Whew! I’m glad to see the back of October, aren’t you? Last month lived up to its usual market volatility, with several big down days on the Dow Jones Industrial Average. However, things are looking up, and with this morning’s futures, it looks like investors appreciate the coming gridlock in Congress, following yesterday’s mid-term elections.

The market advanced nicely today, continuing the bounce it’s enjoyed during the past week and a half. It’s encouraging action, and we’re not opposed to doing a little buying here or there given our large (76%) cash position.

That said, our trend-following indicators are still negative, telling us that, despite the nice rally, we need to see continued positive action before starting a major new buying spree. Right now, we’re mostly focused on fine-tuning our watch list, which we’re not having trouble doing given the many strong earnings gaps seen recently.

In tonight’s issue, we talk a bit about how markets usually bottom after a big decline, something that’s good to keep in the back of your mind. And we spend a lot of space discussing potential leaders of the next advance.

The rally continues, but it is definitely losing steam; odds are that the market will see more downside action soon, so if you’re heavily invested, you should think about lightening up.

At the same time, there are pockets of strength developing, so if you’re perhaps underinvested, several of the portfolio stocks deserve a hard look.

The stock market continues to work its way through the second of two 10% corrections in 2018, as measured by performance of the S&P 500 index. On the bright side, the worst appears to be over for the majority of stocks that I follow. Exceptions will include stocks that are reaching annual lows. Unfortunately, those stocks will likely fall further until tax loss selling subsides.

I continue to expect many stocks to remain low through year end, possibly followed by quite a bull run in January.

Current Market Outlook


After a punishing month, last week’s three-day bounce qualifies as a decent first step for the market and many individual stocks and sectors—most now have some breathing room above last week’s low points, and ideally, we’ll begin to see more potential leaders strut their stuff in the weeks ahead as the situation stabilizes. But a good first step is the best description we can give the bounce at this point given that the intermediate-term trends of just about everything (indexes, sectors, stocks) remain pointed down, and the odds favor plenty of volatility (at the very least) going forward. It’s not 2008 out there, but trends are negative, so until the bulls truly retake control, defense is the name of the game. We’re leaving our Market Monitor at a level 3.

The good news is that this week’s list has many recent earnings winners that could do well once a new uptrend gets underway. Our Top Pick is Exact Sciences (EXAS), a name we’re high on and that remains perched near its highs after another excellent quarterly report.

Stock Name	Price	Buy Range	Loss Limit
Bilibili (BILI)	28.71	13.3-14.5	11-12
Cooper Tire (CTB)	31.50	30.5-32.5	27.5-29
Deckers Outdoor Corp. (DECK)	141.68	126-131	114-117
Exact Sciences (EXAS)	116.91	70-74	63-65.6
HealthEquity, Inc. (HQY)	70.70	90-94	81-83.5
Keurig Dr Pepper (KDP)	25.35	25-26	22.5-23.5
Omnicell (OMCL)	81.03	66-69	61.5-62.5
Starbucks (SBUX)	64.49	62-64	56-57.5
Under Armour, Inc. (UAA)	26.82	22-23.5	20-20.9
VeriSign (VRSN)	190.71	157-162	145-149

October proved to be a challenging month for stocks, but one good thing came out of it—it helped me identify stocks that investors really want to own!

The recent bounce in emerging market stocks has raised hopes that the end might be near for the powerful correction that has hit EM stocks so hard. That may be the case, although the only sure way to tell is to watch the market’s action tomorrow and through the rest of earnings season and beyond. We’re certainly not going to do any predicting, just telling you what to do based on the action we see. The next few weeks will see quarterly reports from four of our stocks, and will also give us a sense of what the future leadership among emerging-market stocks will look like. In today’s issue, we have a South African company that’s becoming a global player in a software niche.

October has been a challenging month for many investors, but dividend stocks and income investments have been a rare safe haven. After a few sells last week, our portfolio is looking ready for whatever November throws at us. So far, investors are optimistic about turning the calendar page: the market managed to rally yesterday and then opened higher today.
However, we’re not out of the woods yet, and as always, I recommend sticking with what’s working. That’s why today I’m adding another conservative consumer staples stock to the Safe Income tier, which I expect to provide us with a secure income stream for a long time.
Read the whole issue for the story, plus earnings updates on many of our holdings, and a look into why REITs have been doing so well recently.

What a difference a month can make! What an April! The S&P rose 9.6% in April, making it the best single month for the market in six years. It hit an all-time high on Friday.

Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of some skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings. And for good reasons.

The results are in for the month of April. It was fabulous. The S&P rose 9.6%, making it the best single month for the market in six years. It hit an all-time high on Friday.

Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of minor skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings.

Now before you call me crazy concerning today’s newsletter headline, hear me out.

Even though large-cap names have garnered more than a fair share of attention among investors this year, I think a case can be made that companies with big capitalizations have a lot more room to run higher before they can be truly regarded as “overbought” or “played out.”

The market is digesting the push and pull of higher oil prices, a deeply divided Federal Reserve, prospects for a prolonged blockade of the Strait of Hormuz and fading momentum from the AI trade that helped push markets to all‑time highs earlier this month.

Despite the crosscurrents, the overall tone still tilts bullish, supported by investor comfort (for the time being) with the geopolitical tension, resilience in the U.S. economy, and improving visibility into earnings growth over the coming quarters.

Yesterday, four tech giants, Alphabet, Amazon, Meta and Microsoft, representing 22% of the S&P 500’s market value, reported strong quarterly earnings that highlighted the importance of AI.

You might think the above companies and their AI brethren are “asset light” companies but you would be very wrong.

It’s been a glorious April following a miserable March for the market. What happens in May may determine which direction stocks are headed for the rest of the year.

That’s probably overstating things a bit, but May should be crucial for the reasons we discussed last week: namely, the fate of the Iran war, but also the bulk of first-quarter earnings season and the introduction of a new Fed chair.

What war? This market is moving on. We may not be out of the woods yet, but investors are looking beyond the Iran war.

Stocks have already made up all losses from a rough March and then some. The S&P 500 had fallen 7.7% in the month of March by the 30^th. Since then, the index has rallied over 13%. The S&P is now at a higher level than before the war began and is hitting new all-time highs.

The other day I was paid a visit by a roving ISP salesman who was pitching his company’s fledgling internet service over the local monopoly’s. We struck up a conversation and he asked what I did for a living. When I told him, his eyes lit up and he asked, “Got any good stocks you can recommend?”

Without thinking I blurted out, “Anything AI-related. You can’t go wrong.” The advice was only semi-facetious, for there’s undeniably a degree of truth behind it. My instinctive response to that question also prompted me to consider the question: just how long can the broad market continue its “all things AI” run without broader sector participation

Note: I’m out of town this week, so I’ll be a bit briefer on the update today—but I’m still checking my laptop a couple of times a day if you have any questions or comments. I’ll be back at my desk come Monday. Cheers.

WHAT TO DO NOW: Remain optimistic. The market and some leaders have hesitated, but all of our market timing indicators are bullish, and most stocks we own or are watching are working. Last Friday, we bought a half-sized stake in Nebius (NBIS) and added a 3% additional stake in ProShares S&P 500 Fund (SSO); earlier this week, we sold our small remaining position in GE Aerospace (GE); and tonight, we’ll buy a half-sized position (5% of the portfolio ) in Cava (CAVA). We’ll still have 46% in cash or so after these moves.

Despite all the headline noise lately we’re marching deeper into first‑quarter earnings season with the market’s path of least resistance still pointing higher.

Optimism around the extension of the tentative ceasefire in the Middle East has reduced geopolitical anxiety to a seemingly manageable level. The U.S. economy continues to show resilience, and the corporate earnings outlook points toward meaningful growth in the coming quarters and years.

The old saying, “History doesn’t repeat itself, but it rhymes,” is an apt one for the stock market these last two years.

In early 2025, the S&P 500 raced to new all-time highs before peaking in late January/early February, only to get dragged down in March and April by a geopolitical crisis (tariffs/Liberation Day), before rallying in a V-shaped pattern as the severity of the crisis abated.

The market turned on the afterburners. The S&P 500 made up all the March losses and catapulted to a brand new high in a remarkably short time. It’s a market that sure looks like it wants to go higher. But stocks are being held back this week by more war uncertainty.

The current ceasefire with Iran expires on Wenesday night. Talks may not happen, and war talk is growing. The resumption of the war will almost certainly prompt a decline in the market. Aside from that near-term threat, investors are clearly looking past this war. Hopefully, it won’t last much longer.

Two of our stocks reported strong quarterly results.

Wall Street believes this healthcare stock is going to produce double-digit growth over the next five years. The shares were recently upgraded by Morgan Stanley to ‘Overweight’.

The earnings forecasts for this pharma company were just increased by 14 analysts, and the stock has received two upgrades.

Three analysts have increased their earnings estimates for this telecom company in the last 30 days.

The earnings forecasts for this internet marketplace have been raised by 11 analysts in the past 30 days.

When share prices fall, it’s important to determine whether the situation will last for a couple of months, which can be quite normal, or for several years, which can be insufferable.

With a sizeable earnings beat ($0.29), 14 analysts have now raised their forecasts for this drug company.

Today we’re adding a managed healthcare operator to the Buy Low Opportunities Portfolio.

The top five holdings of this real estate fund are: Lennar Corp (LEN, 5.51%), Land Securities Group PLC (LSGOF.L, 5.49%), Weyerhaeuser Co (WY, 5.44%), Global Logistic Properties Ltd (GBTZF.SI, 5.25%) and Cheung Kong Property Holdings Ltd (CHKGF.HK, 5.14%).

The price of one of our stocks has dropped to one-sixth of its yesterday close and is now trading around 29. The move is the result of a change in the ratio of native shares to ADR shares.

Although this Mexican cement company’s earnings climbed by 41% in its latest quarter, the stock has taken a hit on weaker cash flow numbers.

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 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.