During the past three-plus months, the market has put in a firm foundation, with numerous tests of long-term support, positive divergences among various breadth measures and three legs down to the correction. And now we’re starting to see buyers take control—today our Cabot Tides flashed a green light, telling us to begin putting money to work.

Market volatility declined somewhat, leaving us at about the same level we were at the time of last month’s issue. The Federal Reserve—while still indicating it will most likely raise rates in June due to creeping inflation—left them alone last week. Coupled with steady economic improvement, including stable employment (the unemployment rate for April dropped to 3.9%) and improving consumer sentiment, the maintaining of the rates helped allay any market jitters that Washington’s continued schoolyard fighting may have caused.

Cabot’s intermediate-term market timing indicator has swung back to the positive side, lending a bit of ammunition to the bulls, but a look at the bigger picture reveals that the market remains in the sideways trading pattern that has defined it since the market’s initial selloff at the start of February.

Current Market Outlook


After the umpteenth test of their February lows and 200-day moving averages, the major indexes have surged over the past couple of days, with many potential leading stocks going along for the ride. Put together, the action is very encouraging and raises the odds that we’ve seen a tradeable bottom. However, despite the uptick, we haven’t yet gotten a green light from our intermediate-term—a good day or two from here could do the trick, but we don’t anticipate signals. Thus, right here, we’re sticking with our current, cautious stance, though we’re keeping our eyes open for definitive signs that a new intermediate-term uptrend has begun.

This week’s list is chock-full of stocks that look like they want to move higher if this rally is the real McCoy. Our Top Pick is Shake Shack (SHAK), which catapulted higher on earnings last week on its heaviest volume ever. Keep positions small and use a loose leash.

Stock Name	Price	Buy Range	Loss Limit
Box Inc. (BOX)	0.00	23-25	21-22
Ecopetrol (EC)	22.17	20.5-22	18.5-19.5
Interactive Brokers (IBKR)	0.00	74-77	68-70
Realpage (RP)	0.00	57-59.5	53-54
Sarepta Therapeutics (SRPT)	120.93	85-88	76-78
Shake Shack (SHAK)	92.08	54-58	48-50
Shutterfly (SFLY)	94.71	89-93	82-84
Splunk (SPLK)	207.67	106-110	97-100
Valero Energy (VLO)	97.40	109-113	99-101
Zendesk (ZEN)	82.19	51-54	46-48

If you want to invest in the whiskey trend, and a select few food trends, there’s really only one way to do it. That’s to buy shares in the company I’m profiling in this month’s Issue of Cabot Small-Cap Confidential. All the, oaky, spicy, and bold details are inside.

The intermediate-term trend in emerging market stocks remains down, and we continue to advise a substantial degree of caution. At the same time, the fact that the indexes (both emerging markets and domestic) have been able to hold above their February lows means there’s a chance that a renewed advance can begin at any time. But we won’t predict; we’ll just follow the market’s lead, while keeping you apprised of the action in the highest potential emerging markets stocks we can find. Today we add another name to the watch list; it’s an old friend that just hit a new high a couple of days ago.

There’s quite a bit of discussion on stock market trends pertaining to energy stocks, financial stocks and takeover stocks.

Last week I downgraded four stocks to Hold, and this week I recommend selling two—one for a fat profit and one for a quick loss. Still, because I keep adding a new stock every week, that leaves nineteen stocks in the portfolio, and most of them are acting very well!

As to this week’s recommendation, it’s a real wild card, a recent Chinese IPO that has been spun off from one of the big Chinese leaders. Risk-averse investors might want to give it a pass, or at least wait until there’s an established uptrend, but if you can handle the risk, buying down here might work out really well!

Current Market Outlook


The broad market continues to be challenging, with last week’s low having the potential to kick off a renewed market uptrend and at the same time holding the potential to establish a floor that—if it collapses—could bring a fresh round of pain. In short, the path ahead is foggy and continued caution is advised. But don’t put your head in the sand! Our OptiMo system continues to dig up top-performing stocks with the potential to bring you substantial profits, if you play your cards right—and one of the most promising characteristics of these stocks is that they tend to be under-owned, meaning far more institutional money could arrive to boost them higher over time.

Today’s roster includes some strong breakouts and a handful of set-ups, and our Top Pick is AMN Healthcare (AMN), which has a steadily growing business in the field of healthcare staffing.

Stock Name	Price	Buy Range	Loss Limit
AMN Healthcare Services Inc. (AMN)	0.00	62-67	57.5-60
Chipotle Mexican Grill (CMG)	773.32	405-420	375-385
Dexcom (DXCM)	421.36	71-74	64-67
Integra LifeSciences (IART)	0.00	57-62	52.5-54
Michael Kors Holdings Limited (KORS)	73.22	67-70	66-64
Novocure (NVCR)	0.00	25-27	23-24
Oil States International (OIS)	0.00	35-37	32-33
Phillips 66 (PSX)	0.00	107-111	99-102
SVB Financial Group (SIVB)	0.00	285-295	265-270
Transocean Ltd. (RIG)	0.00	11.7-12.5	10.2-10.6

The market rolls sideways amidst a slew of conflicting forces.

The S&P 500 has bounced around and is at the same level it was in the middle of May. The primary culprit is technology. That sector has been in a funk. The S&P 500 is hard-pressed to generate any lasting traction while this massive sector, accounting for over 40% of the index, flounders.

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.

This company is a play on the Internet of Things, as well as rising auto sales.

Sell one of our stocks. There is nothing wrong at the company, and earnings are growing at an attractive rate. However, the share price is quite fairly valued, with the 2018 EPS and dividend growth rates equal to the 2018 P/E.

We’re going to book our profits in one of our stocks today. Today’s sale will likely net us a profit of about 48%, for a total return, including dividends, of about 49%.

This technology company beat earnings estimates by $0.03 last quarter, and is forecast to post double-digit growth.

Today we have important news on two of our stocks. I also comment on homebuilder stocks, and name several stocks that are looking good today.

This Xerox spin-off has an enviable list of clients and operates in a rapidly-growing sector.

This ETF is comprised of mostly consumer cyclical and basic materials companies linked to the home building industry.

This company is the subject of an investigative report published today by the Southern Investigative Reporting Foundation.

This companies shares dropped 7% on February 16 after the company released disappointing fourth-quarter results and suspended its dividend.

Ongoing problems in China’s travel industry are concerning me enough that I am moving one of our stocks from Strong Buy to Hold.

GM has officially agreed to sell its European business to Peugeot. The deal was announced this morning and GM is trading slightly higher pre-market.

This defense, aerospace, and industrial contractor beat earnings estimates by $0.11 last quarter.

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.