Issues
Current Market OutlookWe’ve seen some constructive action during the past few days—the major indexes have thus far successfully re-tested their August lows and we saw some positive divergences in the broad market (far fewer stocks hitting new lows this time around). Now we’re looking to see if the intermediate-term trend can turn up; by our measures, it could happen within a day or two if the market holds its recent gains. And if it does happen, we’ll move to a more neutral stance—giving some stocks looser leashes and advising more new buying (though we wouldn’t advise jumping in with both feet). We’ll see how it goes, but for now, be sure to have your shopping list ready.
This week’s list has a few steady Eddies but also some real growth stories, including a couple of new ones to us. For our Top Pick we’ll stay with the big-cap growth theme that’s offered many resilient stocks—Adobe Systems (ADBE) dominates its field and just completed a transition to the cloud, which will lead to huge recurring revenues going forward.
| Stock Name | Price | ||
|---|---|---|---|
| Zoës Kitchen (ZOES) | 0.00 | ||
| VeriSign (VRSN) | 190.71 | ||
| Sarepta Therapeutics (SRPT) | 120.93 | ||
| Shopify (SHOP) | 585.00 | ||
| Jabil Inc. (JBL) | 41.50 | ||
| Incyte Corporation (INCY) | 76.98 | ||
| Edwards Lifesciences (EW) | 228.06 | ||
| Cal-Maine Foods, Inc. (CALM) | 0.00 | ||
| Adobe Inc. (ADBE) | 315.23 | ||
| Advance Auto Parts (AAP) | 0.00 |
Current Market OutlookLast Monday we wrote that the next few days would be telling—and given the action, it’s clear the onus remains on the bulls to show they have sufficient strength to halt the market’s downtrend. There are some positives, including the fact that the indexes have held above their late-August lows for five weeks and, believe it or not, the broad market is in slightly better shape now than in late August. But, as always, it’s best to just take the evidence as it comes—today, that means holding lots of cash and limiting new buying as we patiently wait for a bottom to form.
This week’s list has a big-cap feel to it as investors seek out some dependability. Our Top Pick is Salesforce.com (CRM), whose stock is big, liquid and remains resilient.
| Stock Name | Price | ||
|---|---|---|---|
| Vantiv (VNTV) | 0.00 | ||
| Starbucks (SBUX) | 64.49 | ||
| Nike (NKE) | 89.77 | ||
| Nordic American Tankers (NAT) | 0.00 | ||
| Medicines Company (MDCO) | 56.98 | ||
| JetBlue Airways Corporation (JBLU) | 0.00 | ||
| Imperva Inc. (IMPV) | 0.00 | ||
| Salesforce.com (CRM) | 0.00 | ||
| Chipotle Mexican Grill (CMG) | 773.32 | ||
| Big Lots (BIG) | 43.12 |
Current Market OutlookIt’s been four weeks since the August 24 panic low and the market has done a decent job hanging in there—all of the major indexes probed higher into last week before selling off on Friday. Currently, the major trends of the market remain down, so we’re staying defensive. However, the next few days will be telling—if the indexes can advance from here, we could receive an intermediate-term buy signal late this week, which will have us loosening the wallet a bit. But if the sellers show up again, all bets are off. For now, it’s best not to anticipate anything; you should continue to hold plenty of cash and keep new buys small. We’ll let you know on Friday if the outlook has changed.
In the meantime, we are encouraged by the action of many individual growth stocks, which are showing lots of relative strength even as the market struggles. Our Top Pick this week is Activision Blizzard (ATVI), which is pushing higher on the back of some very good product news. Consider nibbling on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Tyler Technologies (TYL) | 0.00 | ||
| T-Mobile US (TMUS) | 0.00 | ||
| Sucampo Pharmaceuticals (SCMP) | 0.00 | ||
| Pandora Media Inc. (P) | 0.00 | ||
| Masco (MAS) | 0.00 | ||
| Expedia Group (EXPE) | 0.00 | ||
| Dexcom (DXCM) | 421.36 | ||
| Activision Blizzard, Inc. (ATVI) | 0.00 | ||
| Athenahealth (ATHN) | 0.00 | ||
| Adaptive Biotechnologies Corporation (ADPT) | 39.41 |
Current Market OutlookThe major indexes have done a decent job of holding above the August 24 lows, and a few stocks and sectors have pushed to new high ground. In the short term, we still think further upside testing is possible, especially if the Federal Reserve issues some reassuring words later this week. However, it’s going to take more than just another couple of good days to turn the market’s trends back up—right now, all of the major indexes (and the vast majority of stocks) are still buried beneath resistance and are trading below key moving averages. Thus, we’re sticking with our defensive stance—the onus is clearly on the bulls to re-take control.
This week’s list has another batch of potential leaders; there’s not many defensive stocks making the list, which is encouraging. Our Top Pick is Royal Caribbean (RCL), a big-cap leisure stock that has a strong chart and big earnings estimates.
| Stock Name | Price | ||
|---|---|---|---|
| WellCare Health Plans, Inc. (WCG) | 271.83 | ||
| Virgin Airlines (VA) | 0.00 | ||
| Tempur Sealy (TPX) | 85.53 | ||
| RH Inc. (RH) | 252.93 | ||
| Royal Caribbean Cruises (RCL) | 0.00 | ||
| Neurocrine Biosciences (NBIX) | 123.40 | ||
| Martin Marietta Materials (MLM) | 261.52 | ||
| Clovis Oncology (CLVS) | 0.00 | ||
| Amazon.com (AMZN) | 2.00 | ||
| Abiomed (ABMD) | 0.00 |
Current Market OutlookThe market continues to gyrate wildly, gapping up or down based on the news of the day. In the short-term, the indexes (and most stocks) have etched out a little trading range, and that could continue for a while longer. But the main trend remains down, so you should be using these bounces as a chance to unload any broken stocks and raise cash if you’ve yet to do so. On the buy side, we are starting to see the wheat separate from the chaff, but it remains too early to put any big money to work; a couple of small positions is fine, but we suggest focusing mostly on preserving capital for the next sustained run—that’s when the big money will be made.
This week’s list includes with some recently strong themes (medical, construction and retail), including a couple of recent IPOs. Our Top Pick is one of those newly-public firms—Planet Fitness (PLNT) has a good story and the stock has shown solid relative strength since coming public.
| Stock Name | Price | ||
|---|---|---|---|
| Signet Jewelers (SIG) | 0.00 | ||
| Post Holdings (POST) | 0.00 | ||
| Planet Fitness (PLNT) | 0.00 | ||
| PDC Energy (PDCE) | 0.00 | ||
| Medicines Company (MDCO) | 56.98 | ||
| Lululemon Athletica (LULU) | 304.69 | ||
| JetBlue Airways Corporation (JBLU) | 0.00 | ||
| TopBuild (BLD) | 111.00 | ||
| Anacor Pharmaceuticals (ANAC) | 0.00 | ||
| AMN Healthcare (AHS) | 0.00 |
Current Market OutlookThe major indexes actually made decent gains last week, though that came on the heels of a major breakdown the week before. In the short-term, last week’s show of support was encouraging; it could be the start of a multi-week bottoming process following the extreme selling pressure. If you want to trade stocks, taking small positions on dips could be worthwhile. However, remember that the bigger picture remains bearish—the major trends of the indexes are clearly down and most stocks have a ton of overhead supply to deal with. Thus, you should remain overall defensive, holding lots of cash and focusing more on building a watch list than trying to make a bunch of money here.
This week’s list has some steady growth stories as well as a few earnings winners from last week. Our Top Pick is Dycom (DY), a leading provider of construction services to the telecom industry, which is dramatically expanding its bandwidth. It’s not a long-term growth story but should be in great shape for at least another few quarters.
| Stock Name | Price | ||
|---|---|---|---|
| Vantiv (VNTV) | 0.00 | ||
| Under Armour (UA) | 0.00 | ||
| Tyler Technologies (TYL) | 0.00 | ||
| TransDigm (TDG) | 599.41 | ||
| Sarepta Therapeutics (SRPT) | 120.93 | ||
| Incyte Corporation (INCY) | 76.98 | ||
| Flotek (FTK) | 0.00 | ||
| Express (EXPR) | 0.00 | ||
| Dycom Industries (DY) | 0.00 | ||
| Buffalo Wild Wings (BWLD) | 0.00 |
Current Market OutlookThe market had a mini-crash this morning, as what looked like forced liquidation took the Dow down more than 1,000 points before a gigantic snapback. Today’s wash-and-rinse action (and the many climactic readings we saw) raises the prospects that a near-term bottom is in and that a bottoming process (weeks of vicious ups and downs) could begin. That said, the main trend of the market is down, so we’re advising a defensive stance—focus on capital preservation and building a watch list for the next sustained advance, while keeping new buys small. In time, we’re going to see some incredible winners set-up, but patience is required first.
This week’s list has a few solid growth stories, though they skew toward the conservative side of the spectrum. Our Top Pick is Chipotle Mexican Grill (CMG), which has the trading volume, growth prospects and dependability to keep big investors interested.
| Stock Name | Price | ||
|---|---|---|---|
| Tempur Sealy (TPX) | 85.53 | ||
| Mohawk Industries (MHK) | 0.00 | ||
| Lennar (LEN) | 61.85 | ||
| IntercontinentalExchange, Inc. (ICE) | 0.00 | ||
| Heron Therapeutics (HRTX) | 35.25 | ||
| Global Payments Inc. (GPN) | 0.00 | ||
| CyrusOne Inc (CONE) | 0.00 | ||
| Chipotle Mexican Grill (CMG) | 773.32 | ||
| CDW Corporation (CDW) | 0.00 | ||
| Alaska Air Group (ALK) | 0.00 |
Current Market OutlookLast week was a microcosm of 2015 as a whole, with plenty of ups and downs, intraday reversals, sector rotation … and not much overall progress for the major indexes. That said, we have seen more and more leading stocks hit the skids during the past two weeks, which is a yellow flag; there are still plenty that remain in good shape, but it’s obvious that picking your spots remains vital. We’ll keep our Market Monitor in neutral territory, waiting for a decisive show of strength or weakness before turning bullish or bearish.
This week’s list has something for everyone—airlines, medical, construction and retail. Our Top Pick is Wayfair (W), a newer stock that blasted out of a base on earnings last week as growth accelerated. Given the market, keep new positions small and try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Wayfair (W) | 167.03 | ||
| Vulcan Materials Company (VMC) | 137.10 | ||
| Sabre Corp. (SABR) | 0.00 | ||
| Molina Healthcare (MOH) | 0.00 | ||
| Fortune Brands Home & Security (FBHS) | 81.02 | ||
| Expedia Group (EXPE) | 0.00 | ||
| Envision Healthcare (EVHC) | 0.00 | ||
| D. R. Horton (DHI) | 66.55 | ||
| AmSurg (AMSG) | 0.00 | ||
| Allegiant Travel (ALGT) | 170.65 |
Current Market OutlookPure and simple, last week was a bad one for the market—not only did the major indexes take hits, but many resilient stocks came under severe selling pressure. The fact that strong, Top Ten-type stocks took hits (leaving fewer stocks in good shape) has us lowering our Market Monitor by a notch, and it’s vital that the repeated waves of intense selling seen last week don’t continue. For now, though, the bigger picture hasn’t changed: The trading range environment and the vicious rotation from sector to sector remains the order of the day. Thus, the general game plan is the same: being selective on the buy side and holding some cash on the sideline—as we wait for the major indexes to show their hand.
This week’s list actually has quite a few solid growth stories, though there’s definitely a bigger-cap tilt to the list. Our Top Pick is one of them—Lockheed Martin (LMT) has just hit new highs and is under strong accumulation as business is set to pick up.
| Stock Name | Price | ||
|---|---|---|---|
| Ultimate Software (ULTI) | 0.00 | ||
| Tesoro (TSO) | 0.00 | ||
| Royal Caribbean Cruises (RCL) | 0.00 | ||
| Martin Marietta Materials (MLM) | 261.52 | ||
| Lockheed Martin (LMT) | 0.00 | ||
| Lennox International (LII) | 270.56 | ||
| Facebook, Inc. (FB) | 0.00 | ||
| BofI Holding (BOFI) | 42.93 | ||
| Activision Blizzard, Inc. (ATVI) | 0.00 | ||
| Arista Networks (ANET) | 0.00 |
Current Market OutlookThe divergence continues, with the broad market looking increasingly weak. Even the rally last week couldn’t lift many stocks off their bottoms. So what comes next? Optimists may claim that low interest rates mean there are no attractive alternatives to stocks, but pessimists will note that divergences such as these seldom end well. Thus our market monitor remains unchanged—in slightly positive territory. You can still make money in this market, but more than ever, skillful stock-picking, combined with proper entry timing, is critical. So we urge you to study numerous individual stocks carefully. Try to buy on normal pullbacks. And above all, keep losses small if a stock doesn’t do what you hired it to do. Today’s roster includes some strong breakouts and a handful of set-ups, and our Editor’s Choice is Vantiv (VNTV), which vaulted out to new highs last week on a positive earnings report and is riding a fine trend of long-term growth.
| Stock Name | Price | ||
|---|---|---|---|
| Zoës Kitchen (ZOES) | 0.00 | ||
| WisdomTree (WETF) | 0.00 | ||
| Vertex Pharmaceuticals (VRTX) | 230.36 | ||
| Vantiv (VNTV) | 0.00 | ||
| ServiceNow (NOW) | 341.86 | ||
| Masco (MAS) | 0.00 | ||
| ICON plc (ICLR) | 0.00 | ||
| Equinix, Inc. (EQIX) | 547.73 | ||
| Buffalo Wild Wings (BWLD) | 0.00 | ||
| Anacor Pharmaceuticals (ANAC) | 0.00 |
Current Market OutlookIf you haven’t stuck with a proven system in 2015, chances are you’ve been chopped to pieces by the market’s never-ending ups and downs. Today was another headline-driven selloff (Chinese stocks are seeing renewed weakness), but it doesn’t change the market’s condition—the intermediate-term trend is still sideways, with some stocks acting fine and others looking like it’s 2008. The plan remains the same—be selective on the buy side, honor all stops and hold some cash, but also give your most resilient stocks a chance to hold up and resume their advances. If leading stocks decisively break down, then we’ll change our tune, but so far focusing on the strongest stocks has been fruitful.
This week’s list features a few recent earnings winners, as well as a few that are set up well heading into their earnings reports. Our Top Pick is Valeant Pharmaceuticals (VRX), a big-cap growth stock that remains in a firm uptrend following a better-than-expected report.
| Stock Name | Price | ||
|---|---|---|---|
| Valeant Pharmaceuticals (VRX) | 0.00 | ||
| Netflix, Inc. (NFLX) | 423.92 | ||
| Infinera (INFN) | 0.00 | ||
| IACI (IACI) | 0.00 | ||
| GoPro, Inc. (GPRO) | 0.00 | ||
| Criteo (CRTO) | 0.00 | ||
| Chipotle Mexican Grill (CMG) | 773.32 | ||
| Cempra (CEMP) | 0.00 | ||
| China Biologic Products (CBPO) | 0.00 | ||
| Amazon.com (AMZN) | 2.00 |
Current Market OutlookLast week was a great one for the major indexes and leading stocks, with many surging higher on big volume to notch new highs, a good sign that big investors are putting money to work in growth stocks. That said, it’s not all peaches and cream out there—hundreds of stocks are actually hitting new 52-week lows (mostly energy and interest rate-sensitive stocks, but others, too), and to this point, only the Nasdaq has reached new high ground; the intermediate-term trend for most indexes remains neutral. Reflecting the terrific action of Top Ten stocks, we’ll nudge our Market Monitor up a notch; if you see a good set-up, go ahead and take it. But we’re still advising holding some cash on the sideline and being selective on the buy side.
This week’s list has a hodgepodge of stocks, many of which haven’t been featured here for a long time. For our Top Pick, we’ll stick with the big-cap growth stock theme that’s working well—Celgene (CELG) just popped out of a four-month base on big volume last week following a major acquisition. It’s buyable around here.
| Stock Name | Price | ||
|---|---|---|---|
| Intrexon (XON) | 0.00 | ||
| Take-Two Interactive (TTWO) | 123.32 | ||
| Progressive Corp. (PGR) | 0.00 | ||
| Blackhawk Network (HAWK) | 0.00 | ||
| Alphabet, Inc. (GOOGL) | 0.00 | ||
| Fitbit Inc. (FIT) | 0.00 | ||
| Domino’s Pizza (DPZ) | 339.47 | ||
| Celgene (CELG) | 0.00 | ||
| Barnes & Noble (BKS) | 0.00 | ||
| Alaska Air Group (ALK) | 0.00 | ||
| ACADIA Pharmaceuticals (ACAD) | 47.84 |
Updates
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.
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.
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.”
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.
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.
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.
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 30th. 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.
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 30th. 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
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.
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.
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.
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.
Alerts
GameStop rolled out its new Ship from Store process in all 4,100 of its U.S. stores in late February.
The market followed up Wednesday’s big-volume turnaround with further gains yesterday—at day’s end, the Dow rose 216 points and the Nasdaq gained 40 points. The push higher by the major indexes took them above resistance levels, and gives us a clear Cabot Tides buy signal.
Portfolios
Strategy
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.