Current Market Outlook


It looks as if the first “test” of the nascent uptrend has arrived; the major indexes have barely been dented, but under the market’s hood, we’re seeing something of a rolling correction, with a couple of sectors getting hit every day, and with a few stocks breaking down. The next few days will probably be where this rally’s rubber will meet the road—to this point, the selling has been normal (even expected) given the month-long rally from the mid-October lows. Thus, we remain bullish, but we’re also keeping a close eye on the action, both to judge the market’s health and to identify stocks that are setting up new entry points.

This week’s list has a nice array of stocks of varying sizes and from different sectors. We like many of them, but we’re going to go with Sierra Wireless (SWIR) as our Top Pick—it’s a bit speculative, but has a powerful chart and huge numbers, and any shakeout could create a nice buying opportunity.

Stock Name	Price	Buy Range	Loss Limit
Taser (TASR)	0.00	19-20	16-17
Sierra Wireless (SWIR)	0.00	34.5-36.5	29.5-30.5
NetSuite, Inc. (N)	0.00	105-108	96-98
Leggett & Platt, Incorporated (LEG)	49.79	39-41	35-37
Health Net (HNT)	0.00	48-50	44-46
Electronic Arts (EA)	0.00	40-42	37-38
Dexcom (DXCM)	421.36	50-53	45-46
CyberArk (CYBR)	111.74	39-43	33-34
Ambarella (AMBA)	52.79	47.5-48	43-44
Apple (AAPL)	248.94	108-114	100-103

Current Market Outlook


After a vacuum of selling pressures helped the S&P 500 and Nasdaq soar to new highs, last week’s generally tight, calm action was just what you want to see—despite the run, investors aren’t booking profits and the bears aren’t coming out of the woodwork. That’s not to say there won’t be pullbacks (possibly brief, sharp dips) or that every investor is rowing in the same direction—some groups are lagging and many major indexes are still shy of their September peaks. Thus, you shouldn’t buy with both fists, but there’s clearly enough evidence to be bullish and look to latch onto new leading stocks as they emerge.

This week’s list is chock-full of stocks with big stories and powerful charts. There are many we like, but for our Top Pick we’ll go with Medivation (MDVN), a well-traded (but little-known) biotech firm that has a blockbuster treatment for prostate cancer on its hands.

Stock Name	Price	Buy Range	Loss Limit
Wabtec (WAB)	0.00	86-89	81-82
Ulta Beauty (ULTA)	331.95	119-123	110-111
Textron (TXT)	0.00	40.5-41.5	37.5-38.5
Spirit Airlines (SAVE)	57.03	73.5-77	68-69
Receptos (RCPT)	0.00	103-108	88-90
MercadoLibre, Inc. (MELI)	980.83	128-135	122-124
Medivation (MDVN)	0.00	106-111	96-98
Marriott International, Inc. (MAR)	0.00	73-75	68-70
Alibaba (BABA)	254.81	112-116	102-105
Allison Transmission (ALSN)	51.79	31.5-33.5	29.5-30

Current Market Outlook


We wrote a few weeks ago that a straight-up move from October’s vicious selloff would be highly unusual bullish action … and that’s just what we’ve seen! Now, to be clear, not everything is positive—many commodity-related sectors are still struggling, and earnings season has resulted in more than a few duds. Plus, having soared back to their highs, the indexes could easily take a breather in the short-term. That said, the snapback from the October lows has produced tons of stocks surging to (or close to) new highs, and the power of the move tells us to expect better times ahead. Following the evidence, we’ll move our Market Monitor up another couple of notches. There will be pullbacks, but the path of least resistance is up.

This week’s list focuses on a bunch of recent earnings winners, including some big-cap firms that big investors are gravitating toward. Our Top Pick is Visa (V), which is on the move after building a base for most of 2014.

Stock Name	Price	Buy Range	Loss Limit
Whirlpool (WHR)	0.00	165-170	148-150
Visa (V)	0.00	234-242	218-220
Ulta Beauty (ULTA)	331.95	114-120	100-105
Infinera (INFN)	0.00	13-14	11-12
Incyte Corporation (INCY)	76.98	65-67	59-60
Salesforce.com (CRM)	0.00	61-63	56-57
Centene (CNC)	0.00	88-91	81-83
Baidu (BIDU)	0.00	225-235	210-215
AbbVie Inc. (ABBV)	93.53	62-64	59-60
AmerisourceBergen (ABC)	0.00	84-86	76-78

Current Market Outlook


First, the bad news: the intermediate-term trend of the market remains down, and there remains a wide swath of the broad market that’s in rough shape. But following some panic selling on October 15 and 16, the market’s rebound has been very, very impressive—the major indexes have quickly regained 70%-plus of their recent losses, many stocks found huge-volume support at the lows, and a few (mostly growth) stocks have already leapt to new highs. The market isn’t out of the woods, and even if it was, we’re still smack-dab in the middle of earnings season, so at the very least, volatility is a sure thing. All in all, we’re nudging our Market Monitor up into neutral territory—we still believe in holding some cash and keeping positions small, but we’re also seeing lots of stocks acting well.

This week’s list isn’t all go-go stocks, as it also has some “defensive growth” and some sector-specific winners. Our Top Pick is Celgene (CELG), a big-cap growth stock that, after 10 months of consolidation, is under extreme accumulation.

Stock Name	Price	Buy Range	Loss Limit
Union Pacific (UNP)	0.00	111-114	107-108
O’Reilly Automotive (ORLY)	0.00	166-169	159-160
Lennar (LEN)	61.85	42.5-44	40-40.5
Leggett & Platt, Incorporated (LEG)	49.79	36.5-38	34-35
Illumina Inc. (ILMN)	289.74	182-187	165-171
ICICI Bank (IBN)	0.00	52-54	48-49
Genuine Parts (GPC)	0.00	91-94	89-90
Celgene (CELG)	0.00	98-102	92-94
Alaska Air Group (ALK)	0.00	48-50.5	45-46
Akorn (AKRX)	0.00	41-43	38-39.5

Current Market Outlook


The good news is that the market found some support in the middle of last week and has finally been able to get off its knees during the past couple of days; some potential growth stock leaders, too, have bounced back nicely, including a few in today’s issue. We do think the current bounce will likely go further given the severe selling of the past month and some of the climactic readings seen last week. But it’s going to take more than a couple of up days to change the market’s intermediate-term trend, which remains firmly down. We’re keeping our Market Monitor in bearish territory, and while a little nibbling is fine, the main goal is to remain defensive until a sustained uptrend emerges.

This week’s list is very interesting, as there are a few vibrant growth stocks that have snapped back nicely. Still, our Top Pick is more slow-and-steady —Domino’s Pizza (DPZ) just leapt out of a tight base on huge volume thanks to a bullish earnings report. Dips look buyable.

Stock Name	Price	Buy Range	Loss Limit
Zoës Kitchen (ZOES)	0.00	32-34	29.5-30.5
XPO Logistics (XPO)	0.00	34-37	31-32
Sherwin-Williams (SHW)	526.09	213-217	204-206
Regeneron Pharmaceuticals (REGN)	512.96	350-365	335-340
Pacira Biosiences (PCRX)	54.85	97-101	90-92
Palo Alto Networks (PANW)	236.92	95-98	88-89
Jack in the Box (JACK)	0.00	65-68	62-63
Domino’s Pizza (DPZ)	339.47	82-84.5	78-79
Autohome (ATHM)	98.65	44-47	39-40
Advance Auto Parts (AAP)	0.00	135-138	129-130

Current Market Outlook


We’ve pointed out the numerous yellow and red flags seen in the market during the past few months, and during the past two or three weeks, those chickens have come home to roost—the massive weakness in the broad market is now infecting the major indexes and most formerly resilient stocks. It’s not 2008 out there (the worst of the selling is still in the commodity and economically-sensitive areas) and there are signs of short-term panic (820 combined new lows on Friday). But the trend of the market and the vast majority of stocks is now down, so you should be in a defensive stance until the bulls prove they have the strength to get things going on the upside. We’re knocking our Market Monitor down to reflect this.

This week’s list isn’t defensive, per se, but most of the stocks here have defensive characteristics (businesses that aren’t too economically sensitive) or have enjoyed a recent bullish catalyst. Our Top Pick is American Eagle (AEO), a turnaround that pays a nice dividend.

Stock Name	Price	Buy Range	Loss Limit
United Therapeutics (UTHR)	0.00	120-124	112-113
Mylan (MYL)	0.00	50-51	47-48
MercadoLibre, Inc. (MELI)	980.83	108-112	105-106
The Hain Celestial Group, Inc. (HAIN)	0.00	96.5-98	92-93
GoPro, Inc. (GPRO)	0.00	65-70	62-63
Gilead Sciences (GILD)	75.10	100-103	93-94
Foot Locker (FL)	0.00	54.5-56	52-53
AMAG Pharm. (AMAG)	0.00	27.5-29.5	24-24.5
American Eagle (AEO)	0.00	13.7-14.5	13.2-13.3
Apple (AAPL)	248.94	99-102	96-97

Current Market Outlook


As each week has passed, we’ve seen more and more yellow and red flags, including divergences, an implosion in the broad market, and recently, some key leading groups (like chip stocks) and individual stocks break down. There are still some positives out there, especially that many growth stocks remain within multi-month consolidations; if the market pulls out of its funk, they could be the leaders of the next advance. But, right now, that’s a big if—with selling pressures intensifying, we’re knocking our Market Monitor down another notch. Holding cash and being very choosy when doing some buying is your best course.

This week’s list has a larger-cap flavor to it as investors hunker down in well-traded names. Our Top Pick is Nike (NKE), which recently staged a huge gap on earnings, something that almost always leads to good performance in institutionally-owned stocks.

Stock Name	Price	Buy Range	Loss Limit
Ulta Beauty (ULTA)	331.95	113-117	105-106
Nike (NKE)	89.77	86-89	82-83
Monster Beverage Corporation (MNST)	0.00	88-92	83.5-84.5
Mallinckrodt (MNK)	0.00	89-92	83-84
Home Depot (HD)	0.00	90-93	85-86
Keurig Green Mountain (GMCR)	0.00	128-132	119-121
FedEx (FDX)	0.00	156-161	150-151
Carter’s (CRI)	0.00	81-83	76-77
Acuity Brands (AYI)	0.00	128-132	120-121
Actavis (ACT)	0.00	238-243	222-224

Current Market Outlook


It’s hard to talk about “the market” right now, partly because there are so many diverging trends out there. The broad market remains in rough shape, with 200 to 300 stocks hitting new lows every day and small- and mid-cap indexes looking poor. But the bigger-cap indexes are holding up, and, surprisingly, we’re seeing lots of growth stocks holding up (and a few shooting ahead) despite the turbulence out there. Overall, then, we remain in a cautious (but not defensive) stance—you should hold stocks that are acting fine, and some buying (preferably on dips) is fine, too. But we’re still advising you to hold a good amount of cash in case the broad market infects the resilient sectors.

This week’s list features many stocks that remain in favor today. Our favorite is Stratasys (SSYS), a leader in 3D printing whose stock has spent most of the year consolidating. The recent pullback looks normal, and you could start a position around here.

Stock Name	Price	Buy Range	Loss Limit
Twitter (TWTR)	40.37	50-53	46.5-47.5
Stratasys (SSYS)	0.00	118-123	110-112
Regeneron Pharmaceuticals (REGN)	512.96	350-360	335-340
Medivation (MDVN)	0.00	97-102	88-90
Mobileye N.V. (MBLY)	0.00	49-51	43-45
Facebook, Inc. (FB)	0.00	76-79	71.5-72.5
Deckers Outdoor Corp. (DECK)	141.68	96-98	91-92
Community Health Systems (CYH)	0.00	53-55	50-51
Ambarella (AMBA)	52.79	41-43	35-36
American Eagle (AEO)	0.00	14.5-15	12.5-13

Current Market Outlook


The major indexes continue to whip around, with last Monday’s dip followed by a strong recovery, and now a renewed drop. By our measures, the intermediate-term uptrend is on the fence, and it’s clear that large chunks of the broad market are falling apart (gold, silver and oil shares are especially weak). And, at the very least, it’s obvious the environment remains very choppy and making big money is difficult. Of course, we’ve seen repeated shakeouts followed by recoveries, but the evidence tells us to pull in our horns; we’re shifting the Market Monitor back toward neutral while we wait for the buyers to return.

When doing buying, the key is to focus on what’s working and this week’s list has a good batch to consider. Our Top Pick is Parexel (PRXL), a steady grower in the medical testing field that is just getting going after a couple of big corrections during the past year.

Stock Name	Price	Buy Range	Loss Limit
XPO Logistics (XPO)	0.00	36-38	33.5-34.5
Steel Dynamics (STLD)	0.00	23-24.5	21.5-22
Salix Pharmaceuticals (SLXP)	0.00	155-160	144-146
Charles Schwab (SCHW)	0.00	29-30	27.5-28
Parexel Corp. (PRXL)	0.00	59-61	55-56
Norwegian Cruise Lines (NCLH)	0.00	35.5-37	33.5-34
Gilead Sciences (GILD)	75.10	101-105	94-96
Canadian Solar (CSIQ)	0.00	35.5-37	32.5-33
Spansion (CODE)	0.00	22-23	20.5-21
Archer Daniels (ADM)	0.00	50-51	47-48

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%.

GameStop rolled out its new Ship from Store process in all 4,100 of its U.S. stores in late February.

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.