Current Market Outlook


The market has put on a good show during the past three weeks, with the major indexes pushing to two-month highs, turning the intermediate-term trend positive. And many sectors (including the most beaten-down sectors like commodity, industrial and transport stocks) have bounced extremely well. All of that is encouraging … but the question is what comes next. Some indexes are starting to butt up against major overhead resistance (the 2,000 to 2,100 area on the S&P 500 has been a thorn in the market’s side for more than a year), and all indexes are still stuck below their longer-term 200-day lines. Overall, we remain neutral—if you see a good set-up, by all means take it, but we would hold off on flooring the accelerator until we see more breakouts and a longer-term uptrend in the general market.

This week’s list has a mix of stocks and sectors—some new, some old, some growth-oriented while others are turning around. Our Top Pick this week is Lumentum (LITE), which is enjoying a round of analyst upgrades on double-digit earnings growth.

Stock Name	Price	Buy Range	Loss Limit
Zoës Kitchen (ZOES)	0.00	35-37	31.5-32.5
Wayfair (W)	167.03	42-44	39-40
Vulcan Materials Company (VMC)	137.10	98-102	88-89
Sturm, Ruger & Co. (RGR)	0.00	70-73	62-65
MaxLinear (MXL)	0.00	16-17.5	14-15
MACOM Technology Solutions (MTSI)	0.00	41-43	37-38
Lumentum (LITE)	87.00	23-24	20-21
Kate Spade & Company (KATE)	0.00	21.5-23	19-19.5
Credicorp (BAP)	0.00	120-125	110-115
Broadcom Limited (AVGO)	266.26	142-146	127-131

Current Market Outlook


Our job as investors isn’t to forecast where the market will be in two or three months, but to follow the current evidence and stay on the right side of the market’s trends. The intermediate-term trend turned positive last week for the first time in more than two months, so it’s time to take a couple of steps back into the market’s waters by purchasing some strong stocks with big potential. That said, it’s best to go slow, partly because the longer-term trend remains down, and partly because many stocks are still repairing the severe damage they suffered in recent months. Our Market Monitor remains in neutral territory, and we’ll be looking for more bullish action from leading stocks to tell us to shift to a more aggressive stance.

This week’s Top Ten has a bit more of a growth flavor, which we like to see, with many stocks expected to grow earnings nicely. Our Top Pick is Texas Roadhouse (TXRH), a full-service restaurant operation that should see its bottom line accelerate this year. Even better, the stock just exploded out of a multi-month base.

Stock Name	Price	Buy Range	Loss Limit
WellCare Health Plans, Inc. (WCG)	271.83	87-90	82-83
Texas Roadhouse (TXRH)	0.00	40.5-42	36.5-37
Stamps.com (STMP)	0.00	112-117	106-107
Sprouts Farmers Market (SFM)	19.00	26-27.5	23.5-24
Motorola Solutions (MSI)	0.00	71-73	66-67
Mellanox Technologies (MLNX)	92.00	49-51	45-46
Lennox International (LII)	270.56	127-129	120-121
First Solar (FSLR)	83.74	68-70	60-61
Franco-Nevada (FNV)	125.51	57-59	52-53
()	0.00	-	-

This is a TOC.

Current Market Outlook


The market continues to face many headwinds, the largest of which is the fact that the major indexes and the vast majority of individual stocks remain in longer-term downtrends. However, let’s give the market credit where it’s due—after a panic selloff on January 20, the major indexes chopped around, retested those lows during the following three weeks, and now, have nearly risen to their highest levels since early January. By our measures, the intermediate-term trend is starting to turn up, so after many weeks in a defensive stance, it’s OK to loosen the purse strings and put some cash to work—though we do advise going slow on the buy side and continuing to hold a good-sized cash position. Our Market Monitor will move up a couple of notches into neutral territory.

This week’s list is still a bit light on true growth stocks, but there are other interesting ideas to consider. Our Top Pick is TAL Education (XRS), a stock we’ve recommended before that’s now showing excellent relative strength.

Stock Name	Price	Buy Range	Loss Limit
TAL Education (XRS)	0.00	48-50.5	43.5-44
Wynn Resorts (WYNN)	121.08	76-79	69-70
The Priceline Group Inc. (PCLN)	0.00	1220-1300	1080-1100
NVIDIA Corporation (NVDA)	242.42	30-32	27-28
Hawaiian Holdings Inc. (HA)	0.00	38-40	34-35
Five Below (FIVE)	134.58	35.5-37.5	32.5-33
CenturyLink (CTL)	22.88	28-29.5	26.5-27
CyrusOne Inc (CONE)	0.00	36.5-38	34-34.5
Coherent, Inc. (COHR)	0.00	78-82	72-73
Burlington Stores (BURL)	193.95	52-54	47.5-48

Current Market Outlook


The market spent most of last week testing its late-January low, and the combination of some positive breadth divergences (about 1,200 stocks on the NYSE and Nasdaq hit new lows last Thursday, versus 2,300 on January 20) and Friday’s big upmove could mean it’s time for another rally attempt. We’ll be watching the 1,950 level on the S&P 500 and 4,650 level on the Nasdaq—pushes above both levels could turn the intermediate-term trend back up. But that’s looking far down the line; right now, the market’s major trends remain down, and while some stocks and sectors have shaped up, most are still in the mud. Thus, a defensive stance is advised, though we’ll be keeping a close eye on the action in the days ahead.

This week’s list has some enticing names, including a few that reacted well to earnings. Our Top Pick is Sabre (SABR), a behind-the-scenes player in air travel and hotel bookings that has steady growth, booming cash flow and a stock that showed unusual power following its recent quarterly report.

Stock Name	Price	Buy Range	Loss Limit
WellCare Health Plans, Inc. (WCG)	271.83	78-81	72-73
Sabre Corp. (SABR)	0.00	24.5-26	22-22.5
Rovi Corp. (ROVI)	0.00	19-20	16.5-17
O’Reilly Automotive (ORLY)	0.00	245-255	227-229
Nasdaq (NDAQ)	0.00	58-61	55-55.5
Vail Resorts (MTN)	0.00	116-122	109-110
Barrick Gold (GOLD)	27.20	84-88	76-77
Goldcorp (GG)	0.00	14-15	12-12.5
Ellie Mae (ELLI)	0.00	69-73	62-62.5
CH Robinson (CHRW)	0.00	67.5-70	62.5-63

Current Market Outlook


Trend following is our preferred method of market timing for two major reasons: If you follow the system, you’re guaranteed never to remain heavily invested in serious downtrend, and you’re also guaranteed never to miss out on a major uptrend. We’ve seen that play out in recent months—our Market Monitor shifted to neutral in mid-November and to bearish at the start of January, and we continue to advise a defensive stance as the market remains under pressure. We do think stocks could snap back some in the short-term, partially because the broad market isn’t in nearly as bad shape as it was on January 20, when the indexes initially dipped to these levels. But, bounce or not, it’s best to stick with the system, which means remaining defensive until the intermediate-term trend turns up.

This week’s list is a hodgepodge of stocks and sectors, but we feel many can do well once the market finds its footing. Our Top Pick is Michael Kors (KORS), which, after a multi-month bottoming effort, reacted well to earnings last week as results weren’t as bad as feared. The stock is dirt cheap, too.

Stock Name	Price	Buy Range	Loss Limit
Vantiv (VNTV)	0.00	43.5-45.5	41-42
Vulcan Materials Company (VMC)	137.10	86.5-90	81-82
Super Micro Computer (SMCI)	0.00	29-31	26-27
PayPal (PYPL)	147.00	32-34	29-29.5
Universal Display (OLED)	187.54	40-43	37-38
Newmont Mining (NEM)	57.31	23.5-25	21.5-22
Mattel, Inc. (MAT)	0.00	30-31	28-28.5
Michael Kors Holdings Limited (KORS)	73.22	47.5-50.5	43-44
First Solar (FSLR)	83.74	62-64	57.5-58
Agnico Eagle Mines (AEM)	79.05	31-33	28-28.5

Current Market Outlook


First, the good news: By last week’s end, the major indexes had extended their bounce, with many recouping about 45% or more of their December 29-January 20 meltdowns. And this bounce probably has further to run, especially as earnings season has helped a few stocks show excellent strength. All of that said, the onus remains on the bulls to prove this bounce can morph into a sustained rally—the intermediate- and longer-term trends are still pointed down for all indexes and the vast majority of stocks, and to this point, most of the “action” has been in defensive and interest rate-sensitive sectors (utilities, REITs, tobacco, etc.). That can always change, and we hope it does, but right now it’s best to remain defensive and allow the market to prove itself on the upside.

This week’s list contains some turnaround situations, but we’re encouraged to see some real growth stocks as well. And the Top Pick this week is the flag-bearer for all growth stocks—Facebook (FB) is well owned, but remains one of the best stories around, and last week’s earnings report revealed accelerating growth.

Stock Name	Price	Buy Range	Loss Limit
TAL Education (XRS)	0.00	45-47	41-42
Under Armour (UA)	0.00	80-83	74-76
T-Mobile US (TMUS)	0.00	38-40	35-36
SolarEdge Technologies Inc. (SEDG)	124.37	27-29	24-24.5
Facebook, Inc. (FB)	0.00	110-115	102-103
Diamondback Energy (FANG)	0.00	70-74	63-64
Dollar Tree (DLTR)	0.00	78-81	72-73
Cirrus Logic Inc. (CRUS)	0.00	33-35	30-30.5
Align Technology (ALGN)	316.20	64-67	61-61.5
Barrick Gold (ABX)	0.00	9.5-10	8-8.5

Current Market Outlook


Last Wednesday appears as if it will mark a short-term low for stocks—there were many extremes in sentiment (fewest number of bullish investors in 10 years) and breadth (most stocks hitting new 52-week lows since 2008), which, combined with the big turnaround that day (and the big relief rally on Friday), increases the odds that we’re now in bounce mode. This bounce could continue for a while, so if you want to nibble on a couple of strong names (especially those that react well to earnings), that’s fine. But our bigger message remains the same: The market’s intermediate- and longer-term trends are clearly down, so it’s likely any bounce will eventually lead to a retest (or worse) of the recent lows.

The good news is that any bounce will allow us to separate the wheat from the chaff, and that process has already begun. This week’s list has a few intriguing growth stories to consider. Our Top Pick is Ligand Pharmaceuticals (LGND), a small, little-known biotech firm with a very unique business model. Put it near the top of your watch list.

Stock Name	Price	Buy Range	Loss Limit
Take-Two Interactive (TTWO)	123.32	32-34	29.5-30
STORE Capital (STOR)	0.00	22.5-23.5	21-21.5
Seaspan (SSW)	0.00	15.5-16.5	14-14.5
Lululemon Athletica (LULU)	304.69	53-57	47-48
Ligand Pharmaceuticals (LGND)	267.14	99-104	90-91
First Republic Bank (FRC)	0.00	64-66	59-60
Edwards Lifesciences (EW)	228.06	76-79	70-71
Cree, Inc. (CREE)	67.96	26-27.5	24-24.5
CoreSite Realty (COR)	0.00	57-59	53-54
Burlington Stores (BURL)	193.95	49-51	46-47

Current Market Outlook


After another week of major selling in the market (the S&P 500 is down 8% this month, while the Nasdaq is off 10.3%), there’s not much left to say except the obvious—the sellers remain in control of nearly every stock and sector, and thus we continue to advise a highly defensive stance. Of course, the market is also very oversold, and at some point there will be a snapback rally (likely to last more than just a few days) that will take the indexes and many stocks higher. But until we see some definitive signs of support, it’s best to stay mostly on the sideline and wait patiently for legitimate set-ups to occur.

This week’s list has a variety of resilient names; some are defensive, some have solid growth stories and others are special situations. Our Top Pick is Chuy’s Holdings (CHUY), a small (and thinly traded) cookie-cutter story whose stock has been amazingly resilient this month.

Stock Name	Price	Buy Range	Loss Limit
Ryanair DAC (RYAAY)	0.00	81-84	75-76
MACOM Technology Solutions (MTSI)	0.00	34-36	31.5-32
Intuitive Surgical, Inc. (ISRG)	0.00	535-555	500-505
Alphabet, Inc. (GOOGL)	0.00	695-720	640-645
Flir Systems (FLIR)	0.00	30-31	27.5-28
Five Below (FIVE)	134.58	32-34	29-29.5
DreamWorks (DWA)	0.00	24-25.5	22-23
CubeSmart (CUBE)	0.00	29.5-31	27.5-28
Chuy’s Holdings (CHUY)	0.00	32.5-35	29.5-30
Abiomed (ABMD)	0.00	83-87	77-78

Current Market Outlook


The first week of the year was historically bad, with all the major indexes breaking lower and most individual stocks going along for the ride. With such dramatic action, we’re sure you’ll hear and read a variety of predictions, but we urge you to ignore the noise and focus on the facts—and the facts today are that the trends are down, so you should remain in a defensive posture, meaning lots of cash, little if any new buying, with the focus on building a watch list of future winners. Obviously, short-term, a bounce is overdue, and when it comes, it could be a great one. But the fact that the market has had trouble rallying even in the face of “oversold” conditions isn’t a good sign. It’s best to stay defensive until we see some sustained buying emerge.

This week’s list contains special situations, income securities, precious metals and even a couple of resilient growth stocks. Our Top Pick is Rovi Corp. (ROVI), a cheap technology stock that just exploded higher following two major license renewals. Nibbling on dips could work out.

Stock Name	Price	Buy Range	Loss Limit
58.com (WUBA)	0.00	58-61	54-55
Ulta Beauty (ULTA)	331.95	176-182	163-165
Rovi Corp. (ROVI)	0.00	16-17.5	14-15
Children’s Place (PLCE)	0.00	59-62	53-54
National Storage (NSA)	0.00	16-17.5	15-15.5
FLSR (FLSR)	0.00	62-65	56-58
Equinix, Inc. (EQIX)	547.73	300-308	278-282
Athenahealth (ATHN)	0.00	150-155	140-142
Abercrombie & Fitch (ANF)	15.37	24-25.5	22-23
Agnico Eagle Mines (AEM)	79.05	28-29.5	25.5-26

Current Market Outlook


The first week of the year was historically bad, with all the major indexes breaking lower and most individual stocks going along for the ride. With such dramatic action, we’re sure you’ll hear and read a variety of predictions, but we urge you to ignore the noise and focus on the facts—and the facts today are that the trends are down, so you should remain in a defensive posture, meaning lots of cash, little if any new buying, with the focus on building a watch list of future winners. Obviously, short-term, a bounce is overdue, and when it comes, it could be a great one. But the fact that the market has had trouble rallying even in the face of “oversold” conditions isn’t a good sign. It’s best to stay defensive until we see some sustained buying emerge.

This week’s list contains special situations, income securities, precious metals and even a couple of resilient growth stocks. Our Top Pick is Rovi Corp. (ROVI), a cheap technology stock that just exploded higher following two major license renewals. Nibbling on dips could work out.

Stock Name	Price	Buy Range	Loss Limit
58.com (WUBA)	0.00	58-61	54-55
Ulta Beauty (ULTA)	331.95	176-182	163-165
Rovi Corp. (ROVI)	0.00	16-17.5	14-15
Children’s Place (PLCE)	0.00	59-62	53-54
National Storage (NSA)	0.00	16-17.5	15-15.5
FLSR (FLSR)	0.00	62-65	56-58
Equinix, Inc. (EQIX)	547.73	300-308	278-282
Athenahealth (ATHN)	0.00	150-155	140-142
Abercrombie & Fitch (ANF)	15.37	24-25.5	22-23
Agnico Eagle Mines (AEM)	79.05	28-29.5	25.5-26

Current Market Outlook


The market began 2016 on a bearish note, with the major indexes plunging and even the market’s most resilient stocks getting hit very hard. The “reason” for the decline was supposedly a meltdown in China’s stock market overnight, but there’s no question the U.S. market’s underpinnings had been weak for a while (hence our cautious approach in recent weeks). From here, anything is possible—January is a notoriously volatile month full of crosscurrents, so yet another snapback is possible. But we’re moving our Market Monitor down a notch into bearish territory given the evidence; now’s the time to think more about capital preservation and work mostly on building a watch list, keeping new buys to very small positions.

This week’s list has many great ideas, stocks that should do well if the market does find strong support. Our Top Pick is SolarEdge (SEDG), which is aiming to be the Intel of the solar sector; the company and the sector as a whole are turning around after a big decline last year.

Stock Name	Price	Buy Range	Loss Limit
SolarEdge Technologies Inc. (SEDG)	124.37	25.5-27	22-22.5
Royal Caribbean Cruises (RCL)	0.00	96-99	91.5-92
Pacira Biosiences (PCRX)	54.85	72-75	66-67
Ophthotech (OPHT)	0.00	70-74	64-65
Universal Display (OLED)	187.54	51.5-54	47.5-48
Nevro Corp. (NVRO)	0.00	64-67	57-58
Neurocrine Biosciences (NBIX)	123.40	50-53	45-46
Dollar Tree (DLTR)	0.00	74.5-78	71.5-72
China Biologic Products (CBPO)	0.00	135-140	123-125
Acorda Therapeutics (ACOR)	0.00	39.5-41	37-38

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%.

Putting it altogether, we remain more bullish than bearish, however, we are going to pull in our horns a bit tonight to respect the market’s action.

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.