There are only a few companies out there that provide the software that companies can use to implement IT cost-accounting. Today’s Cabot Small-Cap Confidential candidate is pioneering the entire movement.

In today’s issue, I dig into the reasons behind this painful correction, finding an aggravating Chinese government regulatory shift that can account for a large part. Despite the turmoil, the Cabot Emerging Market Timer is still positive, and I have a fresh, young Chinese tech stock that has enormous potential as the development of the Chinese cloud continues.

In today’s issue, we’re adding a reliable new stock to the Safe Income Tier. I also review why you might want to own preferred stock in today’s educational section, and provide updates on all our holdings.

Today’s recommendation is a chain restaurant—a chain I’d never even heard of—but the company is growing fast and the chart is very constructive.

In tonight’s issue, we dive into some education, revealing a long-term chart pattern that bodes well (including one stock that’s at the top of our Watch List now). We also give you all our latest thoughts on the market and our recommended stocks, and present the usual crop of new ideas if you have some cash on the sideline.

Current Market Outlook


The market’s not all peaches and cream, as many sectors have been doing more gyrating than advancing, the broad market is iffy and the number of stocks hitting new highs has been falling on each push higher. But we always place most of our emphasis on the primary evidence—the trend of the major indexes and the action of leading stocks—and on that front, the evidence is clearly positive, so we remain heavily invested. The goal from here is to simply follow the system—hold on to your strong performers (though taking partial profits here or there is fine), honor your stops with any stocks that hit potholes and look for new leaders that show explosive strength.

This week’s list is again heavy on recent earnings winners, though it has more of a small- and mid-cap flavor to it. Our Top Pick is Splunk (SPLK), a leading Big Data software firm that has gotten going after a long consolidation.

Scheduling Note: Due to the Thanksgiving holiday, there will be no Movers & Shakers this Friday or Top Ten issue next Monday (one of our two scheduled weeks off all year). Have a great holiday weekend!

Stock Name	Price	Buy Range	Loss Limit
Bluebird Bio (BLUE)	0.00	153-161	137-141
Canada Goose Holdings (GOOS)	46.21	24.5-26	22-23
Cypress Semiconductor (CY)	0.00	26-17	15-15.5
ICU Medical (ICUI)	0.00	202-207	188-192
Nutanix (NTNX)	55.91	28.5-30	25-26
Red Rock Resorts (RRR)	34.70	27-28	25-25.5
RH Inc. (RH)	252.93	96-101	86-90
Splunk (SPLK)	207.67	78-82	71.5-73.5
Westlake Chemical Corp. (WLK)	0.00	90-93	84-86
Wingstop (WING)	121.52	37-39	34.5-35.5

If you bought a basket of my 10 Best Marijuana Stocks when the report was originally published in August, you’re off to a great start. Since that report was written, the average of the 10 stocks is up 32%, with the best stock up 131% and the worst down just 4%. Read on for more details.

While flashier, more star-studded teams like Lionel Messi’s Argentina, Kylian Mbappe’s France and Erling Haaland’s Norway garnered most of the headlines at the just-completed World Cup, Spain was the best team. There was nothing flashy about Spain: no mega-stars, not a ton of goals, no relentless attack. Instead, they dominated the tournament with precision passing, immaculate ball control and near-impenetrable (just one goal allowed all tournament!) defense.

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.

It’s time to sell EMAN. I think eMagin remains a mediocre company that has excellent technology and which will continue to have modest success in its military markets. But I don’t think this is “the next big thing.”

USA Technologies (USAT) reported quarterly results this morning that came in just about as expected.

I’ve steered clear of small caps that would have been heavily influenced by either a Trump or Clinton victory, so I don’t expect to make any moves in our current portfolio based solely on today’s results.

While many investors will be selling stocks in panic today, fearful of the unknown, I recommend that you sit calmly. Wait for the panic to pass and the dust to settle.

Southwest Airlines (LUV) reported weak sales and earnings, and increasing costs could put a damper on earnings for an extended period. I recommend selling your LUV shares now.

Momo Inc. (MOMO) reported earnings before the open today and the results looked great, with revenue, earnings and guidance all coming in ahead of analysts expectations.

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.