Current Market Outlook


We’ve begun to see a few worrisome developments when it comes to the market. Small-cap indexes have lagged badly and haven’t made any progress in three months. A few sectors (especially commodity-related) have broken down. And breadth in general has weakened, with the number of stocks hitting 52-week lows expanding in recent days. However, we see a lot of good news, too—the intermediate-term trend is still pointed up, lots of strong stocks have consolidated normally in recent days and we’ve even seen a few new leaders begin to emerge on big volume. Altogether, it’s fair to say that the evidence has weakened so we’re knocking down our Market Monitor back to a level 7 and will be watching events closely. But until the uptrend is cracked, you should remain mostly bullish, holding your strong performers and looking for new buys as opportunities arise.

This week’s list has a wide variety of stocks and sectors, including a few names we haven’t seen in a long time. Our Top Pick is Builders Firstsource (BLDR), a good-sized supplier of building products that just gapped up strongly on earnings after trashing earnings estimates.

Stock Name	Price	Buy Range	Loss Limit
Autohome (ATHM)	98.65	34-36	31-32
Builders FirstSource (BLDR)	44.12	14.5-15.5	13.5-14
Exelixis (EXEL)	27.35	20.5-22	19-19.5
Leucadia (LUK)	0.00	26-27	24-25
ON Semiconductor (ON)	24.07	14.5-15.5	13.5-14
PulteGroup (PHM)	45.93	22.5-23.5	21-21.5
Shopify (SHOP)	585.00	60-64	53-55
SVB Financial Group (SIVB)	0.00	190-195	175-178
Synopsys (SNPS)	137.53	69-72	64-66
Take-Two Interactive (TTWO)	123.32	56-59	53-54

Roy introduces two new stocks that hold great promise: one is poised to start producing better sales and earnings this year and next, and the other is taking advantage of strong demand for digital storage created by the cloud computing revolution.

Current Market Outlook


With the market beginning a long-overdue correction that has the potential to bring high-flying stocks down to earth, one very human temptation is to defer new buying until risk seems to be past. But if you always think that way, you’ll never invest. Instead, we recommend keeping it simple. Recognize that the market’s main trend today is clearly up, and focus on identifying strong stocks with logical entry points. The candidates for today’s Top Ten included many semiconductor stocks, medical technology stocks, basic chemical stocks, financial services stocks and REITs, and you’ll find the best of those, along with other attractive stocks.

Our Top Pick is NetEase (NTES), which gapped up to new highs on its earnings report in mid-February and has since pulled back to support at the low end of its recent range. (Note: Don’t let the high share price dissuade you; simply buy fewer shares.)

Stock Name	Price	Buy Range	Loss Limit
Bluebird Bio (BLUE)	0.00	80-85	73-74.5
Century Aluminum Co. (CENX)	17.24	13.5-15	12-12.5
Conduent (CNDT)	0.00	15-16	13.5-14
Copa Holdings (CPA)	0.00	101-105	96-97
NetEase, Inc. (NTES)	0.00	280-290	260-265
Pacira Biosiences (PCRX)	54.85	48-51	44-45
STMicroelectronics (STM)	30.09	13.5-14.5	12.5-13
Symantec Corporation (SYMC)	0.00	27-29	25-26
TAL Education (TAL)	50.49	85-91	80-81
United Rentals, Inc. (URI)	0.00	125-130	114-115

Current Market Outlook


The overall market continues to act just fine, the trends are pointed up for most indexes and stocks, and the broad market remains in great shape. That said, it’s not all peaches and cream—the last three days have seen some selling pressure in a few highflyers and money flows into defensive groups (like utilities and consumer staples). Moreover, this action comes after a few short-term signs of enthusiasm, including a huge number of new highs on Nasdaq last Wednesday. Don’t get us wrong: We’re still bullish, and you should hold your strong stocks and be heavily invested. But we’ll knock our Market Monitor back down a notch (to a level 8), and think being selective on the buy side and ditching losers and laggards makes sense.

This week’s list has a broader array of stocks than in recent weeks as money flows shift. Our Top Pick is Square (SQ), which looks like a new leading growth stock after galloping ahead on earnings last week. Keep positions small and try to get in on dips.

Stock Name	Price	Buy Range	Loss Limit
Applied Optoelectronics (AAOI)	0.00	43.5-47	38-40
Autohome (ATHM)	98.65	32-34	30.5-29.5
HubSpot (HUBS)	582.89	57.5-60.5	55-53
Marriott Vacations (VAC)	0.00	93.5-97.5	87-89
Sage Therapeutics (SAGE)	0.00	62-66	56-59
Sinclair Broadcasting (SBGI)	54.14	38-40	35-36
Southwest Airlines (LUV)	0.00	55-57	51-52.5
Square, Inc. (SQ)	91.04	17-18	15.2-15.6
Univar (UNVR)	0.00	30.5-32	28-29
Universal Display (OLED)	187.54	82-85	74-76

Current Market Outlook


Stocks notched another solid week, with most major indexes rising 1.5% or so and a bunch of stocks going along for the ride. We saw the S&P 500, S&P 400 Midcap, Nasdaq, NYSE Composites and the NYSE Advance-Decline line all hit new highs. That’s bullish! We’re also encouraged by the increasing number of powerful earnings reactions we’re seeing, with many stocks surging on their heaviest volume in over a year. Short-term, pullbacks and shakeouts are always possible, but looking at the big picture, we saw the market blast out of an 18-month trading range in November, consolidate tightly for two months through January, and now resume its uptrend, with more stocks and sectors participating. All told, we’ll bump our Market Monitor up another notch to level 9 (out of 10).

This week’s list has another crop of very strong stocks, most of which have either gapped up on earnings or are just emerging from consolidations. Our Top Pick is ON Semiconductor (ON), a chip firm that just blew away estimates and is expecting huge bottom-line growth thanks in part to its acquisition of Fairchild.

Stock Name	Price	Buy Range	Loss Limit
Arista Networks (ANET)	0.00	115-120	102-105
NetEase, Inc. (NTES)	0.00	285-295	260-265
ON Semiconductor (ON)	24.07	14.5-15.5	13.5-14
Paycom Software (PAYC)	0.00	51-53	47-48.5
Portola Pharmaceuticals (PTLA)	0.00	29.5-31.5	26-27
Shopify (SHOP)	585.00	56.5-61.5	50-53
TIM Participacoes (TSU)	0.00	15-15.5	13.8-14.2
TTM Technologies (TTMI)	0.00	15.8-16.8	14.5-15
United States Steel Corporation (X)	0.00	37.5-39.5	35-36
Wix.com (WIX)	302.53	58-62	52-55

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.

Both Carnival (CCL) in the Smart Investing Growth & Income Portfolio, and Royal Caribbean Cruises (RCL) in the Growth Portfolio, were up over 5% yesterday, after Carnival reported a blowout first quarter.

GameStop (GME) reported fourth-quarter 2016 results on Friday (January year end), encouraging both bulls and bears.

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.