Issues
Current Market OutlookThe selling pressure that appeared two weeks ago carried through to last week, with many leading stocks breaking down and others falling back into consolidations. That said, it’s not the end of the world—many major indexes are now testing their 50-day lines, and a bunch of stocks are in the same boat. There’s no question that the evidence has worsened lately, which is why our Market Monitor is back down to a reading of 6 (out of 10), but we’re most interested in what happens from here, which will probably go a long way toward determining the market’s next intermediate-term move. All told, you should still hold your strong, profitable stocks, but we also think it’s best to cool your heels a bit, keeping new buys small and holding some cash as we wait to see the market show its hand.
In the meantime, we’re using this brief period of market weakness to identify the stocks unaffected by the selling, as those will likely do the best when the market resumes its major advance. This week’s list has plenty to choose from, and our Top Pick is Wayfair (W), which is unusually strong—keep positions small and try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Five Below (FIVE) | 134.58 | ||
| Ligand Pharmaceuticals (LGND) | 267.14 | ||
| Netflix, Inc. (NFLX) | 423.92 | ||
| Oasis Petroleum (OAS) | 12.57 | ||
| Supernus Pharmaceuticals (SUPN) | 52.50 | ||
| Teladoc, Inc. (TDOC) | 127.95 | ||
| Ultragenyx Pharmaceutical Inc. (RARE) | 87.63 | ||
| Wayfair (W) | 167.03 | ||
| WellCare Health Plans, Inc. (WCG) | 271.83 | ||
| WPX Energy (WPX) | 0.00 |
With the MSCI Emerging Markets Index headed steeply down since June 13, we have been moving quickly to cut our exposure and kick losers out of our portfolio. It’s not pleasant, but it’s the only way to stay profitable in a volatile sector like emerging market stocks. Today’s bounce in the markets was a welcome relief from the selling pressure, but we will discount the good news until the Cabot Emerging Markets Timer gives us the all-clear.
The market rolled over this week, but it’s too early to say if it’s the start of another correction or just some turbulence. Either way, we’re well prepared, with exposure to a broad range of sectors, including some benefiting from the uncertainty.
As to this week’s stock, once again I’m trying to buy low, with a recommendation of Crista Huff that should soon see improved earnings thanks to last year’s huge merger.
Current Market OutlookMay and June were generally great for leading stocks, but some yellow flags began to appear during the past couple of weeks—the major indexes were showing widening divergences, sentiment reached giddy levels and some stocks (like many recent IPOs) went vertical. Some sort of retreat was likely, but the severity of the selling in recent days looks abnormal; many stocks are pulling back after big runs, but a bunch of others are cracking, and the lagging indexes look sick—the NYSE Composite is below its 200-day line! We don’t advise hitting the panic button, as most indexes and stocks are still above intermediate-term support, so you can hold your strong, profitable stocks. But given the evidence, it’s smart to pare back—honor your stops and loss limits, and on the buy side, keep new positions small until support appears.
This week’s list has stocks that have been yanked down recently, but the action looks normal after strong prior advances. Our Top Pick is Carvana (CVNA), which is early stage and holding up well after a big run. Again, keep new positions small and try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Carvana (CVNA) | 82.90 | ||
| Cheniere Energy (LNG) | 63.82 | ||
| Darden Restaurants (DRI) | 106.63 | ||
| Heron Therapeutics (HRTX) | 35.25 | ||
| Illumina Inc. (ILMN) | 289.74 | ||
| Spotify (SPOT) | 272.82 | ||
| Stitch Fix (SFIX) | 36.79 | ||
| Trade Desk (TTD) | 468.02 | ||
| Turtle Beach (HEAR) | 26.70 | ||
| Wix.com (WIX) | 302.53 |
The market’s evidence remains mostly bullish, so we do, too, but it’s a selective advance—most indexes are doing just OK, but growth-oriented stocks and sectors have put on a great show. In the near-term, there are signs of exuberance, and while that doesn’t mean you should sell your strong stocks, it is a sign to keep your feet on the ground.
In the Model Portfolio, most of our stocks are performing well, but we’re standing pat for the moment, holding about 20% in cash as we look for solid entry points in fresh leading stocks.
In tonight’s issue, we review the market, all of our stocks and even write about one growth sector that’s showing extreme power of late—we already own two of the leaders in the group, but many look great. We also touch on the sentiment backdrop, while highlighting a few potential new buys if things settle down a bit.
In the Model Portfolio, most of our stocks are performing well, but we’re standing pat for the moment, holding about 20% in cash as we look for solid entry points in fresh leading stocks.
In tonight’s issue, we review the market, all of our stocks and even write about one growth sector that’s showing extreme power of late—we already own two of the leaders in the group, but many look great. We also touch on the sentiment backdrop, while highlighting a few potential new buys if things settle down a bit.
We were having a pretty good month on the Dow Jones Industrial Average, until the trade tariffs issue raised its ugly head again. That consternation has driven the markets back to their month-ago trading levels—after a 1,000 point or so gain. While short-term trading is volatile again, most market insiders remain very bullish, as you’ll see in our Advisor Sentiment Barometer and in our Market View.
Calling market tops is impossible, but leaning against the wind is something you learn after a while, if you pay attention. So today, with many of our stocks once again hitting or near new highs, I’m leaning into the wind by selling one and downgrading another to hold.
As for new buying, today’s recommendation comes straight from Cabot Top Ten Trader. It’s an underappreciated retail stock that surged higher on a great earnings report two weeks ago and has since pulled back to what I think is a great entry point.
As for new buying, today’s recommendation comes straight from Cabot Top Ten Trader. It’s an underappreciated retail stock that surged higher on a great earnings report two weeks ago and has since pulled back to what I think is a great entry point.
Updates
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.
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.
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.”
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.
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.
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.
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 30th. 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.
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 30th. 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
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.
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.
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.
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.
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.
Alerts
In the last thirty days, six analysts have increased their earnings forecasts for this industrial company’s next quarter.
An update on one of our stocks, and a rating change on another.
This small semiconductor company beat analysts’ estimates by $0.02 last quarter, and Wall Street is forecasting double-digit growth for the next five years.
One of our stocks reported yesterday after the close and nearly all the analysts following the company are disappointed, including me.
The shares of this food repurposing company are rated 1.6 (Buy) by Wall Street Analysts. The company has strong cash flow and is reducing its debt.
This fitness company has opportunities to expand its mission, but it is in the midst of a turnaround.
An update on one of our stocks, and ratings changes on two others.
This aircraft product maker’s shares are trading at a heavy discount due to an ongoing dispute with Bombardier.
This tele-health company’s shares were recently initiated as ‘Outperform’ at Robert W. Baird, and six analysts have raised their earnings forecasts for the company in the past 30 days.
Today’s bulletin describes a management change at one of our stocks and bullish price movements, especially among integrated oil stocks.
This infrastructure company beat earnings estimates by $0.10 in the latest quarter. Ten analysts have raised their forecasts for both this year and next in the past 30 days.
Portfolios
Strategy
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.