Wow! The Dow Jones Industrial Average saw a bumpy month the first couple of weeks in October, but made up for those doldrums yesterday, gaining 547 points—all in one day! The catalyst? Some important and very positive earnings news from Morgan Stanley, who pointed to the resurgence of its IPO business; Goldman Sachs, who also enjoyed increases in its underwriting area; and Johnson & Johnson, who cited some nice sales improvements.

Overall, it just seems like folks were ready for some good news. Sentiment remains bullish, as you’ll see from our Advisor Sentiment Barometer, which barely moved this month. However, some caution is being advised—at least in the short term—as reflected in our Market Views section of the newsletter.

The market’s broad rebound continued today, erasing a good part of the losses sustained in the recent two-week collapse. The major indexes still have a long way to go to return to their old highs, but I think they will do it, as our market timing studies tell us that the sharp pullback was likely simply a normal correction in the long-term uptrend.

Current Market Outlook


The market continued to unravel last week, with leading growth stocks getting battered again and the rest of the market joining the downturn. In the near-term, we have seen some signs of panic and also some support, so it’s certainly possible the market can get off its duff a bit in the days ahead. But given the severity of the selling and the fact that the intermediate-term is firmly down, the odds favor more correction and consolidation ahead. That means the main goal here is the preservation of your capital and your confidence, both of which will come in handy during the next upturn. Nibbling on a name or two if you already hold a lot of cash is fine (we have some intriguing resilient situations in today’s issue) and could prove profitable if we bounce. But the big money will be made in the next sustained uptrend, so it’s best to stay mostly safe until that arrives.

This week’s list is a hodgepodge of stocks and sectors, which isn’t surprising given the environment. Our Top Pick is Ulta Beauty (ULTA), which remains resilient and looks ready to be a steady leader once the market correction is over.

Stock Name	Price	Buy Range	Loss Limit
Advanced Micro Devices (AMD)	82.24	25-26.5	22-23
Amarin (AMRN)	14.06	18-20	15-16
Callaway Golf (ELY)	20.21	22.5-23.5	20.5-21.5
Ensco plc (ESV)	6.52	8.0-8.5	7.0-7.3
Kirkland Lake Gold (KL)	51.30	20-21	18.4-18.9
Match (MTCH)	0.00	51-54	47-48
The Mosaic Company (MOS)	29.22	31.5-33	29.5-30.5
PBF Energy (PBF)	38.93	47.5-49.5	45-46
Petrobras (PBR)	14.78	14.5-15.5	13.5-14
Ulta Beauty (ULTA)	331.95	275-280	258-261

The leaves are rapidly falling here in Tennessee, but thankfully, the markets continue to hold their own, with the Dow Jones Industrial Average picking up about 500 points since our last issue. As you’ll see in our Market Views, our advisors are a bit cautious in the short-term, but overall, market sentiment remains very bullish.

Growth stocks have gone over the cliff during the past eight trading days, with many suffering waterfall-like declines. With our Tides negative and most growth stocks in tatters, we’ve turned defensive by quickly paring back on our names.

Since last Monday, we’ve sold three stocks and taken partial profits on three more. And tonight, we’re selling another (Autodesk) -- all told, boosting our cash position from 16% a week and a half ago to 61% after tonight’s sale. From here, we’re likely to give some stocks a little rope given the chance of a short-term snap back, and because, big picture, we’re still in a bull market. But right now it’s time to focus on capital preservation.

In tonight’s issue, we give you all our latest thoughts on the market, our stocks and some names we see holding up so far (one of our favorites is written about starting on page 6). And we also talk a bit about what to do when everything falls apart at once, offering some pointers about differentiating what to hold and what to dump.

The market’s intermediate-trend has turned decidedly down, so taking steps to minimize the risk from your most aggressive stocks is critical. But don’t throw the baby out with the bathwater! The market’s long-term trend is still up, and I’m confident there is still more upside potential for a well-diversified portfolio of carefully-chosen stocks.

Current Market Outlook


You can blame interest rates or the Chinese or the economic cycle or politicians or even the celestial bodies, but it when all is said and done, it doesn’t matter why stocks have been struggling; the fact is that they are. And if you simply recognize that fact and accept it, then you can turn to the next step, which is to protect the profits you’ve earned in the long bull market and be selective when it comes to venturing into new stocks. That’s what Cabot Top Ten Trader is all about. The Market Monitor falls one notch lower to 5, but the ten stocks in today’s issue are still—on their own—quite attractive, plus they come from a wide variety of industries.

Our Editor’s Choice is Clean Harbors (CLH), a stock that was last hot in 2011, after which it spent nearly seven years out of the limelight. But now it’s back and the chart risk looks low.

Stock Name	Price	Buy Range	Loss Limit
American Outdoor Brands (AOBC)	13.69	14-15	13-13.5
Canopy Growth (CGC)	38.82	46-50	40.5-43
Clean Harbors (CLH)	66.42	68.5-71	63-64.5
Endo International plc (ENDP)	13.32	16-17	14-14.7
EOG Resources, Inc. (EOG)	101.98	127-131	120-122
Exact Sciences (EXAS)	116.91	67-70	62-64
Glaukos Corp. (GKOS)	67.84	58-61.5	53-55
Novocure (NVCR)	0.00	47.5-49.5	43-44
Roku, Inc. (ROKU)	150.46	63-66	58-60
Square, Inc. (SQ)	91.04	83-86	76-78

Despite weakness in the broad market today’s addition is holding up very well. The company specializes in simulation software – programs that tell users what a physical object, or process, may or may not do.

The market has gone sideways since May. It seems to be deciding what to do.

It’s encouraging that the resumption of hostilities with Iran has not sent the market lower. It’s also positive that oil prices aren’t rising back to the $100 level earlier in the war, although prices have risen. It’s also another earnings season and analysts expect a big one.

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.

Oracle (ORCL) has reached its Minimum Sell Price and should be sold. Kroger (KR) is expected to flounder in the 21.5 to 23 area for an extended period of time so it’s a Sell too.

Weibo (WB) shares are down around 10% in pre-market trading. The stock plummeted after news out of China that a regulator had ordered Weibo to shut down its audio and video services.

Here’s an update on the three exchange-traded funds, designed for a rising interest rate scenario.

Updates on two stocks and a rating change on another.

This company is transforming itself into a player in the automotive, avionics, and B2B arena.

This chemical company has a ‘1’, or strong buy rating by Wall Street analysts. The shares recently crossed over their 50-day moving average, a bullish indicator.

Celanese Corp. (CE 96.80) reached its Minimum Sell Price of 96.66 today, June 19.

As shares of one of our financial services companies approach long-term price resistance, I’m moving the stock from Strong Buy to Hold, simply because there’s less capital gain potential in the near-term.

Our first idea is an industrial company that clobbered estimates for eight consecutive quarters.

Our second recommendation is some great profit-taking on a previous selection.

Three analysts have raised their earnings estimates for this tech company in the past month, and Wall Street is predicting double-digit growth for the next five years.

One of our stocks moves from Buy to Hold. The company cut the dividend and is implementing a new business plan. The outlook is positive.

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.