The shift from Wednesday’s pullback to today’s nice market bounce is just par for the course as investors scramble to figure out the fallout from alarming headlines and conflicting predictions. It’s not an easy market to navigate, and the portfolio is dealing with it by holding a heavy (50%) cash position and cutting back on most buying. But we’re still finding attractive stocks for our watch list, and will be ready when we finally get a green light from the Cabot Emerging Markets Timer.

The economy remains strong, prompting the Federal Reserve to raise interest rates another 25 basis points, and signaling that two more rate increases are in the cards for the rest of this year. The unemployment rate for June did rise from 3.8% to 4%. But the housing market remains healthy and estimated second quarter earnings growth for the companies in the S&P 500 Index is 20%. If that number is correct, it will be the second best earnings growth that we’ve seen since the third quarter of 2010.

Eternal vigilance is the price of investment success. For us, that means continually adapting our portfolio so that it is best positioned to benefit from the stocks that can do well in today’s market.

Current Market Outlook


It came on low volume and Independence Day made it just four days, but last week’s trading action was encouraging, with the major indexes generally holding key support early in the week and then bouncing nicely into the weekend. By our measures, the intermediate-term trend is still tilted up, and while there are fewer stocks hitting new highs than there were a few weeks back, there remain many stocks in good shape. With the improved evidence, we’re nudging our Market Monitor up a notch to 7; like we just wrote, last week was encouraging. But we also want to see how the indexes and leading stocks handle themselves now that big investors are back at their desks and earnings season gets underway.

This week’s list is again heavy on growth-oriented stocks, including a couple of newer names we haven’t seen before. Our Top Pick is Vertex Pharmaceuticals (VRTX), which has surged toward the top of an 11-month consolidation. We’re OK starting small and adding more if shares advance.

Stock Name	Price	Buy Range	Loss Limit
AeroVironment (AVAV)	80.48	68-71	61-63
Carrizo Oil & Gas (CRZO)	24.03	28-30	25-26
Dexcom (DXCM)	421.36	96-100	87-89
iRhythm Technologies (IRTC)	51.15	84-87	76-78
Lululemon Athletica (LULU)	304.69	122-128	112-115
Novocure (NVCR)	0.00	31.5-33	28.5-29.5
Shake Shack (SHAK)	92.08	62-65	55-57
Twitter (TWTR)	40.37	42-45	37.5-39.5
Vertex Pharmaceuticals (VRTX)	230.36	169-175	158-161
Yext Inc. (YEXT)	21.32	18.5-19.5	17-17.5

With this month’s new addition, I decided to go in a different direction then we have with previous recommendations. Instead of featuring another rapid-growth medical device or software stock, I’ve selected a consumer defensive stock in a very specialized industry and with a more modest growth profile. It’s the perfect summertime stock for a period in which many growth stocks are acting a little schizophrenic—especially for those investors who like getting out of the house for a bite to eat and a good beer or glass of wine.

One of the minor predictable patterns that the stock market has developed over the years involves the days before and after holidays (like the Fourth of July). Basically, stocks do a little bit better on those days, but the pattern is neither big enough nor dependable enough to make money on. Still it’s worth keeping in mind as you watch the action of stocks this week.

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...

This stock and its peers are experiencing a game-changing situation within its industry. The stock therefore deserves a second look by growth investors.

Traders will be happy to see this stock joining the Buy Low Opportunities Portfolio for the third time in less than a year. Let’s see if we can accomplish a trifecta!

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.

Now that CMG has been resting for quite a few weeks in a trading range between 470 and 500, I’m moving CMG back to Strong Buy.

This home builder is benefiting from increased demand from first-time home buyers.

Ratings changes on three stocks, one update and 10 stocks that are at good buy points.

While profits are still in the red, this infrastructure company’s fortunes are looking up, with a revenue and earnings beat in its most recent quarter.

Our first idea is a company that is growing at a triple-digit pace, with two analysts increasing forecasts for this year.

Our second recommendation is partial profit-taking.

This global media company beat analysts’ estimates by $0.10 last quarter and 25 analysts have raised their EPS forecasts for the company in the last 30 days.

Good news for TiVo (TIVO); H&R Block (HRB) and Mattel (MAT) shares are rising.

Our first idea is a transportation company that beat Wall Street’s estimates by a nickel last quarter.

. Our second recommendation is a sale of a previous idea.

Crista writes about earnings for two stocks, a management change and a $300MM share repurchase.

This stock reported first-quarter earnings that beat expectations last night. However, the stock declined in after-hours trading.

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.