Current Market Outlook


Last Wednesday’s huge decline was a shot across the bow—most indexes threatened the lower end of their three-month trading ranges and even the strong Nasdaq showed some abnormal action. But few leading stocks broke down, and the action since then has been encouraging, with the indexes snapping back toward their highs. Overall, we remain more bullish than not, but given Wednesday’s action and the continued sideways action for most of the market, we’ll nudge our Market Monitor down a notch to level 7 and watch the next few days closely. Another big bout or two of distribution would darken the intermediate-term outlook, but the longer the market can hold up (or advance) from here, the greater the odds that last Wednesday was a news-driven shakeout.

In the meantime, we continue to find a variety of great charts and stories in a few different sectors. We’re sticking with the big-cap theme with our Top Pick this week—Global Payments (GPN) isn’t a barnburner but it has surged out of 13-month base on great earnings.

Stock Name	Price	Buy Range	Loss Limit
Adobe Inc. (ADBE)	315.23	136-139	127.5-129
Boyd Gaming Corporation (BYD)	0.00	24-25	22-23
Deere & Company (DE)	0.00	116-120	110-112
Global Payments Inc. (GPN)	0.00	88-91	82.5-84.5
MiMedx Group (MDXG)	0.00	13.5-14.5	12-12.5
Parexel Corp. (PRXL)	0.00	77-80	72-74
RingCentral (RNG)	238.73	31.5-33.5	29-30
Teladoc, Inc. (TDOC)	127.95	27.5-29.5	24.5-26
Vertex Pharmaceuticals (VRTX)	230.36	114-120	106-1090
Yum China (YUMC)	0.00	34.5-36.5	31.5-33

Investors’ jitters about the dog fight in Washington, D.C. caused a sharp market correction this week that included emerging market stocks. Our portfolio also sustained a little damage, but, so far at least, it’s under control. The major uptrend in emerging markets has been dulled, but not blunted. In this issue, I look at the performance of emerging vs. developed market stocks. I also bring back a stock from last year that will give us a different take on Chinese retail.

We are still bullish, and as you can see from our Advisor Sentiment Barometer and Market Views section, so are most investment pros. And that’s great news, as it means our contributors continue to find an array of stocks with excellent potential.

Recognizing the risk in today\'s hot market, today’s selection is not a hot stock; it’s a slower grower, a big stock with a heathy and growing dividend that’s technically in the leisure services business.

Current Market Outlook


Nothing about the market really changed last week—small- and mid-cap indexes are lagging and most indexes are still trading tightly with in 10-12 week ranges, but the Nasdaq is in a firm uptrend and leading Top Ten stocks are acting great. The question now is whether the recent push higher that began in mid-April will broaden out; the S&P 500 has been knocking on the door of new highs (above 2,400) and the small- and mid-cap indexes found support at their 50-day lines today. If we see buying pressures strengthen, it could lead to another batch of leaders emerging in the weeks ahead and be a big feather in the bulls’ cap. It’s something to watch for, but right now, we’ll stick with our current stance, keeping our Market Monitor at level 8.

This week’s list has a ton of very attractive growth stories; it was hard to select just one as our Top Pick. But with big-cap growth stocks in favor, we chase Nvidia (NVDA), which has exploded out of a four-month consolidation following a great earnings report.

Stock Name	Price	Buy Range	Loss Limit
Atlassian (TEAM)	182.16	34.5-36.5	32-33
Electronic Arts (EA)	0.00	105-110	97-100
Five Below (FIVE)	134.58	49.5-52	46-47.5
HubSpot (HUBS)	582.89	68-71	63-65
IPG Photonics (IPGP)	0.00	132-138	123-126
NVIDIA Corporation (NVDA)	242.42	127-134	117-120
Ryanair DAC (RYAAY)	0.00	97-101	89.5-91.5
Tesla, Inc. (TSLA)	818.87	307-319	282-289
Trade Desk (TTD)	468.02	48-52	42-45
XPO Logistics (XPO)	0.00	52.5-55	48-49.5

This month, I introduce a new stock that has outshined most stocks in the retail sector. The company will add 100 new stores in 2017, which will surely add significant growth, but there’s much more to the story. Today’s issue describes how this specialty retailer has thrived in a difficult sector.

Our Spotlight Stock this month became a common household name to many investors during the tech revolution. The Internet/mobile chip provider not only managed to survive the boom and bust, but has come out on top of the growing semiconductor sector for low-cost chips for the exploding biometrics identification industry. Nancy’s Feature further explores the tremendous demand for biometrics around the world.

The overall market is just OK here, as most indexes are still stuck in 10-plus week trading ranges. Our market timing indicators are positive, but it\'s hard to say the bull market is overly powerful here. However, the action among leading growth stocks has been fantastic since mid-April, with most of the stocks we own or are watching racing up the charts.

WHAT TO DO NOW: Big picture, the market and most leaders look great, and our market timing indicators are in fine shape. Near-term, though, there’s little doubt things have gotten a bit giddy, with many names and indexes extended to the upside. Tonight, we’re placing Cava (CAVA) on Hold as that stock has been caught up in some group weakness; we’ll hold our 45% cash position for now, but stay tuned, as we’d like to add some new names (or add to existing names) in the near future.

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.

Dave & Buster’s (PLAY) has dipped back toward the top of its prior launching pad as many restaurant stocks have sagged. We’ll place the stock on Hold and keep it on a tight leash. And today, Vulcan Materials (VMC) fell sharply after missing earnings estimates, partially because poor weather in the second quarter delayed construction projects. We’ll respect the stock’s action and move VMC to a Hold rating tonight.

Updates on LeMaitre Vascular (LMAT), Chembio (CEMI) and Blackbaud (BLKB).

Sell: Corning (GLW), Ensco (ESV) and Matthews International (MATW).

Our LogMeIn (LOGM) position is now up 45%, and I’m recommending selling a portion of your stock to lock in the gain.

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.