Current Market Outlook


We’re eight and a half months into 2014, and it finally looked as if the choppy (four weeks up, four weeks down, etc.) type of environment had been left behind. But not yet! Just during the past couple of trading days, we’ve seen the market churn near its highs and the sellers come out of the woodwork. We can’t conclude at this point that the market is set to sink for a few weeks; the evidence doesn’t support that. But given that sustained trends have been hard to come by, we also continue to think holding some cash on the sideline and booking partial profits makes sense. We’ll keep our Market Monitor in a “lean bullish” position, but we’ll be watching the upcoming action closely. If the uptrend is OK, buyers should show up soon.

This week’s list has a broader array of stocks and sectors on it, with a few stable stories. Still, we’re going with a true growth stock as our Top Pick—Palo Alto Networks’ (PANW) quarterly report was a barnburner and the stock soared to new highs on record volume. And we think its pullback since looks normal.

Stock Name	Price	Buy Range	Loss Limit
WhiteWave Foods (WWAV)	0.00	34.5-36.5	32-33
United Therapeutics (UTHR)	0.00	118-123	105-107
TriQuint Semiconductor (TQNT)	0.00	19-20	17-18
Gentherm (THRM)	0.00	47-49.5	44-45
Palo Alto Networks (PANW)	236.92	94-98	86-88
Monster Beverage Corporation (MNST)	0.00	86-89	78-80
Southwest Airlines (LUV)	0.00	32-33	29-30
Jazz Pharmaceuticals (JAZZ)	0.00	154-162	145-148
Greenbrier (GBX)	57.73	67-70	63-64
Foot Locker (FL)	0.00	55-57	52-53

Current Market Outlook


September is often a herky-jerky month, with crosscurrents arising as institutional investors position their portfolios for the rest of the year. So far, though, despite some ups and downs in the major indexes, the action has been encouraging—growth stocks are waking up, with some glamour stocks (including a few recent IPOs) tearing up the charts. As we’ve written repeatedly, there are still some dark clouds out there; despite the improved action, we still see many broader, smaller-cap indexes acting poorly, and even the big-cap indexes have hit resistance in recent days. But the action of individual stocks continues to have us leaning bullish.

This week’s list has a few out-of-the-way ideas today, and our Top Pick is one of them—Mallinckrodt (MNK) is a little-known (but well-established) drug firm with huge earnings estimates for the next few quarters. And the stock has been super strong during the past few weeks.

Stock Name	Price	Buy Range	Loss Limit
Western Refining (WNR)	0.00	46-48	42.5-43.5
Mallinckrodt (MNK)	0.00	82.5-85.5	75-76
Health Net (HNT)	0.00	44-46.5	42-43.5
GoPro, Inc. (GPRO)	0.00	57-61	50-51
Green Plains Energy (GPRE)	0.00	43-45	39.5-40.5
Chipotle Mexican Grill (CMG)	773.32	660-685	625-635
Cavium (CAVM)	0.00	52-54	49.5-50.5
Baidu (BIDU)	0.00	218-228	205-208
Banco Bradesco (BBD)	0.00	17-18	16-16.5
Ambarella (AMBA)	52.79	36-38	32-33

Current Market Outlook


You shouldn’t read too much into last week’s action; volume was super-light as most investors were on the beach. We’ll get a clearer read on things this week and next as institutional investors return to their trading desks. Still, taking a step back, the market’s rally from early August is intact, and we’ve seen a continued, gradual improvement among leading stocks, with a few popping higher each week and, importantly, with many moving higher after their initial breakouts. Right now, we’ll keep our Market Monitor where it stands—we continue to lean bullish, but we’re not yet willing to pound the table—but we like the persistently positive action of the past month.

This week’s list features another strong group of stocks that have seen heavy-volume buying of late, a sign big investors are getting in. Our Top Pick is Avago Technologies (AVGO), a chipmaker with a couple of major catalysts that should propel earnings much higher in the quarters ahead.

Stock Name	Price	Buy Range	Loss Limit
Twitter (TWTR)	40.37	47-50	42-43
Skyworks Solutions (SWKS)	0.00	54-56	49-50
Seagate Technology (STX)	0.00	60-62.5	58-59
Petrobras (PBR)	14.78	18-19	16-17
Madison Square Garden (MSG)	298.38	64.5-66	60-61
Macquarie Infrastructure (MIC)	0.00	71-73	66-67
Mobileye N.V. (MBLY)	0.00	41-42	37-38
The Hain Celestial Group, Inc. (HAIN)	0.00	94-98	89-90
Broadcom Limited (AVGO)	266.26	81-85	75-76
Aruba Networks (ARUN)	0.00	20-21	18-19

Current Market Outlook


In the market, it’s the unexpected that you should pay closest attention to. Two weeks ago, the broad market was heading south and the major indexes broke down after a month of distributive action. But since then, the market has zoomed ahead like a rocket, with all the major indexes back above their 50-day lines and many stocks either hitting new highs or racing toward the top of multi-week launching pads. There are still some things to worry about, and we’ll probably get a truer read on things once the big boys come back from vacation next week. But overall, we’re leaning bullish, encouraged by what we’ve seen during the past two weeks.

This week’s list shows a bunch of stocks that have shown big-volume buying of late, a sure sign institutions are sniffing around. Our Top Pick this week isn’t a stock we think is going to double, but rather, one we feel strongly will head higher. It’s Home Depot (HD), the granddaddy of housing stocks, which just busted free from a 15-month base.

Stock Name	Price	Buy Range	Loss Limit
WPX Energy (WPX)	0.00	23-25	20-21
Sensata Technology (ST)	0.00	47-49	44-45
Regeneron Pharmaceuticals (REGN)	512.96	340-350	319-320
Royal Caribbean Cruises (RCL)	0.00	61-63	57-58
Home Depot (HD)	0.00	88-91	83-84
Keurig Green Mountain (GMCR)	0.00	129-135	119-121
F5 Networks, Inc. (FFIV)	0.00	120-122	113-114
Community Health Systems (CYH)	0.00	50-52	46-47
Canadian Solar (CSIQ)	0.00	34.5-35.5	31-32
Akorn (AKRX)	0.00	37-38.5	34-35

Current Market Outlook


The market’s snapback in recent days has been impressive, with the Nasdaq toying with new-high ground, some other indexes popping back above their 50-day lines and many growth stocks acting much better. But not all is bright and sunny—there remain many divergences in the market, and the advance is extremely thin, with just one-third as many stocks hitting new highs today as during the Nasdaq’s initial run at this level in early July. Because the evidence has improved, we’re shifting our Market Monitor toward bullish territory, so you can put some sidelined cash to work, but we advise stepping back into the market slowly.

Regardless of the daily gyrations, we remain encouraged by the many growth stocks showing better action. Our Top Pick this week is LinkedIn (LNKD), a stock that still has resistance to chew through, but has turned the corner after getting cut in half.

Stock Name	Price	Buy Range	Loss Limit
YY Inc. (YY)	0.00	86-88	77-79
Western Refining (WNR)	0.00	43-45	40-41
Tata Motors Limited (TTM)	0.00	43-44.5	40-41
Tesla, Inc. (TSLA)	818.87	250-260	235-240
Medivation (MDVN)	0.00	82-85	77-78
LinkedIn Corporation (LNKD)	0.00	208-218	189-193
Jumei Holdings (JMEI)	0.00	36-38	33-34
Green Plains Energy (GPRE)	0.00	40-42	35.5-36.5
FleetCor Technologies (FLT)	0.00	140-146	132-134
Carter’s (CRI)	0.00	78-81	73-74

After being unable to get off its knees for more than a few hours, the market staged a rally during the past two days, which is always good to see. That said, while the Nasdaq is looking halfway decent (back above its 50-day line today), the other major indexes are still in rough shape, and the broad market is still iffy. Now is certainly not the time to be complacently negative—it’s not like every stock is in tatters and the major indexes are in bear phases. But after the toppy action in July and decisive break two weeks ago, we need to see more than just a couple of mild-volume rallies to put a bunch of money back to work. Thus, you should remain generally defensive as we patiently wait for the bulls to re-take control.

The good news is that many growth stocks (and a few turnarounds) continue to act well—not much money is being made but many names are building solid bases. Our Top Pick this week is Under Armour (UA), an emerging blue chip stock that, while not early in its advance, is in great position after a beautiful base and breakout.

Stock Name	Price	Buy Range	Loss Limit
58.com (WUBA)	0.00	50-51	47-48
Vipshop Holdings (VIPS)	14.25	210-214	200-203
Under Armour (UA)	0.00	66-70	62-63
Tenet Healthcare (THC)	0.00	55-57	51-52
Royal Gold, Inc. (RGLD)	129.66	77-79	72-74
NRG Yield (NYLD)	0.00	51.5-53	49-50
NorthStar Realty (NRF)	0.00	17.5-18	16.5-17
Lithia Motors Inc. (LAD)	146.30	90-92	84-85
Dexcom (DXCM)	421.36	41-43	37-38
Arista Networks (ANET)	0.00	70-74	64-65

Last week’s market break was decisive, as it took down just about every stock and sector. It also came on the heels of a few weeks of funky action, with small- and mid-cap indexes diverging (small-cap indexes are down a few percent on the year!), few growth stocks sustaining their upmoves and lots of choppy action. Could the market come storming back and resume its uptrend? Sure, anything is possible. But the evidence has clearly turned sour, and the odds are that the next bounce or two will be sellable. Thus, it’s best to turn defensive by selling some stocks, holding plenty of cash and limiting new buying to small positions.

That said, you should keep your shopping list ready—this week’s list has many recent earnings winners that continue to hold up well in the face of a weak market. Our Top Pick is U.S. Steel (X). The stock broke out from a solid base last week and exploded higher on enormous volume—and we think it can do well in this challenging environment.

Stock Name	Price	Buy Range	Loss Limit
United States Steel Corporation (X)	0.00	30.5-32.5	27.5-28.5
Western Digital Corporation (WDC)	0.00	98-100	93-94
Skechers (SKX)	0.00	50-52	45-46
Pacira Biosiences (PCRX)	54.85	93-95	84-85
Lam Research (LRCX)	268.47	67.5-69.5	64-65
Facebook, Inc. (FB)	0.00	70-73	66-67
Deckers Outdoor Corp. (DECK)	141.68	87-89	81-82
Chipotle Mexican Grill (CMG)	773.32	640-670	595-602
Celgene (CELG)	0.00	85-87	79-80
Baidu (BIDU)	0.00	200-210	192-194

There are a decent number of warts on this market, including some lackluster action from the broad market, the fact that big-cap indexes have been chopping up and down for the past few weeks, and that small-cap indexes look sick. However, the major trends of the indexes remain up, and most leading stocks, while not tearing up the charts, are still in decent shape. (The many earnings reports last week brought a mixed bag of gaps up and down.) We have our antennae up, especially as more earnings reports push stocks this way and that, but right here the evidence continues to tell us to lean bullish and give our top performers a chance to keep rising.

This week’s list has a bunch of recent earnings winners; if the market is going to continue trending higher, most of these names should do well. Our Top Pick is Steel Dynamics (STLD). We’re usually not big fans of highly-cyclical steel stocks, but STLD just had a big quarter and an even bigger acquisition, with huge earnings forecasts for the next 18 months.

Stock Name	Price	Buy Range	Loss Limit
Under Armour (UA)	0.00	65-70	59-60
Steel Dynamics (STLD)	0.00	20.5-22	18.5-19
Silver Wheaton (SLW)	0.00	25-26	23-24
Royal Caribbean Cruises (RCL)	0.00	59-62	55-56
Patterson-UTI Energy (PTEN)	0.00	36-37	33-34
Polaris Industries (PII)	0.00	143-147	136-137
HCA Healthcare (HCA)	137.60	61-63	56-57
Canadian Pacific Railway (CP)	0.00	190-195	178-180
Cameron (CAM)	0.00	71-73	66-67
Apple (AAPL)	248.94	95-98	89-90

From July 7 through July 17, we saw a harrowing decline among individual stocks and many major indexes. There was enough damage to suggest selling off a couple of your weaker holdings and possibly taking partial profits in a couple of winners. However, the market found some support last Friday, few stocks have broken down and the indexes have generally held support (though small-cap indexes look sick). Because of that, we remain overall bullish—you shouldn’t push the envelope here, but holding your best performers and keeping your eyes open for new leaders (possibly via earnings gaps) makes sense.

This week’s list surprised us (in a good way) by including a bunch of top-notch growth stories. Our Top Pick this week is Fairchild Semiconductor (FCS), a turnaround in the chip sector with huge projected growth. The stock just enjoyed a huge-volume, earnings-induced surge.

Stock Name	Price	Buy Range	Loss Limit
Weatherford International plc (WFT)	0.00	22-23	20.5-21
Vertex Pharmaceuticals (VRTX)	230.36	92-96	87-89
Vipshop Holdings (VIPS)	14.25	190-200	175-180
Newfield Exploration (NFX)	0.00	42-44	39-40
Cheniere Energy (LNG)	63.82	70-72	65-66
Keurig Green Mountain (GMCR)	0.00	117-122	110-112
Fairchild Semiconductor (FCS)	0.00	16-17	14.5-15
Blackstone Group (BX)	49.12	34-36	31-32
Applied Materials (AMAT)	0.00	22-23	20-21.5
Akorn (AKRX)	0.00	31-33	29-30

Last week’s post-holiday action was suspicious and a bit abnormal; many stocks gave up two or three weeks of gains in just a day or two, and on big volume to boot. That said, very few stocks actually broke down (many fell down to their 50-day moving averages before bouncing), and the major indexes are in good shape, so we remain bullish. But our main thought is that, if last week was just a typical bull market shakeout (possibly some pre-earnings season jitters), most stocks should hold last week’s lows and resume their major uptrends. But in case the selling intensifies, you should have some stops in place for your weaker holdings.



The good news is we’re still seeing many good looking charts, including most of this week’s list. Our Top Pick is Adobe (ADBE), a software giant that’s enjoying new growth from its new focus on the cloud.

Stock Name	Price	Buy Range	Loss Limit
Zebra Technologies (ZBRA)	154.94	81-83	76-77.5
Synaptics (SYNA)	0.00	86.5-88	79-80
SunEdison (SUNE)	0.00	22-23.5	20-21
KLA Corp. (KLAC)	158.80	73-75	69-70
Health Net (HNT)	0.00	42-43	39-40
Barrick Gold (GOLD)	27.20	84-88	81-82
Freeport-McMoRan Inc. (FCX)	13.78	38-39	35-36
Concho Resources (CXO)	0.00	142-145	135-136
Bitauto Holdings (BITA)	0.00	50-52	43-44
Adobe Inc. (ADBE)	315.23	69-72	66-67

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%.

The market followed up Wednesday’s big-volume turnaround with further gains yesterday—at day’s end, the Dow rose 216 points and the Nasdaq gained 40 points. The push higher by the major indexes took them above resistance levels, and gives us a clear Cabot Tides buy signal.

Updates on WellCare Health Plans (WCG) and Whirlpool (WHR).

Boise Cascade (BCC) reported forth-quarter results yesterday, and Axiall (Axiall) rescheduled its earnings report.

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.