Current Market Outlook


The market definitely showed some improvement last week—the major indexes bounced back decently, and importantly, many recent earnings winners not only held their gains but stretched higher, something we haven’t seen much of for a few months. Because of that, we’re pushing the Market Monitor up a bit, but we remain relatively neutral for one simple reason: the market (and most stocks) are still range-bound, and until that changes, it’s going to be hard for any stock to make persistent progress. We’re OK doing some new buying, especially in some recent earnings winners (preferably on dips), but holding cash and keeping risk in check is necessary in this environment.

The good news is that we continue to see a broadening array of stocks firming up. Our Top Pick for the week is Tesoro (TSO)—while most energy stocks are still struggling, refiners are surging, and TSO looks like the leader. Buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Vulcan Materials Company (VMC)	137.10	71.5-73.5	66-67
Tesoro (TSO)	0.00	82-85	75-76
Sprouts Farmers Market (SFM)	19.00	34-36	31-32.5
Lear Corp. (LEA)	0.00	105-108	96-98
Integrated Device Technology (IDTI)	0.00	19-20	17-17.5
GrubHub (GRUB)	140.03	38.5-40.5	35-35.5
E*Trade Financial (ETFC)	0.00	24-25	22-22.5
Tableau Software (DATA)	126.42	91-95	85-86
Ashland Inc. (ASH)	0.00	122-125	114-115
Amazon.com (AMZN)	2.00	362-372	335-338

Current Market Outlook


Officially, the major indexes are still in no-man’s land, gyrating within their two-month ranges. But the action is definitely feeling heavier. While a few stocks have emerged during earnings season (including a few in today’s issue), every market rally of a day or two has led to quick selling pressure; the broad market can’t get its act together and most stocks that poke into new high ground quickly retreat. We’re still not willing to make any bold predictions here—the environment remains more choppy than bearish—but the bottom line is that no money is being made. Thus we are knocking our Market Monitor down a notch (though it’s still in neutral territory) due to the recent deterioration.

The silver lining is that our screens are still picking up on a good number of resilient stocks, including more than a few earnings winners. Our Top Pick this week is Harman International (HAR), which has come to life after a yearlong rest. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Pacira Biosiences (PCRX)	54.85	103-107	95-97
ServiceNow (NOW)	341.86	70-73	65-66
Netflix, Inc. (NFLX)	423.92	420-440	385-390
Lowe’s Companies (LOW)	98.15	66-68	60-62
Harman International Industries, Inc. (HAR)	0.00	126-131	115-116
Freescale Semiconductor (FSL)	0.00	30-32	26.5-27
Blackstone Group (BX)	49.12	35.5-36.5	32-33
Burlington Stores (BURL)	193.95	45-50	44.5-45
Biogen (BIIB)	0.00	378-385	348-352
Boeing (BA)	432.22	141.5-146.5	130-132

Current Market Outlook


The market bounced back nicely last week, though the major indexes are still in no-man’s land, sitting in the middle of their two-month ranges, and with many stocks still hovering just south of new highs as earnings season gets underway. We have seen a couple of rays of light (growth stocks are showing a hint of outperformance this month, which is a good thing), but overall, the environment remains on the edge—decisive upmoves by the indexes and breakouts from leading stocks would be bullish, while a move below support and a bunch of downside earnings gaps would be bearish. For now, we’re keeping our Market Monitor neutral, but we’ll let you know if we see a sustained trend getting underway.

This week’s list contains a couple of recent earnings winners, as well as a couple of others that shot to new highs on big volume last week. Because of the market environment, our Top Pick will be a slower, but surer, play—Starbucks (SBUX) isn’t going to double, but it’s just the type of mega-cap name that institutions can pile into following a great quarterly report.

Stock Name	Price	Buy Range	Loss Limit
Zebra Technologies (ZBRA)	154.94	81-84	75-76
WisdomTree (WETF)	0.00	17-18	15.5-16.5
Ulta Beauty (ULTA)	331.95	132-137	122-124
United Continental Holdings (UAL)	96.76	68-71.5	61-62
Starbucks (SBUX)	64.49	85-88	77-78
Royal Gold, Inc. (RGLD)	129.66	72-74	65-67
Janus Capital (JNS)	0.00	17-18	14.5-15
Dexcom (DXCM)	421.36	58-61	54-55
Dollar Tree (DLTR)	0.00	68.5-70.5	64-65
Agrium (AGU)	0.00	101-105	94-95

Current Market Outlook


After many weeks of choppy action, the sellers sunk their teeth into many indexes and stocks last week. Friday’s rebound was encouraging, but by our measures, the intermediate-term trend is sideways-to-down, the broad market is weak and few stocks are making any sustained upside moves—i.e., there’s still no money being made out there. On the positive side, many stocks remain near the top of multi-month ranges, and if earnings season goes well, plenty of new leadership could emerge. But right now, the onus is on the bulls to prove that they can create a sustained uptrend in the market and individual stocks. We’re knocking our Market Monitor to neutral and will be watching the action closely.

This week’s list has many resilient stocks that could be part of that new leadership if the bulls step up their game. Our Top Pick is Mohawk Industries (MHK), which is one of a few very strong housing supply stocks and has a recent catalyst to boot.

Stock Name	Price	Buy Range	Loss Limit
United Therapeutics (UTHR)	0.00	137-139	130-132
Taser (TASR)	0.00	24-25	22-23
Royal Caribbean Cruises (RCL)	0.00	80-82	75-76
Pharmacyclics (PCYC)	0.00	140-145	130-133
Outerwall Inc, (OUTR)	0.00	73-75	68-69
NetEase, Inc. (NTES)	0.00	104-108	96-98
Mohawk Industries (MHK)	0.00	160-165	150-153
HDFC Bank Limited (HDB)	0.00	54-56	50-52
Celgene (CELG)	0.00	117-122	108-111
Acuity Brands (AYI)	0.00	145-150	135-136

Current Market Outlook


The market remains all over the place, with nearly every day bringing another 1%-plus move in the major indexes; such wide-and-loose action isn’t usually a good thing after a big market advance. That said, our outlook isn’t negative here (we’re still more bullish than bearish), and we continue to see more and more stocks set-up to get going … if the bulls can create a real, sustained uptrend. For now, though, it’s best to hold your top performers, do a little buying (preferably on weakness) and hold some cash as we wait for the market to show its true colors.

This week’s list is encouraging, as we’re not having any trouble spotting stocks that have consolidated tightly or recently popped to new highs on good volume. Our Top Pick is the first big-cap growth stock to surge above resistance this week—Chipotle Mexican Grill (CMG), which remains a great cookie-cutter story.

Stock Name	Price	Buy Range	Loss Limit
Valeant Pharmaceuticals (VRX)	0.00	149-154	137-139
Rackspace (RAX)	0.00	45-48	42-43
Rackspace (RAX)	0.00	45-48	42-43
Lululemon Athletica (LULU)	304.69	60-62	54-55
Leggett & Platt, Incorporated (LEG)	49.79	42-44	39-40
D. R. Horton (DHI)	66.55	25.5-26.5	23.5-24
Chipotle Mexican Grill (CMG)	773.32	695-720	650-655
CF Industries (CF)	45.23	285-295	265-268
Brunswick Corporation (BC)	0.00	51-53	47-48
Alkermes (ALKS)	0.00	63-67	56-57
Align Technology Inc. (ALGN)	316.20	60-62	56-57

Current Market Outlook


The major indexes have been pulling back in recent days, and many are now back to their 50-day moving averages after a nice snapback for the second half of December. The question is whether the recent wobbles have more to do with year-end/start-of-year positioning (this portion of the calendar is notorious for crosscurrents creating volatility), or a renewed wave of selling that would basically be a continuation of what we saw in early December. We’re still optimistic, but we’re knocking our Market Monitor down a couple of notches today, and if all’s well, buyers should appear very soon as many stocks test support.

This week’s list has a larger-cap, steadier feel to it as the market favors “defensive growth” names most of all. Going along with that theme, our Top Pick is Whole Foods Market (WFM), whose stock is firmly in a turnaround phase.

Stock Name	Price	Buy Range	Loss Limit
Whole Foods (WFM)	0.00	48-50	44-46
Visa (V)	0.00	255-265	240-242
Virgin Airlines (VA)	0.00	40-43	36-37
PPG Industries (PPG)	0.00	219-230	209-211
O’Reilly Automotive (ORLY)	0.00	186-193	175-178
CarMax (KMX)	0.00	62-64	58-59
KLA Corp. (KLAC)	158.80	68-70	65-66
Jones Lang LaSalle (JLL)	0.00	145-149	139-141
Electronic Arts (EA)	0.00	45.5-47.5	43-44
Cirrus Logic Inc. (CRUS)	0.00	22-23.5	19.5-20

Current Market Outlook


A lot has changed since our last issue two weeks ago! Most important of all is the “blast-off” or “volume thrust” signal that came from two consecutive days (December 17 of 18) of very broad and powerful upside market action. It was strong enough to erase any lingering negative technical action, setting the stage not only for a nice Christmas rally but also the traditionally solid start to January that we expect. Thus our Market Monitor is now solidly back in the green bullish zone. So what to buy? Not oil stocks; it’s better to focus on what’s going up! Today’s issue brings a diverse group of both big old companies and younger faster growers, and all of them have great potential, but our Top Pick is Freescale Semiconductor (FSL), a chip manufacturer that has great potential to benefit from the boom in machine-to-machine (MTM) communication.

Stock Name	Price	Buy Range	Loss Limit
Whirlpool (WHR)	0.00	184-193	173-175
Taser (TASR)	0.00	25-26.5	23-24
Swift Transportation (SWFT)	0.00	27.5-29	25-26.6
RockTenn (RKT)	0.00	59-61	55-56
Red Hat (RHT)	0.00	69-71	66-67
ServiceNow (NOW)	341.86	67-70	62-63
Hawaiian Holdings Inc. (HA)	0.00	22.5-24	19-20
Freescale Semiconductor (FSL)	0.00	24-25	21-22
Bluebird Bio (BLUE)	0.00	83-87	75-77
Broadcom Limited (AVGO)	266.26	98-101	93-94

Current Market Outlook


If we came down from another planet and looked at the state of the market, we would conclude that there are more things for the bulls to be excited about than not—few stocks have broken down, the indexes are above their 50-day lines and the major trends are still up.

But we’ve been around for the past month, and we know there’s clearly been an increase in distribution as investors fret over the reverberations of the oil price plunge. At the very least, not a lot of money has been made since mid-November. And that’s the reason we’re taking our foot off the gas; if the market and most stocks hold support, we’ll be quick to return to a more bullish stance, but for now, we think it’s best to do some watching and waiting, and possibly sell your weakest stock or two (and take partial profits in a winner or two).

This week’s list is more growth oriented than in recent weeks as investors abandon all things commodity-related. Our Top Pick is Restoration Hardware (RH) which has a great growth story and just broke out to new highs last week.

Stock Name	Price	Buy Range	Loss Limit
United Continental Holdings (UAL)	96.76	62.5-64.5	58-59
Sierra Wireless (SWIR)	0.00	39-41	37-38
RH Inc. (RH)	252.93	91-95	84-85
Outerwall Inc, (OUTR)	0.00	70-73	63-64
Lululemon Athletica (LULU)	304.69	50-52	45-47
Fiesta Restaurants (FRGI)	0.00	61-63	58-59
Dollar Tree (DLTR)	0.00	66-68	60-62
Centene (CNC)	0.00	99-102	90-92
Buffalo Wild Wings (BWLD)	0.00	164-170	152-154
Adobe Inc. (ADBE)	315.23	73-75	66-68

Current Market Outlook


After a relatively quiet week, the major indexes and most stocks remain in uptrends, and that’s why we’re keeping our Market Monitor in bullish territory. But there remain a growing list of yellow flags, and the fact is that the broad market is very split, with lots of crosscurrents pushing and pulling various stocks and sectors. So far, the gyrations are normal and, possibly, bullish, helping to shake the tree, as we wrote last week. But many stocks are now approaching support—the next few days will be telling, as buyers should arrive on the scene if the intermediate-term uptrend is intact. All told, we remain bullish, but we’re keeping a watchful eye on things.

This week’s list includes everything from big, old-world companies to high-flying new-age firms. Our Top Pick is AMAG Pharmaceuticals (AMAG). The firm has transformed itself thanks to a recent acquisition, and the stock has been acting great for the past few weeks.

Stock Name	Price	Buy Range	Loss Limit
Valeant Pharmaceuticals (VRX)	0.00	140-144	133-135
Packaging Corp (PKG)	0.00	76-77.5	70-72
Palo Alto Networks (PANW)	236.92	113-118	104-106
Old Dominion Freight Line Inc. (ODFL)	221.91	77-79	72-73
Infinera (INFN)	0.00	13.5-14.5	12.5-13
Celgene (CELG)	0.00	112-116	104-105
Brunswick Corporation (BC)	0.00	48-50	46-46.5
Applied Materials (AMAT)	0.00	23-24.5	22-22.5
AMAG Pharm. (AMAG)	0.00	39-41	35-36
Alliance Data Systems (ADS)	0.00	273-284	265-268

Current Market Outlook


After a quiet-but-good holiday week (except for the energy stocks, which have crashed), the sellers came out of the woodwork today, pulling down many stocks that have enjoyed good runs. Big picture though, while there remain a few yellow flags and divergences (including the small caps, which are again acting poorly), the major trend remains up for the indexes and the vast majority of stocks. Thus, our advice is to remain bullish, and to remain focused on what’s working—for many stocks, this pullback could go further, but the odds favor weakness leading to higher prices in the weeks ahead.

This week’s list has a slightly larger-cap tint to it, but all of the stocks have enjoyed huge-volume buying sometime during the past month. Our Top Pick is D.R. Horton (DHI), the nation’s largest homebuilder that’s participating in a powerful upmove for that group.

Stock Name	Price	Buy Range	Loss Limit
Whirlpool (WHR)	0.00	178-184	162-164
Whole Foods (WFM)	0.00	46-48	43-44.5
SolarWinds (SWI)	0.00	49-51	46-47
NetEase, Inc. (NTES)	0.00	100-103	93-95
KLA Corp. (KLAC)	158.80	66-68	62-63
Incyte Corporation (INCY)	76.98	72-74	65-67
Gentex Corp. (GNTX)	0.00	34-35	31-32
D. R. Horton (DHI)	66.55	24.5-26	22.5-23
Tableau Software (DATA)	126.42	81-85	73-74
Bloomin’ Brands (BLMN)	0.00	21-22	19-20

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 international package delivery company FedEx Corp. (FDX) rose $17 (11.8%) yesterday, after the company reported a third quarter earnings beat, and raised its full-year 2016 profit estimate.

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.