The market\'s rally in recent days has turned our Cabot Tides positive, joining our Cabot Trend Lines and Two-Second Indicator. Because of that, we did some buying in a Special Bulletin last evening, but added half-sized positions because both companies are set to report earnings next week.

In today’s issue, we add a large-cap industrial stock to the Dividend Growth Tier, review our sales from the past week, and explain how to write covered calls.

In choosing today’s stock, I deliberately looked for one that was not hitting new highs, a stock with limited downside. And what I found was a stock that came public recently—to great fanfare—but that has since cooled off and settled down to what I believe is a buyable bottom.

Current Market Outlook


A week ago at this time, all the major indexes had just broken below their 50-day moving averages, key sectors were lagging and hardly any stocks were heading consistently higher. But since then, the market has acted very well, capped by today’s French election-induced move higher; it’s looking more and more like the prior dip could have been the final, news-driven shakeout (North Korea fears) to the market’s seven-week consolidation. That said, we don’t want to get carried away—while the Nasdaq hit new highs today, other indexes haven’t yet, and we’re still smack dab in the middle earnings season, which will have a lot to say about the market’s near-term fate. All told, we’re bumping our Market Monitor back up to a level 7 and will look to raise it further if the market holds (or builds) on its gains in the days ahead.

This week’s list is heavy on growth ideas, which is good to see given the market’s recent struggles. For our Top Pick, we’ll go with a strengthening liquid leader—Alibaba (BABA) looks ready to challenge all-time highs, though with earnings likely out in a couple of weeks, keep new positions small.

Stock Name	Price	Buy Range	Loss Limit
Activision Blizzard, Inc. (ATVI)	0.00	49-51	45-46
Alibaba (BABA)	254.81	106-112	90-100
Autodesk (ADSK)	229.00	87.5-90	82-84
Chipotle Mexican Grill (CMG)	773.32	455-475	420-430
Cotiviti (COTV)	0.00	40-42	36.5-38
Dycom Industries (DY)	0.00	102-106	94-96
IAC/InterActiveCorp (IAC)	0.00	74-78	69-71
Intuitive Surgical, Inc. (ISRG)	0.00	780-815	735-745
Momo Inc. (MOMO)	44.65	36-38	32-33
Ollie’s Bargain Outlet (OLLI)	103.94	35-37	31.5-32.5

Most of our recommended stocks are acting great, and our new recommendation checks many of the boxes we look for when hunting for a long-term winner. It is a dominant restaurant company in China, and the stock just got going after a few months of base-building.

After surging to new highs in mid-March, today’s recommendation entered into a tight consolidation pattern—and today it’s still in that pattern! While the broad market has pulled back, this stock has held up strongly, which is a very good sign.

Current Market Outlook


Last week saw all the major indexes close clearly below their 50-day moving averages, a development which, combined with another batch of breakdowns among leading stocks and cracks in key sectors (like chip stocks), has us taking another couple of steps back—we’re moving our Market Monitor down to a level 5 (out of 10) in today’s issue. To be clear, the market isn’t a disaster here, as most major indexes are just 3% or 4% from all-time highs, many stocks (especially growth stocks) are still relatively resilient and the longer-term uptrend isn’t in doubt. But the onus is on the bulls to take a stand. After six weeks of correcting and consolidating, we need to see buyers step up before putting a bunch of new money to work. In the meantime, we’re holding some cash and keeping new buys small.

Encouragingly, our screens are still picking up on plenty of attractive charts and stories. Our Top Pick is Innoviva (INVA), which has a couple of asthma treatments that are raking in the dough (much of it from royalties). It’s thinly traded, so consider buying a small position on dips.

Stock Name	Price	Buy Range	Loss Limit
Align Technology (ALGN)	316.20	111-114	102-104
Arista Networks (ANET)	0.00	129-133	119-121
Bioverativ (BIVV)	0.00	54-57	49.5-51
HP (HPQ)	0.00	17.7-18.2	16.7-17
Innoviva (INVA)	0.00	13.5-14.2	12.5-12.8
JD.com (JD)	39.58	31.5-32.5	29.5-30
MACOM Technology Solutions (MTSI)	0.00	49-51	46-47
PulteGroup (PHM)	45.93	23.4-24.4	22-22.5
Seagate Technology (STX)	0.00	46.5-49	43-45.5
Yum China (YUMC)	0.00	31.5-33	29-30

This month’s Cabot Enterprising Model contains 16 companies that offer you a mix of low- and moderate-risk stocks to add to your portfolio. In the issue, I feature five stocks, including one new stock that holds great promise.

It’s not often that we discuss currencies in the Cabot Turnaround Letter, but given the persistent relative strength of the U.S. dollar right now, I think it’s imperative that we address it—mainly because of how it will likely impact our portfolio holdings going forward.

The top haven asset for the first half of 2026 wasn’t gold, U.S. Treasury bonds or the Japanese yen.

After spending much of the year leading the market higher, small caps have finally run into a little turbulence. Through midday today, the S&P 600 Index is down 1.8% from last Thursday’s close, roughly in line with the S&P 500’s 1.9% decline.

That said, it’s important to keep the recent pullback in perspective. Small caps remain the market’s clear leader in 2026, with the S&P 600 up 20.2% year to date versus an 8.1% gain for the S&P 500.

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.

High-flying AI-related stocks are facing a high bar of performance. Even what normally would be considered staggering growth is met with a yawn. The backdrop of the Middle East conflict and almost $100 oil is not helpful.

The Philadelphia Semiconductor Index (SOX) has outperformed the S&P 500 by 57% this year, even after a sharp correction. This is basically a macro trade, and there are few industries as cyclical, or as capital-intensive, as semiconductor manufacturing.

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.

Shares of tax preparer H&R Block (HRB) fell 13.6% Wednesday, after the company reported disappointing tax season results. HRB appears in the Growth & Income Portfolio.

I’m raising my rating on Robert Half International (RHI) today to Buy. RHI appears in the Buy Low Opportunities Portfolio.

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.