The main trend remains up, in both the broad market and the cannabis sector in particular. When these uptrends will end, no one knows, but I guarantee that they will someday.

Long-term, however, I remain very bullish on both the companies and the stocks in the industry and continue to adjust the portfolio’s holdings to optimize growth (with reasonable security.)

When the market picture gets confusing, as it often does, it pays to have some reliable indicators to depend on—rather than the guy on the evening news. So today, after a couple of weeks of market correction that have done serious damage to some leading stocks and led many pundits to ask whether we’ve seen the market top, we turn to our indicators and ask whether the bull market is truly over, and here’s what they say.

There is tremendous growth ahead for technology. There will be incredible opportunities to invest. While you probably don’t associate technology stocks with a dividend newsletter, things are changing. In this issue I identify a technological behemoth that is now a blue chip dividend payer. Its products are so widely used that owning the stock provides a great way to play the technology revolution in general and gain exposure to the explosive growth.

The market remains in good health, and all Cabot’s market timing indicators are positive, telling us the odds are that the market will be higher in the months ahead.
For today’s recommendation, we shift to a somewhat unusual investment, a high-yielding limited partnership that may avoid the cycles of a notoriously cyclical sector, while offering substantial upside potential.
As for the current portfolio, overall, our holdings are performing well. But we have one sell, a stock that has popped higher in recent days on news and is now closing in on resistance. Details in the issue.

Current Market Outlook


From a top-down perspective, nothing has really changed with the key evidence; there remain a couple of divergences (number of new highs, lagging small-cap indexes), but the intermediate-term trends of the major indexes and most leading stocks (and even non-leading stocks) are pointed up. Under the surface, though, we’re seeing some ping pong action—the major indexes have been alternating up and down days for the past couple of weeks, while many sectors are whipping in and out of favor on a weekly basis. (Growth stocks have been alternating good and bad weeks for a month.) What does it mean? It’s fair to say the broad buying pressures have eased up, though to this point, the sellers haven’t done much damage at all. We’re going along with the back-and-forth action, nudging our Market Monitor down a notch—we remain overall bullish, but the current earnings season will have a lot to say about the intermediate-term outlook for the market and leading stocks.

In the meantime, we’re still seeing a good number of setups from a wide variety of stocks and sectors. We have a couple of favorites this week, but for our Top Pick we’ll go with Qualcomm (QCOM), which has shown extreme power after a game-changing deal with Apple last week. We’re OK buying here or (preferably) on dips.

Stock Name	Price	Buy Range	Loss Limit
Ctrip.com International Ltd. (CTRP)	34.94	42.5-44.5	39-40.5
D. R. Horton (DHI)	66.55	43-45.5	39.5-41.5
Fastenal (FAST)	37.08	67.5-69.5	62.5-64
First Solar (FSLR)	83.74	57-59	52.5-54
Five Below (FIVE)	134.58	136-142	124-127
Kansas City Southern (KSU)	176.54	121-124	112-113.5
ManpowerGroup (MAN)	90.84	93.5-95.5	84.5-86
Microchip Technology (MCHP)	79.12	95-97	88-89
QUALCOMM Incorporated (QCOM)	106.36	78-82	69-71
Redfin (RDFN)	40.40	21-22	19-19.5

Emerging markets have stayed strong into the second quarter, with China leading the way and calming markets by delivering 6% economic growth.

Inside this issue is a new recommendation with a play on a market some estimate as large as $94 trillion over the next two decades. The company delivers a key ingredient that turns steel into “super steel” and plays a key role in electrifying the grid.

The market remains in good health, and all Cabot’s market timing indicators are positive, telling us the odds are that the market will be higher in the months ahead.
For today’s recommendation we move outside the U.S. to a Chinese company targeting a mass market, a mass market that is virtually guaranteed to grow in the years ahead. It’s a stock that not known to most U.S. investors, and I think it’s a good buy here.
As for the current portfolio, some stocks are hitting new highs and many are close to it, while our value-based selections and Heritage stocks still show long-term potential.

Current Market Outlook


Last week was a solid one for the market, not necessarily in the major indexes but in the action of leading stocks, many of which bounced nicely off key intermediate-term support. Looking at the evidence, the vast majority of it is bullish, so we are, too—we’re bumping our Market Monitor up to a level 8 in tonight’s issue. That said, earnings season is just getting underway for most stocks, which will obviously be important. There will surely be the usual ups and downs, but we’ll be looking to see if any new leadership emerges or, conversely, if some of the leading stocks that have had good moves show abnormal weakness.

In the meantime, we’re just following the system, looking for strong stocks that are relatively early in their overall runs. Our Top Pick this week is Okta (OKTA), which looks to be resuming its run after a seven-week rest.

Stock Name	Price	Buy Range	Loss Limit
Armstrong World (AWI)	88.01	80.5-83.5	73.5-75.5
Avalara (AVLR)	102.00	52.5-55.5	48.5-50
The Walt Disney Company (DIS)	144.76	128-132	117-120
Heico (HEI)	134.84	96-99	91-92.5
Marvell Technology Group (MRVL)	36.88	22-23.5	20-21
Nexstar Media Group (NXST)	105.68	111-115	101-103
Okta, Inc. (OKTA)	148.41	92.5-95.5	82.5-84.5
Yeti Holdings (YETI)	42.80	29.5-32	26-27.5
Yext Inc. (YEXT)	21.32	20.5-21.5	19-19.5
Zscaler (ZS)	126.22	63.5-67	57-59

With war being one of the most dominant themes of the last four years, it stands to reason that investors should position their portfolios to account for this conspicuous (and unwelcome) trend.

And lest one be tempted to think that the warfare theme will diminish anytime soon, last week’s article by NPR deflates that illusion: It revealed that global military conflicts are at their highest level since WWII.

Price targets are standard practice on Wall Street. But sometimes, they can act as an artificial ceiling.

For example, say Truist sets a price target on an up-and-coming growth stock that’s 25% higher than its current share price. For a growth stock, a 25% return isn’t much. But then again, the stock could be a total flop, which is the natural boom-or-bust tradeoff growth investors must endure in trading off increased risk for massive upside. So, a price target on a growth stock seems almost like an unnecessary cap on a stock that has the potential to go through the roof.

WHAT TO DO NOW: Continue to trim your sails. In the Model Portfolio, we’ve been getting closer and closer to shore as growth funds and indexes are under pressure and AI stocks cascade lower. Tonight we’re going to further trim Marvell (MRVL) given its ugly action, selling a third of what we have left. That will leave the portfolio with a big 58% cash position. We could put some of that to work if growth names find support, but we want to see key growth measures firm up before buying.

After a brief pause last week, small caps are once again leading the pack.

Through Wednesday’s close, the S&P 600 Small Cap Index is up roughly 21% year to date, compared to gains of about 15% for the S&P 400 MidCap Index, 17% for the Nasdaq and 11% for the S&P 500.

Its earnings season again! That’s a good thing. Earnings just might save the day in an otherwise confusing and uncertain market.

The market is causing whiplash. The Iran peace deal changed things. Stocks held back by high oil prices, and the resulting higher inflation and interest rates, reignited as oil prices came back down after the peace deal. But hostilities with Iran have resumed.

The peace deal may be on hold again. But stocks are hanging in there so far.

The ceasefire with Iran is over and hostilities have resumed. That sounds like a bigger bummer than it’s been in the market so far. Falling oil prices enabled previously beleaguered stocks to soar higher again as the prognosis for inflation and interest rates simultaneously improved. But that rally is over if oil prices spike higher again.

It’s no surprise that summer often brings lower market volatility levels as Wall Street heads to the Hamptons and participation rates diminish.

Indeed, what we’re seeing right now has all the classic symptoms of a low-participation environment, with investor sentiment being remarkably muted. This can be seen across a number of sentiment indicators for several different markets, most of which are flashing decisively “neutral” signals.

The divide between value and growth stocks is widening, as the Nasdaq is now more than 5% off its highs after peaking in early June while the Vanguard Value Index ETF (VTV) is hovering near its late-June apex and is up 3% in the last month.

That can flip in an instant, of course, as we saw in April and May. But the bottom line is that value stocks have risen 15% year to date, compared to an 11% gain in the Nasdaq and a 9.5% boost in the S&P 500.

After a very strong run from the March lows, the market appears to be going through an uncomfortable but healthy rotation. Many of the biggest winners from the AI and semiconductor trade have come under pressure, while value stocks, equal-weight indexes and other areas that had lagged earlier in the year have held up much better.

Markets are facing more inflation as the Iran mess gets messier. Concerns over high AI capital spending are a cloud over a resilient market. On the bright side for our portfolio, however, International Business Machines (IBM) shares were up 7.4% this week following last week’s 8.9% gain. Sea Limited (SE) shares leapt 9.6% this week and are up about 20% over the past month. MercadoLibre (MELI) shares are up 11.6% over the last two weeks.

I remain bullish on stocks, but I am turning more cautious, winding down leverage, and letting some cash build up in my non-marginable accounts.

The reason is that spooky season lies just around the corner. September and October are typically the weakest months of the year. We also often see weakness in July and August, perhaps as investors get nervous about those looming difficult months.

After a very strong run since the March lows, the market appears to be going through a healthy, albeit somewhat uncomfortable, rotation.

The biggest winners from the AI and semiconductor trade are finally seeing some profit-taking, with Goldman Sachs (GS) noting that momentum stocks recently suffered their worst two-day decline since 2020. UBS (UBS) just said that the momentum factor is down roughly 20% from its June peak, marking the seventh-largest drawdown of the last decade and the fastest decline of that magnitude on record.

Although this pharma company is still in the loss stage, rising forecasts and new analyst coverage are pushing the shares up.

Three earning updates - Two Holds and a Sell.

Analysts look for this tech company to grow by triple digits over the next five years.

Two of our stocks reported beat-and-raise quarters.

Our first idea today is a Chinese internet company and our second recommendation is a sale of a previous idea with recent mediocre numbers.

Our second recommendation is a sale of a previous idea with recent mediocre numbers.

Three of our stocks have reached their target price and should be sold. Another of our stocks rose 10% in after-hours trading on Friday as news stories cited merger talks.

A better economy is boosting the prospects of this food company, with analysts forecasting double-digit annual growth for the next five years.

Earnings reports from three of our stocks and ratings changes on two stocks.

This fund has returned 32.28% to its investors so far this year, according to Morningstar.

One of our stocks moves from Buy to Hold, plus earnings reports from four of our stocks.

Our first recommendation is a tool company who is being feted on Wall Street, with upgrades (Zelman, to ‘Buy’, and Morgan Stanley, to ‘Overweight’; earnings beat ($0.12), and 21 analysts raising their earnings forecasts in the past 30 days.

A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.

A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.

Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.

Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.

Our Cabot Momentum 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 Momentum Trader features.