Current Market Outlook


Last week had some promising moments, but by week’s end, the sellers had pushed the major indexes back down on the week. At this point, the bears are running wild, as most of the major indexes remain in wide trading ranges. At the very least, the intermediate-term trend is sideways-to-down, and the broad market is in poor health, with hundreds of stocks hitting new lows on a daily basis. It’s OK to hold some resilient performers, but we urge a cautious stance, with plenty of cash on the sideline and limiting new buying to just small positions of resilient stocks.

This week’s list has some solid ideas, though there are no broad trends apparent—mainly company-specific situations that have attracted some buyers. Our Top Pick is Alkermes (ALKS), a speculative biotech that could swim against the tide thanks to the FDA’s recent approval for one of its high-potential drugs.

Stock Name	Price	Buy Range	Loss Limit
Red Hat (RHT)	0.00	79-81	74-75
Pure Storage (PSTG)	25.64	15-16.5	13.5-14
NetEase, Inc. (NTES)	0.00	170-176	160-162
Ligand Pharmaceuticals (LGND)	267.14	103-107	96-97
Intra-Cellular Therapies (ITCI)	0.00	50-55	44-46
FLSR (FLSR)	0.00	62-65	56-58
Extra Space Storage (EXR)	0.00	84-87	80-81
Amazon.com (AMZN)	2.00	650-667	618-622
Alkermes (ALKS)	0.00	75-78	68-69
Adobe Inc. (ADBE)	315.23	89-92	85-86

Current Market Outlook


The broad market’s weakness has finally caught up with the major indexes. Last week we saw an end to the post-September market rally, with all major indexes (and most stocks) breaking down. We never got too bullish in recent weeks because of all the warts on the rally, and now it’s time to be cautious, selling your losers and laggards and holding plenty of cash. From here, we’re open to any scenario, ranging from yet another quick snapback to a prolonged downtrend after months of topping action. Just following the evidence, we’re moving our Market Monitor down to the lower end of neutral.

This week’s list reveals that despite the broad market implosion, there are still many resilient stocks; you could nibble on one or two or just add them to your watch list. Our Top Pick is TAL Education (XRS), a stock that looks to be in a bull market of its own.

Stock Name	Price	Buy Range	Loss Limit
TAL Education (XRS)	0.00	43-45	40-41
Wayfair (W)	167.03	43.5-45.5	40-40.5
Take-Two Interactive (TTWO)	123.32	34-35	32-32.5
NVIDIA Corporation (NVDA)	242.42	31-32.5	29-29.5
ServiceNow (NOW)	341.86	81.5-84	77.5-78
Integrated Device Technology (IDTI)	0.00	26-28	24.5-25
Five Prime Therapeutics (FPRX)	0.00	37-40	31-32
Eagle Pharmaceuticals Inc. (EGRX)	0.00	88-93	80-82
Acuity Brands (AYI)	0.00	224-230	208-210
Abercrombie & Fitch (ANF)	15.37	25-26	22.5-23

Current Market Outlook


Last week didn’t see much net change in the major indexes, but volatility has surged, with big swings up and down based on the news of the day. Overall, not much has changed—some stocks and sectors are acting well, but many others are chopping around and some (like MLPs) are literally crashing. By our measures, the market’s trends are still pointed up, but it’s close. All in all, we’re sticking with a relatively neutral stance, meaning we’re holding our top performers, but also holding some cash and being very selective on the buy side. And if something breaks down or trips its stop, it should be jettisoned quickly.

This week’s list continues with the bigger-cap, growth-oriented theme that’s been present for the past few weeks. Our Top Pick is Ulta Beauty (ULTA), which just gapped up to new highs after three months of rest following a great earnings report. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Weibo (WB)	98.16	18-19	16-17
Western Alliance (WAL)	0.00	36.5-38	34.5-35
Ulta Beauty (ULTA)	331.95	180-184	169-170
Palo Alto Networks (PANW)	236.92	188-193	172-174
Nevro Corp. (NVRO)	0.00	58-62	52-54
Netflix, Inc. (NFLX)	423.92	123-127	113-115
Southwest Airlines (LUV)	0.00	48-50	44-45
Jabil Inc. (JBL)	41.50	24.5-26	23-23.5
Alibaba (BABA)	254.81	82-85	76-77
Broadcom Limited (AVGO)	266.26	142-146	132-134

Current Market Outlook


Since our last issue, the market has rebounded nicely from its sharp one-week pullback in early November, which is obviously good to see. However, not that much has changed from a big picture point of view—the major indexes are in decent shape (the trends remain up), but the advance remains narrow, with a few dozen stocks doing well but many stocks and sectors simply chopping around or trending down. Bottom line, we’ll keep our Market Monitor where it is and stick to our game plan: you should hold your best performers (though taking some partial profits on the way up makes sense), but also hold some cash and be very selective on the buy side.

What’s encouraging is that our screens are finding more and more good growth stories, which is what we see this week. Our Top Pick is a big-cap stock that’s gathering strength as it transitions to the cloud—Autodesk (ADSK) leads its field, but the stock has come alive as big investors anticipate huge recurring revenue ahead.

Stock Name	Price	Buy Range	Loss Limit
Stamps.com (STMP)	0.00	98-103	88-89
PBF Energy (PBF)	38.93	38.5-40.5	36-36.5
Universal Display (OLED)	187.54	49-52	45-46
Monster Beverage Corporation (MNST)	0.00	150-155	139-140
Heartland Payment (HPY)	0.00	76-79	71-72
Home Depot (HD)	0.00	130-133	123-124
Hawaiian Holdings Inc. (HA)	0.00	35-37	31.5-32
General Motors Company (GM)	0.00	35-36.5	32-33
Ctrip.com International Ltd. (CTRP)	34.94	98-104	89-90
Autodesk (ADSK)	229.00	60-63	55.5-56.5

Current Market Outlook


Given the strong October run-up, we weren’t surprised to see the market retreat last week. However, the severity of the dip in both indexes and individual stocks was a yellow flag—many indexes dipped below their 50-day lines, lots of lagging stocks were crushed and even the leaders came under pressure on Friday and today. The action isn’t necessarily a death knell for the rally, but it does put it back on the fence; we’re switching our Market Monitor back into the neutral zone. It’s vital to get rid of losers, honor your stops and remember to book some partial profits in your winners. And as for new buying, it’s prudent to keep new positions small until we see the rally perk up again.

This week’s list has a broad mix of stocks and sectors—no unifying theme but a bunch of good charts and stories. Our Top Pick is Fleetmatics (FLTX), a unique software company with steady growth and a huge opportunity. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Tyler Technologies (TYL)	0.00	164-170	148-150
Charles Schwab (SCHW)	0.00	31.5-33	29-29.5
NetEase, Inc. (NTES)	0.00	141-147	128-130
Kite Pharma (KITE)	0.00	75-78	66-68
Global Payments Inc. (GPN)	0.00	67-69	61-62
Alphabet, Inc. (GOOGL)	0.00	730-750	680-690
Fleetmatics Group PLC (FLTX)	0.00	55.5-58.5	51.5-52
New Oriental Education (EDU)	113.97	26-27.5	23-23.5
A.O. SMITH (AOS)	0.00	74-76	70-70.5
Alkermes (ALKS)	0.00	69.5-72	64-65

Current Market Outlook


Today finally saw a meaningful pullback in the major indexes and most stocks; the realization that the Fed is likely to hike rates next month has created some jitters, and given that the S&P 500 and Nasdaq bumped up against their old highs last week (and that the advance has been narrow), further weakness wouldn’t be unusual. But until we see abnormal action, we’re going with the major trends, which continue to point up. Thus, we believe this dip, while probably having further to run, is buyable. That said, stock selection remains key, as we’re still seeing many stocks fall apart even as others remain in favor.

This week’s list has a well-sponsored feel to it, which isn’t surprising given the market’s preference for bigger-cap stocks of late. Our Top Pick is Nvidia (NVDA), which looks like a liquid leader following its recent run higher. Try to buy on dips of a point or two.

Stock Name	Price	Buy Range	Loss Limit
Sinclair Broadcasting (SBGI)	54.14	32-33.5	27.5-28
Phillips 66 (PSX)	0.00	88-92	80-81
Bank of the Ozarks (OZRK)	0.00	49.5-52	46-46.5
NVIDIA Corporation (NVDA)	242.42	29-30.5	26-26.5
ServiceNow (NOW)	341.86	82-84.5	75-76
MSCI Inc. (MSCI)	0.00	65-67	60-61
Lear Corp. (LEA)	0.00	119-123	112-113
Imperva Inc. (IMPV)	0.00	69-73	62-63
Activision Blizzard, Inc. (ATVI)	0.00	33-35	30.5-31
Align Technology (ALGN)	316.20	65-67	61-62

Current Market Outlook


Last week brought another small improvement in the market, both for the major indexes (the S&P 500 and Nasdaq notched their fifth straight up week and are holding above some key longer-term moving averages) and for some leading stocks—more growth stocks with top-notch fundamentals have reacted well to earnings, offering some much-needed leadership for this rally. Of course, the flip side is also true, as a bunch of stocks have been crushed on earnings, and the broad market’s action is just decent. Overall, we’re a bit more constructive than we have been, so we’ll bump the Market Monitor up a notch, but it remains vital to be selective—buy what’s working, keep losses small and avoid or sell anything that breaks down.


This week’s list has an encouraging batch of growth stocks with good stories and numbers (not as many defensive-type stocks this week). Our Top Pick is LinkedIn (LNKD), a dynamic big-cap growth stock that’s come back to life after its quarterly report blew away expectations.

Stock Name	Price	Buy Range	Loss Limit
Ultimate Software (ULTI)	0.00	200-205	185-186
Lending Tree (TREE)	411.51	108-116	95-97
Royal Caribbean Cruises (RCL)	0.00	96-99	87-88
Proofpoint (PFPT)	113.79	67-70	60-61
The Priceline Group Inc. (PCLN)	0.00	1380-1440	1300-1310
LinkedIn Corporation (LNKD)	0.00	234-242	214-216
IntercontinentalExchange, Inc. (ICE)	0.00	245-255	230-235
Expedia Group (EXPE)	0.00	130-133	119-120
Ctrip.com International Ltd. (CTRP)	34.94	91-95	83-85
Boyd Gaming Corporation (BYD)	0.00	19-20	17-17.5

Current Market Outlook


The big-cap indexes are looking better and better, with the S&P 500 and Nasdaq rocketing above their 200-day lines last week on the back of some bullish earnings reports. That said, not all is hunky dory—mid- and small-cap indexes continue to languish, the number of stocks hitting new 52-week lows is actually picking up and many stocks near their highs are still just biding their time. All in all, we’re still cautiously optimistic but we’re also sticking with our relatively neutral stance—it’s fine to take a shot at a few good set-ups, but honor your stops and keep some cash on the sideline until we see more leadership emerge, possibly on earnings during the next couple of weeks.

This week’s list has a wide array of stocks and sectors, including a few recent earnings winners. For our Top Pick, we’re going to go where the strength is—Delta Air (DAL) isn’t changing the world, but earnings are huge and the sector is acting very well.

Stock Name	Price	Buy Range	Loss Limit
Netgear Inc (NTGR)	0.00	38.5-41	35-36
Lennox International (LII)	270.56	124-128	113-114
General Motors Company (GM)	0.00	33.5-35	31.5-32
Facebook, Inc. (FB)	0.00	98-103	91-92
Euronet Worldwide (EEFT)	142.83	77-80	73-74
Delta Air Lines (DAL)	54.28	48-51	44.5-45
Cavium (CAVM)	0.00	69.5-72	63-64
Acuity Brands (AYI)	0.00	200-209	188-190
Athenahealth (ATHN)	0.00	145-153	135-137
Agnico Eagle Mines (AEM)	79.05	27-28.5	25-26

Current Market Outlook


The market put together another constructive week, with the major indexes recovering following some early weakness and more stocks setting up in constructive launching pads. That said, the rubber will likely meet the road during the next three weeks as earnings season revs up—a bunch of powerful breakouts would dramatically raise the odds that the market is beginning a sustained rally, but if the sellers feast on stocks following their reports, it’ll be best to take things slowly. For now, we remain neutral—buying a stock here or there is fine, but booking some partial profits on the way up and holding a chunk of cash on the sideline also makes sense.

This week’s list contains a mix of stocks already out to new highs, many that are setting up, and a few that are recovering well from huge declines. Our Top Pick is Restoration Hardware (RH), which is near the top of its launching pad and doesn’t report earnings until December.

Stock Name	Price	Buy Range	Loss Limit
TripAdvisor (TRIP)	55.14	80-84	72-73
Synaptics (SYNA)	0.00	84-86	76-77
RH Inc. (RH)	252.93	99-103	91-92
PDC Energy (PDCE)	0.00	56-59	52-52.5
ServiceNow (NOW)	341.86	74-76	67-68
Newfield Exploration (NFX)	0.00	38-40	35-36
The Goodyear Tire & Rubber Company (GT)	0.00	30.5-32	27.5-28
Franco-Nevada (FNV)	125.51	49-52	46-47
Fiat Chrysler (FCAU)	0.00	15.5-16.5	13.5-14
Amazon.com (AMZN)	2.00	555-575	495-500

Current Market Outlook


The market rally continued last week, with the major indexes pushing back toward (and in some cases, above) their multi-week highs. That was enough to turn the intermediate-term trend back up, causing us to flip our Market Monitor back into neutral territory, so you can begin to loosen the purse strings a bit, buying some new positions and looking to add more should you develop profits in the days ahead. That said, there are still a few flies in the ointment; the longer-term trend remains down and most of the big movers have been the worst performers of the past few months. That’s not bearish, but we would like to see real leadership emerge to new highs before we get more bullish.

This week’s list has some newer names, including a few off-the-bottom stocks from beaten-down sectors. For our Top Pick, we’ll take a stab at one of those—Matador Resources (MTDR) resisted the energy plunge well in recent months and is already back toward new high ground. If the energy run continues, it should do very well.

Stock Name	Price	Buy Range	Loss Limit
Zillow Group (ZG)	0.00	32-34	29-30
Cimarex Energy (XEC)	0.00	118-122	107-108
Paycom Software (PAYC)	0.00	39-41	36-37
NVIDIA Corporation (NVDA)	242.42	25-26	22-23
Netflix, Inc. (NFLX)	423.92	108-115	97-98
Matador Resources Company (MTDR)	27.89	25-27	22-23
JinkoSolar Holding (JKS)	0.00	24-26	22-23
Hawaiian Holdings Inc. (HA)	0.00	26-28	23-24.5
Global Payments Inc. (GPN)	0.00	130-133	115-117
EPAM Systems (EPAM)	188.24	79-81	70-72

Current Market Outlook


We’ve seen some constructive action during the past few days—the major indexes have thus far successfully re-tested their August lows and we saw some positive divergences in the broad market (far fewer stocks hitting new lows this time around). Now we’re looking to see if the intermediate-term trend can turn up; by our measures, it could happen within a day or two if the market holds its recent gains. And if it does happen, we’ll move to a more neutral stance—giving some stocks looser leashes and advising more new buying (though we wouldn’t advise jumping in with both feet). We’ll see how it goes, but for now, be sure to have your shopping list ready.

This week’s list has a few steady Eddies but also some real growth stories, including a couple of new ones to us. For our Top Pick we’ll stay with the big-cap growth theme that’s offered many resilient stocks—Adobe Systems (ADBE) dominates its field and just completed a transition to the cloud, which will lead to huge recurring revenues going forward.

Stock Name	Price	Buy Range	Loss Limit
Zoës Kitchen (ZOES)	0.00	38-41	35-36
VeriSign (VRSN)	190.71	71-73	67-68
Sarepta Therapeutics (SRPT)	120.93	39-42	35.5-36
Shopify (SHOP)	585.00	34-37	31.5-32
Jabil Inc. (JBL)	41.50	21-22	19-20
Incyte Corporation (INCY)	76.98	116-121	105-106
Edwards Lifesciences (EW)	228.06	145-150	138-140
Cal-Maine Foods, Inc. (CALM)	0.00	57-60	53.5-54
Adobe Inc. (ADBE)	315.23	83-85	78-79
Advance Auto Parts (AAP)	0.00	187-191	167-170

Current Market Outlook


Last Monday we wrote that the next few days would be telling—and given the action, it’s clear the onus remains on the bulls to show they have sufficient strength to halt the market’s downtrend. There are some positives, including the fact that the indexes have held above their late-August lows for five weeks and, believe it or not, the broad market is in slightly better shape now than in late August. But, as always, it’s best to just take the evidence as it comes—today, that means holding lots of cash and limiting new buying as we patiently wait for a bottom to form.

This week’s list has a big-cap feel to it as investors seek out some dependability. Our Top Pick is Salesforce.com (CRM), whose stock is big, liquid and remains resilient.

Stock Name	Price	Buy Range	Loss Limit
Vantiv (VNTV)	0.00	43.5-45	41-41.5
Starbucks (SBUX)	64.49	55-57	51-52
Nike (NKE)	89.77	118-123	112-113
Nordic American Tankers (NAT)	0.00	14.5-15.5	13.5-14
Medicines Company (MDCO)	56.98	37.5-39	35-36
JetBlue Airways Corporation (JBLU)	0.00	24.5-25.5	21.5-22
Imperva Inc. (IMPV)	0.00	63-66	58-59
Salesforce.com (CRM)	0.00	68-71	64-65
Chipotle Mexican Grill (CMG)	773.32	700-720	675-680
Big Lots (BIG)	43.12	46-48	43-44

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%.

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.