optimistic: Growth stocks and indexes are generally outperforming, the broad market is healthy and investor skepticism remains elevated (all good things). We’re going to leave our Market Monitor at level 7, meaning you should hold your strong stocks but also hold some cash on the sideline until the buyers retake control.

This week’s list has a good collection of stocks, mostly on the growth side. Our Top Pick, though, is a special situation—Tech Data (TECD) just announced a transformative acquisition that catapulted the stock to new highs. We think it’s buyable around here.

Stock Name	Price	Buy Range	Loss Limit
Adobe Inc. (ADBE)	315.23	105-108	99-100
CoLucid Pharmaceuticals Inc (CLCD)	0.00	28-30	23-24
Eagle Pharmaceuticals Inc. (EGRX)	0.00	63.5-67	57-58
Etsy (ETSY)	112.97	14-15	12.5-13
Match (MTCH)	0.00	16.5-17.5	15.5-16
Penske Automotive Group (PAG)	0.00	47-49	43-44
Penumbra Inc. (PEN)	173.25	75-77	69-70
TECD (TECD)	0.00	83-86	75-77
Twilio (TWLO)	183.39	62.5-65.5	54-56
ZELTIQ Aesthetics Inc (ZLTQ)	0.00	40-38	35.5-36.5

Current Market Outlook


The market’s not out of the woods yet, as many indexes are still hovering below their 50-day moving averages. But the way stocks have handled themselves in recent days is encouraging—there’s been little follow-on selling following the initial dump on September 9, and growth-oriented stocks and indexes have perked up nicely, with some reaching new highs late last week. Throw in a still-healthy broad market (there are very few stocks hitting new lows, which is a good sign), and we remain optimistic, though we’ll keep our Market Monitor in its current place (7 out of 10) and will continue to advise you to keep newer positions smaller than normal until the indexes clearly kick into gear on the upside.


Encouragingly, this week’s list contains a ton of growth stock ideas, including a few newer names to consider. Our Top Pick is Arista Networks (ANET), a fast-growing networker that’s benefiting from the big shift to cloud computing and offers a unique software option for developers. Today’s dip looks buyable.

Stock Name	Price	Buy Range	Loss Limit
gdxi (gdxi)	0.00	102-106	94-96
Tata Motors Limited (TTM)	0.00	40-42	37-38
Seattle Genetics (SGEN)	150.85	50-53	48-49
Gigamon (GIMO)	0.00	50-52	46-47
Glaukos Corp. (GKOS)	67.84	34.5-36.5	31-32
Clayton Williams Energy (CWEI)	0.00	69-73	56-58
Cirrus Logic Inc. (CRUS)	0.00	52.5-54.5	47-48
Arista Networks (ANET)	0.00	80-83	74-76
Aerie Pharmaceuticals (AERI)	0.00	31-34	26-27.5
Abiomed (ABMD)	0.00	123-126	113-115

Current Market Outlook


After trading in a tight range for nearly two months, the major indexes were clobbered last Friday; most fell below their 50-day lines and a couple hit their lowest levels since Brexit. The action should certainly be respected—we’re knocking our Market Monitor down a couple of notches—but it’s important to look at all the evidence. While the intermediate-term trends are mostly sideways at this point, the longer-term trend is still up, the broad market isn’t falling apart as it would at major tops, and many individual stocks are pulling back normally so far. Overall, you should take things on a stock-by-stock basis, selling stocks that crack but giving others a chance to hold support and resume their advance. Overall, we remain optimistic, but picking your spots is important, and the next few days should be telling.



This week’s list includes many resilient stocks from a variety of sectors, which is a positive sign. Our Top Pick is Las Vegas Sands (LVS), a big-cap turnaround stock that has just lifted off following a huge bottoming effort.

Stock Name	Price	Buy Range	Loss Limit
Urban Outfitters (URBN)	0.00	35-36.5	32-33
Twilio (TWLO)	183.39	54-57	47.5-49
Tempur Sealy (TPX)	85.53	78-80	70-71
PDC Energy (PDCE)	0.00	64-66	59-60
MercadoLibre, Inc. (MELI)	980.83	174-178	160-161
Las Vegas Sands Corp. (LVS)	0.00	55-57	50-51
GrubHub (GRUB)	140.03	38.5-40.5	35-36
Callon Petroleum (CPE)	0.00	14-15	12.5-13
Burlington Stores (BURL)	193.95	80-82.5	74-75
Alibaba (BABA)	254.81	95-100	89-90

Current Market Outlook


Major indexes, including the S&P 500, Dow Industrials and Nasdaq Composite remain range bound, chopping sideways in very tight ranges during the past five to seven weeks. But the broad market is looking better and better—most small- and mid-cap indexes hit new highs last week, and we’ve seen some improved action among growth stocks. All told, we remain positive on the market and believe the path of least resistance remains up. Individual stocks have been a bit trickier, but many are acting well. We think it’s best to remain heavily invested.


This week’s list includes many smaller, rapidly growing companies, reinforcing the view that money is flowing toward growth ideas. Our Top Pick is Shopify (SHOP), which has enormous potential as e-commerce expands. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Wix.com (WIX)	302.53	39.5-41.5	35-36
Ubiquiti Networks (UBNT)	170.11	50-52	47-48
Shopify (SHOP)	585.00	40.5-42.5	36-37
Ingevity Corp. (NGVT)	99.98	42-44.5	39-40
Microsemi (MSCC)	0.00	38.5-40	36-37
LGI Homes (LGIH)	86.04	37.5-38.5	33-34
Green Plains Energy (GPRE)	0.00	23.5-24.5	21.5-22
Finisar (FNSR)	0.00	21.5-22.5	19.5-20
Exact Sciences (EXAS)	116.91	18-19	15.5-16
Autodesk (ADSK)	229.00	66-68	60-61

Current Market Outlook


Despite the never-ending Fed watch (many investors are looking forward to this week’s jobs report for clues on the Fed’s next move), the major indexes remain in a very tight trading range, with some (including the S&P 500) basically unchanged since mid-July. Still, by our measures, the intermediate- and longer-term trends remain up, and the fact there has been little giveback by the major indexes in recent weeks is a positive. Individual stocks have been trickier, with some potholes emerging on earnings, rotation among industry groups or simply profit taking, but most remain in good shape. Overall, the odds continue to favor the next big move being up, so you should stay heavily invested in strong stocks.

This week’s list has a nice mix of stories to consider, including a couple that are benefiting from recent acquisitions. But our Top Pick is NetEase (NTES), a leading online game company out of China—growth is excellent, and after a brief shakeout, the stock is back in new high ground.

Stock Name	Price	Buy Range	Loss Limit
ZELTIQ Aesthetics Inc (ZLTQ)	0.00	35-37	32-33
Cimarex Energy (XEC)	0.00	129-134	122-124
Thor Industries (THO)	104.76	78.5-79.5	73-74
Proofpoint (PFPT)	113.79	75-77.5	70-71.5
NetEase, Inc. (NTES)	0.00	208-214	195-196
NetApp (NTAP)	0.00	33.5-35	31-32
Microchip Technology (MCHP)	79.12	59-60.5	55.5-56
Lumentum (LITE)	87.00	32-33.5	29-30
Dexcom (DXCM)	421.36	89-91.5	82-83
Berry Global (BERY)	64.22	43-44	39-40

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%.

We’re going to sell our position in Seaspan (SSW), a stock that we’ve had in the portfolio for four full years, enjoying its impressive dividends through many market moves.

The UK has voted to leave the European Union, and while the details of the separation will take years to figure out, markets are responding in typical knee-jerk fashion this morning.

The market’s reaction to the Brexit vote has dropped the iShares MSCI Emerging Markets ETF (EEM) by nearly 6%. Today, our only action will be to sell half of our position in Credicorp (BAP), our Peruvian bank stock.

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.