Current Market Outlook


In the short-term, there’s no question the market is “overbought” and there are some signs of complacency, so we’re not ruling out a market-wide shakeout, some kind of below-the-surface correction or simply a tricky earnings season. But the real money is in the intermediate- and longer-term moves, and on that front, the vast majority of evidence remains in the bull camp, as the trends of the indexes are pointed up, leading stocks are acting well and some new leadership is starting to emerge on earnings. Thus, our game plan remains the same—you should generally be holding your strong stocks (though booking a few partial profit is fine) and looking to do some buying either on pullbacks (for stocks that ran up strongly in September) or on powerful breakouts (likely on earnings).

This week’s list contains another varied batch of strong stocks, including a couple that have shown superb power in recent days. Our Top Pick is Skechers (SKX), which exploded higher last week after a blowout quarter—we advise starting small and adding shares if the stock continues higher.

Stock Name	Price	Buy Range	Loss Limit
Beacon Roofing (BECN)	0.00	53-55	49-50
Cree, Inc. (CREE)	67.96	32.5-34.5	29-30.5
Essent Group (ESNT)	0.00	42-44	39-40.5
HollyFrontier Corporation (HFC)	0.00	35-36	32-32.5
Michael Kors Holdings Limited (KORS)	73.22	47.5-49	45-46
Navistar International (NAV)	0.00	41.5-43.5	37.5-39
Proofpoint (PFPT)	113.79	91-94	87-89
Skechers (SKX)	0.00	32-34	28-29.5
Sohu.com (SOHU)	0.00	64-67	59-61.5
Zogenix (ZGNX)	46.50	36.5-38.5	33-35

Despite the sting of today’s pullback that included just about the entire market, the Cabot Emerging Markets Timer is holding on to its buy signal. We’re watching the big Party Congress in Beijing and are paying attention to the flat performance of a few of our stocks over the past few months. But with good profits in many of our stocks, we’re willing to be patient as we head into earnings season.

This month’s Spotlight Stock is a household name that ran into some challenges that put a dent in its stock price. But now with a new management team and favorable industry trends, the turnaround looks promising, and the stock price is certainly discounted—and attractive.

With today’s recommendation, I swing back to the aggressive side, with a technology company that is revolutionizing (well, maybe that’s too strong a word) the marketing industry. In any case, it’s growing very fast and it’s expected to turn profitable this year.

Current Market Outlook


The market remains in great shape with all the major indexes in gear on the upside, a ton of stocks and sectors acting well and a general lack of selling pressure even after the recent run. Surprisingly, we’re still seeing hesitation among investors in terms of money flows, which, from a contrary point of view, is bullish. The next big test for the market and (especially) individual stocks is earnings season—how leading stocks respond (both those that have been running for a while, and new leaders that emerged in September) will have a big say on the market’s short-term future. But given the overall evidence, the odds continue to favor higher prices down the road, so any reasonable dips should be viewed as buying opportunities.

This week’s list is another good-looking mix of growth and industrial stocks with strong charts. Our Top Pick is Adient (ADNT), which owns about one-third of the car seat market and has big earnings, a cheap valuation and a tidy pullback after a powerful September breakout. Keep new positions small ahead of earnings.

Stock Name	Price	Buy Range	Loss Limit
Adient (ADNT)	0.00	82-85	75-77
Atlassian (TEAM)	182.16	38-40	35.5-37
Baidu (BIDU)	0.00	257-267	236-240
CF Industries (CF)	45.23	35-37	32-33
DXC Technology (DXC)	0.00	88.5-91.5	83-84
LPL Financial Holdings (LPLA)	85.22	51-53	47-48.5
Monolithic Power (MPWR)	0.00	109-113	102-104
Sherwin-Williams (SHW)	526.09	370-380	350-355
Thor Industries (THO)	104.76	124-128	114-116
Vishay (VSH)	0.00	20-21	18.5-19

In this issue, I begin to transition stocks from Roy Ward’s Value and Enterprise Models to my new, more consolidated Prudent Model. My top recommendation is a new stock for us, and I give it a thorough write-up.

In tonight’s issue, we go over all our recent moves, dive into the recent action in one of our stocks and review one of our proprietary indicators that, along with some precedent analysis, adds further evidence to the market’s bullish outlook.

Our Spotlight Stock this month is representative of thriving stock markets—a company that owns and operates exchanges for stocks, options, futures and derivatives. It has grown leaps and bounds, both internally and by acquisition, and numerous opportunities for expansion remain. My Feature further explores those opportunities.

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.

Today we’re reporting on earnings for Applied Materials (AMAT), and adding two stocks to the Cabot Undervalued Stocks Advisor portfolios, Archer Daniels Midland (ADM) and Total SA (TOT).

Marrone Bio (MBII) reported yesterday after the close. The bottom line was a good quarter, with remarkably few surprises. And at this point, “good” is great.

Our Cabot Tides turned positive today, and while the market is still very volatile and divergent, there’s no question the evidence is improving.

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.