Current Market Outlook


It’s been four weeks since the August 24 panic low and the market has done a decent job hanging in there—all of the major indexes probed higher into last week before selling off on Friday. Currently, the major trends of the market remain down, so we’re staying defensive. However, the next few days will be telling—if the indexes can advance from here, we could receive an intermediate-term buy signal late this week, which will have us loosening the wallet a bit. But if the sellers show up again, all bets are off. For now, it’s best not to anticipate anything; you should continue to hold plenty of cash and keep new buys small. We’ll let you know on Friday if the outlook has changed.

In the meantime, we are encouraged by the action of many individual growth stocks, which are showing lots of relative strength even as the market struggles. Our Top Pick this week is Activision Blizzard (ATVI), which is pushing higher on the back of some very good product news. Consider nibbling on dips.

Stock Name	Price	Buy Range	Loss Limit
Tyler Technologies (TYL)	0.00	145-151	132-134
T-Mobile US (TMUS)	0.00	41-42.5	38-39
Sucampo Pharmaceuticals (SCMP)	0.00	26-28	23.5-24
Pandora Media Inc. (P)	0.00	19-21	17.5-18
Masco (MAS)	0.00	26-27	24.5-25
Expedia Group (EXPE)	0.00	120-125	110-112
Dexcom (DXCM)	421.36	98-100	88-90
Activision Blizzard, Inc. (ATVI)	0.00	29-31	26.5-27
Athenahealth (ATHN)	0.00	138-140	130-132
Adaptive Biotechnologies Corporation (ADPT)	39.41	110-114	98-99

Current Market Outlook


The major indexes have done a decent job of holding above the August 24 lows, and a few stocks and sectors have pushed to new high ground. In the short term, we still think further upside testing is possible, especially if the Federal Reserve issues some reassuring words later this week. However, it’s going to take more than just another couple of good days to turn the market’s trends back up—right now, all of the major indexes (and the vast majority of stocks) are still buried beneath resistance and are trading below key moving averages. Thus, we’re sticking with our defensive stance—the onus is clearly on the bulls to re-take control.

This week’s list has another batch of potential leaders; there’s not many defensive stocks making the list, which is encouraging. Our Top Pick is Royal Caribbean (RCL), a big-cap leisure stock that has a strong chart and big earnings estimates.

Stock Name	Price	Buy Range	Loss Limit
WellCare Health Plans, Inc. (WCG)	271.83	92-96	86-88
Virgin Airlines (VA)	0.00	33-35	30-31
Tempur Sealy (TPX)	85.53	74-77	68-69
RH Inc. (RH)	252.93	97-99	85-86
Royal Caribbean Cruises (RCL)	0.00	90-93	85-86
Neurocrine Biosciences (NBIX)	123.40	51-54	46-48
Martin Marietta Materials (MLM)	261.52	170-174	158-160
Clovis Oncology (CLVS)	0.00	98-102	86-88
Amazon.com (AMZN)	2.00	510-530	460-470
Abiomed (ABMD)	0.00	90-95	85-86

Current Market Outlook


The market continues to gyrate wildly, gapping up or down based on the news of the day. In the short-term, the indexes (and most stocks) have etched out a little trading range, and that could continue for a while longer. But the main trend remains down, so you should be using these bounces as a chance to unload any broken stocks and raise cash if you’ve yet to do so. On the buy side, we are starting to see the wheat separate from the chaff, but it remains too early to put any big money to work; a couple of small positions is fine, but we suggest focusing mostly on preserving capital for the next sustained run—that’s when the big money will be made.

This week’s list includes with some recently strong themes (medical, construction and retail), including a couple of recent IPOs. Our Top Pick is one of those newly-public firms—Planet Fitness (PLNT) has a good story and the stock has shown solid relative strength since coming public.

Stock Name	Price	Buy Range	Loss Limit
Signet Jewelers (SIG)	0.00	135-140	125-127
Post Holdings (POST)	0.00	63-65	59-60
Planet Fitness (PLNT)	0.00	17-19	15-16
PDC Energy (PDCE)	0.00	53-56	48-49
Medicines Company (MDCO)	56.98	38-41	34.5-36
Lululemon Athletica (LULU)	304.69	64-66	60-62
JetBlue Airways Corporation (JBLU)	0.00	23-24	21-21.5
TopBuild (BLD)	111.00	32-34	29.5-30
Anacor Pharmaceuticals (ANAC)	0.00	125-132	118-120
AMN Healthcare (AHS)	0.00	33-35	31.5-32

Current Market Outlook


The major indexes actually made decent gains last week, though that came on the heels of a major breakdown the week before. In the short-term, last week’s show of support was encouraging; it could be the start of a multi-week bottoming process following the extreme selling pressure. If you want to trade stocks, taking small positions on dips could be worthwhile. However, remember that the bigger picture remains bearish—the major trends of the indexes are clearly down and most stocks have a ton of overhead supply to deal with. Thus, you should remain overall defensive, holding lots of cash and focusing more on building a watch list than trying to make a bunch of money here.

This week’s list has some steady growth stories as well as a few earnings winners from last week. Our Top Pick is Dycom (DY), a leading provider of construction services to the telecom industry, which is dramatically expanding its bandwidth. It’s not a long-term growth story but should be in great shape for at least another few quarters.

Stock Name	Price	Buy Range	Loss Limit
Vantiv (VNTV)	0.00	43-45	40-41
Under Armour (UA)	0.00	95-97	89-90
Tyler Technologies (TYL)	0.00	135-138	116-120
TransDigm (TDG)	599.41	224-232	213-215
Sarepta Therapeutics (SRPT)	120.93	35-36.5	30-31
Incyte Corporation (INCY)	76.98	116-120	96-100
Flotek (FTK)	0.00	18-19	16-17
Express (EXPR)	0.00	19-20	17.5-18
Dycom Industries (DY)	0.00	65-68	59-60
Buffalo Wild Wings (BWLD)	0.00	188-194	179-180

Current Market Outlook


The market had a mini-crash this morning, as what looked like forced liquidation took the Dow down more than 1,000 points before a gigantic snapback. Today’s wash-and-rinse action (and the many climactic readings we saw) raises the prospects that a near-term bottom is in and that a bottoming process (weeks of vicious ups and downs) could begin. That said, the main trend of the market is down, so we’re advising a defensive stance—focus on capital preservation and building a watch list for the next sustained advance, while keeping new buys small. In time, we’re going to see some incredible winners set-up, but patience is required first.

This week’s list has a few solid growth stories, though they skew toward the conservative side of the spectrum. Our Top Pick is Chipotle Mexican Grill (CMG), which has the trading volume, growth prospects and dependability to keep big investors interested.

Stock Name	Price	Buy Range	Loss Limit
Tempur Sealy (TPX)	85.53	69.5-72.5	67-68
Mohawk Industries (MHK)	0.00	187-194	182-183
Lennar (LEN)	61.85	49.5-51.5	47.5-48
IntercontinentalExchange, Inc. (ICE)	0.00	222-232	213-215
Heron Therapeutics (HRTX)	35.25	32-35	29-30
Global Payments Inc. (GPN)	0.00	104-108	99-100
CyrusOne Inc (CONE)	0.00	30.5-32	28.5-29
Chipotle Mexican Grill (CMG)	773.32	695-715	670-675
CDW Corporation (CDW)	0.00	36.5-38	35-35.5
Alaska Air Group (ALK)	0.00	71.5-74.5	67-68

Current Market Outlook


Last week was a microcosm of 2015 as a whole, with plenty of ups and downs, intraday reversals, sector rotation … and not much overall progress for the major indexes. That said, we have seen more and more leading stocks hit the skids during the past two weeks, which is a yellow flag; there are still plenty that remain in good shape, but it’s obvious that picking your spots remains vital. We’ll keep our Market Monitor in neutral territory, waiting for a decisive show of strength or weakness before turning bullish or bearish.

This week’s list has something for everyone—airlines, medical, construction and retail. Our Top Pick is Wayfair (W), a newer stock that blasted out of a base on earnings last week as growth accelerated. Given the market, keep new positions small and try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Wayfair (W)	167.03	46-52	39-42
Vulcan Materials Company (VMC)	137.10	96-99	89-90
Sabre Corp. (SABR)	0.00	28-29	24-25
Molina Healthcare (MOH)	0.00	78-80	72-73
Fortune Brands Home & Security (FBHS)	81.02	49-52	42-43
Expedia Group (EXPE)	0.00	118-123	112-113
Envision Healthcare (EVHC)	0.00	42-44.5	40-41
D. R. Horton (DHI)	66.55	30-31.5	27-27.5
AmSurg (AMSG)	0.00	82-84.5	75-77
Allegiant Travel (ALGT)	170.65	228-236	212-214

Current Market Outlook


Pure and simple, last week was a bad one for the market—not only did the major indexes take hits, but many resilient stocks came under severe selling pressure. The fact that strong, Top Ten-type stocks took hits (leaving fewer stocks in good shape) has us lowering our Market Monitor by a notch, and it’s vital that the repeated waves of intense selling seen last week don’t continue. For now, though, the bigger picture hasn’t changed: The trading range environment and the vicious rotation from sector to sector remains the order of the day. Thus, the general game plan is the same: being selective on the buy side and holding some cash on the sideline—as we wait for the major indexes to show their hand.

This week’s list actually has quite a few solid growth stories, though there’s definitely a bigger-cap tilt to the list. Our Top Pick is one of them—Lockheed Martin (LMT) has just hit new highs and is under strong accumulation as business is set to pick up.

Stock Name	Price	Buy Range	Loss Limit
Ultimate Software (ULTI)	0.00	178-185	168-170
Tesoro (TSO)	0.00	103-106	92-94
Royal Caribbean Cruises (RCL)	0.00	88-92	83-84
Martin Marietta Materials (MLM)	261.52	166-174	155-156
Lockheed Martin (LMT)	0.00	205-211	193-195
Lennox International (LII)	270.56	117-120	108-110
Facebook, Inc. (FB)	0.00	91-95	85-86
BofI Holding (BOFI)	42.93	125-129	114-115
Activision Blizzard, Inc. (ATVI)	0.00	28-29	25.5-26
Arista Networks (ANET)	0.00	80-82	75-76

Current Market Outlook


The divergence continues, with the broad market looking increasingly weak. Even the rally last week couldn’t lift many stocks off their bottoms. So what comes next? Optimists may claim that low interest rates mean there are no attractive alternatives to stocks, but pessimists will note that divergences such as these seldom end well. Thus our market monitor remains unchanged—in slightly positive territory. You can still make money in this market, but more than ever, skillful stock-picking, combined with proper entry timing, is critical. So we urge you to study numerous individual stocks carefully. Try to buy on normal pullbacks. And above all, keep losses small if a stock doesn’t do what you hired it to do. Today’s roster includes some strong breakouts and a handful of set-ups, and our Editor’s Choice is Vantiv (VNTV), which vaulted out to new highs last week on a positive earnings report and is riding a fine trend of long-term growth.

Stock Name	Price	Buy Range	Loss Limit
Zoës Kitchen (ZOES)	0.00	43-45	39-39.5
WisdomTree (WETF)	0.00	24-26	21-22
Vertex Pharmaceuticals (VRTX)	230.36	135-137	121-123
Vantiv (VNTV)	0.00	42-45	39-40
ServiceNow (NOW)	341.86	76-78	72-73
Masco (MAS)	0.00	24.5-26	23-24
ICON plc (ICLR)	0.00	78-80.5	71-72
Equinix, Inc. (EQIX)	547.73	270-280	260-265
Buffalo Wild Wings (BWLD)	0.00	188-193	174-176
Anacor Pharmaceuticals (ANAC)	0.00	144-151	125-130

Current Market Outlook


If you haven’t stuck with a proven system in 2015, chances are you’ve been chopped to pieces by the market’s never-ending ups and downs. Today was another headline-driven selloff (Chinese stocks are seeing renewed weakness), but it doesn’t change the market’s condition—the intermediate-term trend is still sideways, with some stocks acting fine and others looking like it’s 2008. The plan remains the same—be selective on the buy side, honor all stops and hold some cash, but also give your most resilient stocks a chance to hold up and resume their advances. If leading stocks decisively break down, then we’ll change our tune, but so far focusing on the strongest stocks has been fruitful.

This week’s list features a few recent earnings winners, as well as a few that are set up well heading into their earnings reports. Our Top Pick is Valeant Pharmaceuticals (VRX), a big-cap growth stock that remains in a firm uptrend following a better-than-expected report.

Stock Name	Price	Buy Range	Loss Limit
Valeant Pharmaceuticals (VRX)	0.00	248-256	230-232
Netflix, Inc. (NFLX)	423.92	101-106	93-94.5
Infinera (INFN)	0.00	22.5-23.5	20-21
IACI (IACI)	0.00	78.5-81	75-76
GoPro, Inc. (GPRO)	0.00	59-62	54-55
Criteo (CRTO)	0.00	51-53	48-49
Chipotle Mexican Grill (CMG)	773.32	705-720	660-665
Cempra (CEMP)	0.00	42-44	37-38
China Biologic Products (CBPO)	0.00	112-117	105-106
Amazon.com (AMZN)	2.00	515-530	470-475

Current Market Outlook


Last week was a great one for the major indexes and leading stocks, with many surging higher on big volume to notch new highs, a good sign that big investors are putting money to work in growth stocks. That said, it’s not all peaches and cream out there—hundreds of stocks are actually hitting new 52-week lows (mostly energy and interest rate-sensitive stocks, but others, too), and to this point, only the Nasdaq has reached new high ground; the intermediate-term trend for most indexes remains neutral. Reflecting the terrific action of Top Ten stocks, we’ll nudge our Market Monitor up a notch; if you see a good set-up, go ahead and take it. But we’re still advising holding some cash on the sideline and being selective on the buy side.

This week’s list has a hodgepodge of stocks, many of which haven’t been featured here for a long time. For our Top Pick, we’ll stick with the big-cap growth stock theme that’s working well—Celgene (CELG) just popped out of a four-month base on big volume last week following a major acquisition. It’s buyable around here.

Stock Name	Price	Buy Range	Loss Limit
Intrexon (XON)	0.00	55-57	49-50
Take-Two Interactive (TTWO)	123.32	29.5-31	27.5-28
Progressive Corp. (PGR)	0.00	30-31	27-28
Blackhawk Network (HAWK)	0.00	41-43	38-38.5
Alphabet, Inc. (GOOGL)	0.00	675-700	630-635
Fitbit Inc. (FIT)	0.00	42-46	37-38
Domino’s Pizza (DPZ)	339.47	128-134	117-118
Celgene (CELG)	0.00	130-135	119-121
Barnes & Noble (BKS)	0.00	27.5-29	24-25
Alaska Air Group (ALK)	0.00	72-74	66-67
ACADIA Pharmaceuticals (ACAD)	47.84	47-50	42-43

Current Market Outlook


For the third straight Monday, Greece caused the market to gap sharply at the open, this time on the upside as a deal in Europe is coming into view. The snapback from last week’s panic has been excellent, and we’re especially pleased to see many resilient, growth-oriented stocks spike to (or close to) new highs. That said, even after the past two days, the major indexes are still hovering near their 50-day moving averages, and it’s obvious that news is driving the market on a day-to-day basis. Throw in the fact that earnings season is about to rev up, and we’re sticking with a relatively neutral stance—focusing on the strongest stocks makes sense, but so does holding some cash and ditching any broken stocks.

This week’s list has a group of names that should do well if the market’s recent strength develops into a sustained uptrend. Our Top Pick is old friend Illumina (ILMN), which is emerging from a very long sideways phase. Start small, and look to add shares if the stock reacts well to earnings next week.

Stock Name	Price	Buy Range	Loss Limit
WhiteWave Foods (WWAV)	0.00	48-50	46-47
Ulta Beauty (ULTA)	331.95	161-164	153-154
Tyler Technologies (TYL)	0.00	135-140	125-127
Tesoro (TSO)	0.00	95-99	89-90
RH Inc. (RH)	252.93	96-100	92-93
Nordic American Tankers (NAT)	0.00	14-15	13-13.5
Neurocrine Biosciences (NBIX)	123.40	47-50	42-43
Meritage Homes (MTH)	102.20	48-49.5	44-45
LifePoint Hospitals (LPNT)	0.00	85-87	77-78
Illumina Inc. (ILMN)	289.74	215-220	205-209

Current Market Outlook


Greece continues to dominate the headlines, and this weekend’s “No” vote hit the market and most stocks, though nothing as dramatic as what we saw last week. That said, you shouldn’t overreact to today’s action, just as it wasn’t smart to overreact to last Monday’s drubbing. Overall, we’re still neutral, as the main trend remains sideways, and we expect further volatility based on the news of the day. Our biggest piece of advice is to take things on a stock-by-stock basis—many stocks are acting well, and you should hold onto those, but don’t hesitate to dump shares of stocks if they break key support.

Encouragingly, this week’s list contains a lot of resilient, growth-oriented stocks … just the kind of potential leadership we like to see setting up. Our Top Pick is Horizon Pharmaceuticals (HZNP), which is acting like it wants to get going should the market hold together.

Stock Name	Price	Buy Range	Loss Limit
Wayfair (W)	167.03	35-37	32-33
Valero Energy (VLO)	97.40	63-65	58-59
Receptos (RCPT)	0.00	186-195	165-170
Ligand Pharmaceuticals (LGND)	267.14	94-97	87-88
Horizon Therapeutics (HZNP)	49.89	33.5-35	30-31
HealthEquity, Inc. (HQY)	70.70	30-32	27.5-28
The Hain Celestial Group, Inc. (HAIN)	0.00	64-67	61-62
Celanese (CE)	0.00	70-73	66-67
BioMarin Pharmaceutical (BMRN)	0.00	137-139	122-124
Acuity Brands (AYI)	0.00	183-188	175-176

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%.

Shares of tax preparer H&R Block (HRB) fell 13.6% Wednesday, after the company reported disappointing tax season results. HRB appears in the Growth & Income Portfolio.

I’m raising my rating on Robert Half International (RHI) today to Buy. RHI appears in the Buy Low Opportunities Portfolio.

I’m raising my rating on Cardinal Health (CAH) today to Strong Buy. CAH appears in the Growth & Income Portfolio.

I have three pieces of news about BorgWarner (BWA), maker of engineered automotive systems for power train applications.

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.