Issues
The market’s action of two weeks ago gave evidence that the bulls were taking control…but last week’s volatility tells us the bears still have plenty of tricks up their sleeves. All told, this remains a tough market, so your best move is to keep some of your powder dry while focusing on specific stocks and sectors that are in their own, private bull markets. That means focusing on commodities, especially oil, as well as a few emerging growth-oriented leaders. Just remember that earnings season is beginning, so you should have a game plan in place on how you want to handle your stocks before they report. This week’s Top Ten is similar in structure to many of the past few weeks, but contains a couple of new names to consider. Our favorite of the week is Mechel (MTL), a company that has its hands in all the right cookie jars—steel, iron ore and coal. The stock powered ahead on big volume last week, and we think you can take a position now.
| Stock Name | Price | ||
|---|---|---|---|
| MTL (MTL) | 0.00 | ||
| NFLX (NFLX) | 0.00 | ||
| POT (POT) | 0.00 | ||
| XCO (XCO) | 0.00 | ||
| APA (APA) | 0.00 | ||
| CLR (CLR) | 0.00 | ||
| CSIQ (CSIQ) | 0.00 | ||
| FDG (FDG) | 0.00 | ||
| KEX (KEX) | 0.00 | ||
| MTH (MTH) | 0.00 |
Last week has the potential to be a landscape-changing week for the market, as the major indexes performed well and, more importantly, leadership quality stocks displayed bullish action. That’s the main reason our Market Monitor above is tilted toward the bulls. Of course, it’s just one week, and nobody who studies the market can declare with certainty that the bear market is over. But it’s all about progress, and last week was a big step in the right direction. This week’s Top Ten remains heavy in energy and commodity stocks, but OptiMo (our screening system) turned up many more candidates than in weeks past; should the market continue higher, we expect many of the leaders to be featured right here in the weeks to come. Our favorite of the bunch is Exco Resources (XCO), a little known energy firm that’s showing tremendous accumulation as prices escalate. Try to buy on weakness.
| Stock Name | Price | ||
|---|---|---|---|
| FSLR (FSLR) | 0.00 | ||
| FST (FST) | 0.00 | ||
| LUK (LUK) | 0.00 | ||
| MEE (MEE) | 0.00 | ||
| MMR (MMR) | 0.00 | ||
| MOS (MOS) | 0.00 | ||
| RYL (RYL) | 0.00 | ||
| SCHN (SCHN) | 0.00 | ||
| XCO (XCO) | 0.00 | ||
| XEC (XEC) | 0.00 |
Overall, we continue to see many signs that the market is transitioning from a bear phase to a bullish phase—sentiment is horrid, stocks have refused to break down on the worst of news (i.e., Bear Stearns) and the indexes have held above support for many weeks. However, when it comes to buying individual stocks, there are few options—steel and some oil stocks remain in favor, but for every stock that pops its head up, there seems to be another that gets slapped down. Bottom line, it’s still not a time for aggressive buying, but picking up a few shares of potential leaders during pullbacks can still work out. Just don’t go overboard! This week’s Top Ten is commodity-heavy, with a few growth-oriented names sprinkled in. Our favorite of the week is Comstock Resources (CRK), which staged a good-looking breakout last week. We think you can pick up a few shares on weakness.
| Stock Name | Price | ||
|---|---|---|---|
| CLF (CLF) | 0.00 | ||
| CLR (CLR) | 0.00 | ||
| CRK (CRK) | 0.00 | ||
| ILMN (ILMN) | 0.00 | ||
| MT (MT) | 0.00 | ||
| OI (OI) | 0.00 | ||
| PQ (PQ) | 0.00 | ||
| RIMM (RIMM) | 0.00 | ||
| STLD (STLD) | 0.00 | ||
| TNE (TNE) | 0.00 |
Last week we opined that the headlines filled with bad news about Bear Stearns had the potential to mark a major low in the market’s bear phase. And this week, we’re more optimistic that’s the case – hence the Market Monitor above, which has shifted to neutral. Of course, the market is always a challenge, and last week brought rotation out of many commodity stocks, and into some other groups, such as financials and retail. In our view, the commodity stocks are a mixed bag (some are still fine, others, not so much), but the overall market action is encouraging, so you should be looking to put some—but not all—of your sidelined cash to work. This week’s list contains a mix of growth stocks, turnaround stories and some familiar faces; a few have broken out of good-looking basing patterns over the past few days. Our favorite of the week is Kirby (KEX), a shipping company that has staged an extremely powerful breakout in recent days, thanks to a great earnings report.
| Stock Name | Price | ||
|---|---|---|---|
| OFG (OFG) | 0.00 | ||
| PRGO (PRGO) | 0.00 | ||
| TUP (TUP) | 0.00 | ||
| URBN (URBN) | 0.00 | ||
| XEC (XEC) | 0.00 | ||
| CSX (CSX) | 0.00 | ||
| HCBK (HCBK) | 0.00 | ||
| JOE (JOE) | 0.00 | ||
| KEX (KEX) | 0.00 | ||
| MA (MA) | 0.00 |
We’ve studied the characteristics of bull and bear markets going back decades, and we know that bear phases often end with big selloffs caused by scary, headline-grabbing news. The Bear Stearns debacle certainly qualifies, and this financial panic could result in a sustainable low. So if you have a huge cash position (60% or more of your account), buying a few shares here or there could work out well. Just be sure to stick with what’s working–namely oil and natural gas stocks, as well as some steel names that are acting better–and remember to cut all losses short. Overall, you should stay in a mainly defensive posture until we see real signs of improvement. Our favorite stock this week is Steel Dynamics (STLD). The company raised its earnings guidance last week and the sector as a whole seems to be gaining sponsorship. We think you can buy a little on weakness.
| Stock Name | Price | ||
|---|---|---|---|
| DVN (DVN) | 0.00 | ||
| EAC (EAC) | 0.00 | ||
| HLF (HLF) | 0.00 | ||
| NFLX (NFLX) | 0.00 | ||
| NUE (NUE) | 0.00 | ||
| SLW (SLW) | 0.00 | ||
| STLD (STLD) | 0.00 | ||
| SWC (SWC) | 0.00 | ||
| SWN (SWN) | 0.00 | ||
| WDC (WDC) | 0.00 |
The sellers have dug in their heels during the past two weeks, and with the major indexes near their late-January lows, our Market Monitor above has moved back into bear territory. Growth stocks are still a mess, as they have been for weeks, and even some commodity stocks are now taking it on the chin. Still, the overall inflation theme is intact, and we believe putting a little money to work in the leading sectors (gold, oil, natural gas, coal) during this pullback could work out well. Just be sure not to go overboard; keep plenty of cash on the sideline until a real bull market begins, and keep commitments relatively small. This week’s Top Ten contains some familiar names, but also a couple of newer ones that have good potential. Our favorite of the week is Arch Coal (ACI), a well-positioned coal firm that’s pulled back to its 50-day line in recent days. Usually, the first 50-day test after a powerful breakout (like coal stocks have experienced) is successful, so you could buy a little right around here, and keep a stop in the low 40s.
| Stock Name | Price | ||
|---|---|---|---|
| ACI (ACI) | 0.00 | ||
| APA (APA) | 0.00 | ||
| AUY (AUY) | 0.00 | ||
| BUCY (BUCY) | 0.00 | ||
| EAC (EAC) | 0.00 | ||
| LKQX (LKQX) | 0.00 | ||
| MMR (MMR) | 0.00 | ||
| PGI (PGI) | 0.00 | ||
| SLW (SLW) | 0.00 | ||
| WMS (WMS) | 0.00 |
The market was just beginning to turn the corner last week before sellers re-appeared Thursday and especially Friday, driving the major indexes back toward their January lows. Thus, from a top-down perspective, you should respect the bears, which is why our Market Monitor above is again tilted toward the bearish side. On a sector-by-sector basis, however, many stocks are working – mainly oil, gas and gold, though coal stocks are also a bastion of accumulation these days. Right now, these inflation-related plays are just about the only game in town; how long it lasts, nobody knows, but that’s where you should focus your attention, if anywhere. This week’s Top Ten is once again heavy in these strong areas, with our favorite of the week being Goldcorp (GG), which has staged a good-looking breakout on healthy volume. You could buy a little on any weakness, while placing a relatively tight stop under 39, leaving a good risk-reward ratio.
| Stock Name | Price | ||
|---|---|---|---|
| CLF (CLF) | 0.00 | ||
| COG (COG) | 0.00 | ||
| CTRP (CTRP) | 0.00 | ||
| EOG (EOG) | 0.00 | ||
| FCN (FCN) | 0.00 | ||
| GFA (GFA) | 0.00 | ||
| GG (GG) | 0.00 | ||
| NFLX (NFLX) | 0.00 | ||
| PAAS (PAAS) | 0.00 | ||
| XEC (XEC) | 0.00 |
The market was volatile last week, and we are starting to see signs that the bears are sold out – volume has been unusually light, a few more growth-oriented stocks are acting well, and the major indexes have refused to fall to seriously test their late-January lows. Of course, the buyers aren’t exactly taking control, but the last few weeks of action are enough to warrant a slightly positive shift in our market monitor above. What does that mean for you? If you’ve been sitting on the sidelines the past few weeks, take a couple of small positions in some strong, potentially-leading stocks. If the market improves, you can then put more money to work. This week’s Top Ten has more than a few candidates to choose from; most are from the commodity areas, but three are in the growth camp. Our favorite of the week is Western Digital (WDC), an old company that’s benefitting from a boom in hard drive demand for newer electronic devices. The stock is showing exceptional power and volume; we think it’s worth a nibble around here.
| Stock Name | Price | ||
|---|---|---|---|
| RRC (RRC) | 0.00 | ||
| WDC (WDC) | 0.00 | ||
| WLT (WLT) | 0.00 | ||
| XEC (XEC) | 0.00 | ||
| AUY (AUY) | 0.00 | ||
| CENX (CENX) | 0.00 | ||
| CMP (CMP) | 0.00 | ||
| CPHD (CPHD) | 0.00 | ||
| CREE (CREE) | 0.00 | ||
| DVN (DVN) | 0.00 |
The market as a whole is now eighteen trading days into a consolidation process, as the major indexes hold above their January 22 lows. However, we still haven’t seen enough strength to conclude the trends have turned up, and that’s why our market monitor above remains tilted into the bearish camp. However, among individual stocks, there are a few (not a ton, but a few) emerging signs of strength. Some growth stocks are acting better, but if this market gets going to the upside, the real leadership is likely to be found in commodity and inflation-related stocks – gold, silver, steel, coal, oil, natural gas and the like. So that’s where your focus should be. This week’s Top Ten contains many familiar names, including six commodity-type stocks. Our favorite is Cleveland-Cliffs (CLF), a maker of iron ore pellets. You could buy a little here, but be aware that earnings are due out Thursday night, which will cause volatility.
| Stock Name | Price | ||
|---|---|---|---|
| CALM (CALM) | 0.00 | ||
| CLF (CLF) | 0.00 | ||
| CMED (CMED) | 0.00 | ||
| CMO (CMO) | 0.00 | ||
| COG (COG) | 0.00 | ||
| FDG (FDG) | 0.00 | ||
| ILMN (ILMN) | 0.00 | ||
| KGC (KGC) | 0.00 | ||
| MTL (MTL) | 0.00 | ||
| WMS (WMS) | 0.00 |
The market had another rough go of it last week, as the major indexes finished down more than 4%, though they remain safely above their late-January lows. Overall, the trends of the market and most stocks remain firmly down, and thus the market monitor above remains on the bearish side – and that means you should continue to play defense and buy only small amounts. On a positive note, OptiMo (our stock screening system) is uncovering more stocks meeting with buying pressures – this week’s list contains a few more good stories, and we’re beginning to see signs of group leadership. Gold, coal, metals and now energy stocks (especially energy producers) are sporting more than a few strong stocks, as big investors bet on continued commodity inflation. Our favorite this week is Range Resources (RRC), a mid-sized natural gas explorer that’s hitting new highs. Try to buy on weakness.
| Stock Name | Price | ||
|---|---|---|---|
| ACI (ACI) | 0.00 | ||
| BVN (BVN) | 0.00 | ||
| CLF (CLF) | 0.00 | ||
| CMO (CMO) | 0.00 | ||
| KGC (KGC) | 0.00 | ||
| OI (OI) | 0.00 | ||
| PRGO (PRGO) | 0.00 | ||
| RRC (RRC) | 0.00 | ||
| SWN (SWN) | 0.00 | ||
| URBN (URBN) | 0.00 |
The market put in a solid show last week, with the indexes finally getting off their knees. However, as you can see from our new market monitor above, the field is still tilted toward the bears – eight days of rallying doesn’t undo the 15% to 20% decline seen from mid-December to mid-January. If a new bull market is starting, there will be plenty of time and opportunities, but for now, you should stay defensive, holding cash, and buying only small amounts of certain stocks. OptiMo’s pickings remain somewhat slim, as much of the market’s recent strength has come from the most beaten-down sectors (financials, homebuilders, transports), which aren’t high-odds setups. But we believe there are some emerging leaders in today’s Top Ten, led byInteractive Brokers (IBKR), a newly-public market maker and brokerage firm for professional investors. Its business depends on the market’s action; if a new bull market unfolds, it should drive earnings and the stock much higher.
| Stock Name | Price | ||
|---|---|---|---|
| ACI (ACI) | 0.00 | ||
| ACOR (ACOR) | 0.00 | ||
| CALM (CALM) | 0.00 | ||
| IBKR (IBKR) | 0.00 | ||
| NITE (NITE) | 0.00 | ||
| OI (OI) | 0.00 | ||
| RATE (RATE) | 0.00 | ||
| SID (SID) | 0.00 | ||
| TNE (TNE) | 0.00 | ||
| WMS (WMS) | 0.00 |
The bulls made another, more impressive stand last week, and we do believe last week’s lows have a good shot at holding up for a few weeks. Best case scenario is that a bottom-building process is now underway, which will allow new leaders to build launching pads that will eventually result in much higher prices. But (you knew that was coming, right?) for now, the trend remains down, and while some groups and stocks are catching our eye, it’s best to give the bears real respect until proven otherwise. This week’s list is a mishmash of stocks, but one group that showed exceptional power off last week’s bottom was coal stocks. Consol Energy (CNX) is our favorite of the week – its stock is under tremendous accumulation, as coal prices spike due to tight supply and still-strong demand. Take a small position on any weakness.
| Stock Name | Price | ||
|---|---|---|---|
| CNX (CNX) | 0.00 | ||
| CPHD (CPHD) | 0.00 | ||
| ILMN (ILMN) | 0.00 | ||
| NLY (NLY) | 0.00 | ||
| RATE (RATE) | 0.00 | ||
| SID (SID) | 0.00 | ||
| URBN (URBN) | 0.00 | ||
| WLT (WLT) | 0.00 | ||
| AEM (AEM) | 0.00 | ||
| AUXL (AUXL) | 0.00 |
Updates
WHAT TO DO NOW: It’s not 2008 out there, but the market environment remains very challenging, especially for growth, where most indexes, funds and stocks are struggling. That said, we have started to see some growth names emerge on the upside, and our watch list is growing—if we can see more than a day or two of strength, we’d like to put some money to work. But until then, we’re content to stay close to shore and patiently wait for growth stocks to get moving. In the Model Portfolio, we’re placing Axsome Therapeutics (AXSM) on Hold tonight; our cash position is still just above 50%.
It’s been an interesting week here in Rhode Island, where most people are finally dug out from the roughly three feet of snow that fell across the state Sunday night and into Monday.
Growing up in Vermont, major snowstorms were certainly disruptive. But more often than not, it was all about how we would get to the ski resort without going off the road.
Growing up in Vermont, major snowstorms were certainly disruptive. But more often than not, it was all about how we would get to the ski resort without going off the road.
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.
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.
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%.
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%.
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.
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.
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.
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%).
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%).
Alerts
Portfolios
Strategy
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.