The broad market remains in fine health, with the major indexes trending higher and sentiment measures still bullish. Thus I continue to recommend that you be heavily invested in a diversified portfolio of stocks that fit your investment needs.

Last week’s recommendation was an undervalued cyclical business, and this week we swing back to a fast-growing cloud software stock with strong momentum and big upward potential.

Current Market Outlook


The overall market remains in good shape, with the major indexes and most leading stocks in uptrends. That said, today was a very bad day for growth stocks, as big investors hit the sell button almost from the get-go, leaving most of this year’s winners down sharply. Given the monstrous runs in many of these names and (in some cases) some recent stalling out action, we do take this as a yellow flag—however, to be fair, few have broken any key support and most non-growth issues look completely fine. Bottom line, if you have some good-sized profits and positions, we’re OK booking a couple of partial profits and honoring stops and loss limits going forward. On the buy side, we continue lean toward “fresher” titles, including many steadier growers that have come into favor.
This week’s list has a bunch of names that, until recently, have been marking time, but now look to have begun steady uptrends. Our Top Pick is Teradyne (TER), which leapt out of a huge base on earnings last week.

Stock Name	Price	Buy Range	Loss Limit
Chipotle Mexican Grill (CMG)	773.32	780-805	710-720
Etsy (ETSY)	112.97	67-69.5	59-61
Kirkland Lake Gold (KL)	51.30	43-46	38.5-40
Lithia Motors Inc. (LAD)	146.30	129-132	118-120
Meritage Homes (MTH)	102.20	60.5-63.5	54.5-56.5
New Oriental Education (EDU)	113.97	102-106	91-93.5
Sherwin-Williams (SHW)	526.09	490-505	455-460
Snap Inc. (SNAP)	16.68	16.8-18	14-15
Teradyne (TER)	82.83	55-58	48.5-50.5
TransUnion (TRU)	83.09	79-82	72-73.5

Our emerging market signal stays in positive territory. With our new global mandate in place, we move beyond emerging markets to a European quality play on technology. We also explore what the new Fortune Global 500 rankings can tell us about the changing landscape of investment opportunities.

The cannabis sector remains in a correction, with both marijuana and CBD stocks trending lower, giving up some of their early-year gains—and perhaps building a bottom here.

In the meantime, more and more peripheral companies are getting in on the action, and we have been increasing our exposure to these in recent weeks while still holding substantial cash.

This week we’re selling one more of the pure-play marijuana companies, raising the portfolio’s cash level to about 27%.

Full details in the issue.

The broad market remains in fine health, with the major indexes trending higher and sentiment measures still bullish. Thus I continue to recommend that you be heavily invested in a diversified portfolio of stocks that fit your investment needs.

Today’s recommendation is a well-known name on the consumer side, the biggest airline on the west coast. And, interestingly enough, it will be replacing our current airline stock, which is now being sold for a decent profit after less than four months.

Beyond that, there’s only one change to the portfolio today. Last week’s recommendation, which was bought at an unfortunately high point, will now be downgraded to Hold. Details in the issue.

Current Market Outlook


Bigger picture, nothing has changed with the market’s stance—the intermediate- and longer-term trends of the major indexes and most leading stocks look solid, sentiment (while heating up a bit) isn’t stretched and many background measures (like our 7.5% Rule) bode well for the months ahead. Short-term, though, things continue to look tricky, as earnings season combined with all the news/rumors out there surrounding the Fed, trade negotiations and even Iran is leading to daily wiggles and a ton of under-the-surface rotation. As we’ve been writing for a while, you shouldn’t get caught up in the day-to-day gyrations, but taking partial profits when offered and being choosy on the buy side (keeping positions small ahead of earnings, looking for good setups near support) makes sense as the myriad crosscurrents continue.

Reflecting the environment, this week’s list produced much more diverse than in recent weeks. Our Top Pick is ASML Inc. (ASML), a chip equipment maker that just broke out on earnings from a year-long base.

Stock Name	Price	Buy Range	Loss Limit
Ally Financial (ALLY)	30.44	32-33.5	29-30
Arrowhead Pharmaceuticals (ARWR)	32.16	28-30	24-25
ASML Holding (ASML)	350.01	222-229	200-204
CrowdStrike (CRWD)	105.02	84-88	70-72.5
EPAM Systems (EPAM)	188.24	190-195	173-175
Generac Holdings (GNRC)	86.60	69.5-72	63-64.5
Lululemon Athletica (LULU)	304.69	185-190	172-174
Match (MTCH)	0.00	75-78	67.5-69
Proofpoint (PFPT)	113.79	122-127	112-114
Wheaton Precious Metals (WPM)	34.43	26-27.5	23-23.5

In tonight’s letter, we share a couple of ideas for those of you that don’t like to hold all your stocks though earnings; we review a couple of new names that are on our watch list (ESTC is one we’re very intrigued by) and go over all our current Model Portfolio stocks as many are set to report earnings during the next two weeks.

The broad market remains in fine health, with all major indexes trending higher and sentiment measures still bullish. Thus I continue to recommend that you be heavily invested in a diversified portfolio of stocks that fit your investment needs.

Today’s recommendation is a leader in its field, with great long-term growth prospects—as well as dependable recurring revenue—as the U.S. transitions away from fossil fuels to renewable energy sources.

As for the current portfolio, most of our stocks are doing great, but we’ve got to sell one, and it’s a tough choice. Details inside.

After two near-record-setting months, stocks are encountering their first real turbulence since March. It’s no surprise.

While stocks go up an average of 10% a year, they rarely do so in a straight line. And after the S&P 500 rallied nearly 20% in April and May and the Nasdaq shot up nearly 30%, a pullback of some kind – or possibly even a true correction – was to be expected. It seems it’s happening all at once.

Stocks look to enter summer near all-time highs, but leadership has narrowed and volatility has ticked up thanks to renewed scrutiny on the AI trade and open-ended questions about valuations in some of the hottest areas of the market.

There’s also been more focus on the evolving macro landscape, which features a resilient U.S. economy but stubbornly high energy prices due to the ongoing Iran conflict, and somewhat elevated yields. We’re now looking at a higher likelihood of a Fed rate hike, with the odds of a hike by December now well over 50%.

The high-flying AI stocks got crushed on Friday. But those stocks started this week higher. Where do we go from here?

The technology-heavy Nasdaq index fell 4% on Friday, and the S&P 500 fell for the week for the first time in 10 weeks. A couple of things spooked investors. The AI trade turned sour after Broadcom (AVGO) reported earnings that included slightly lower revenue projections for its AI chips than were expected. Also, a blowout jobs report strengthened the case for a Fed rate hike by the end of the year.

A major economic narrative that took shape in recent years was the decline and (presumptive) inevitable death of the so-called “petrodollar,” as a growing number of countries diversified their foreign exchange reserves away from the U.S. dollar and toward gold and alternative currencies like the Chinese yuan.

WHAT TO DO NOW: The overall market remains in good shape, though we are seeing some exuberance on the upside and also a few leaders begin to act sloppy. Near term, then, it’s still a coin flip as to what comes, but the vast majority of intermediate-term evidence remains bullish. In the Model Portfolio, we took partial profits in Marvell (MRVL) earlier this week; tonight, we’re buying a half-sized position (5% of the account) in Bloom Energy (BE), which is extremely volatile but also strong and coming off a few weeks of rest. Our cash position will now be around 28%.

This market just keeps going higher.

Sure, there’s uncertainty out there. The war isn’t over. Inflation and interest rates are still too high. But stocks didn’t get the memo. After a strong April, the S&P 500 rose 5% and the Nasdaq soared 8% in May. The indexes are up 20% and 30%, respectively, since March 30 and are continuing to make new highs this week.

Despite the negative headlines and volatility, stocks just keep going.

After a strong April, the S&P 500 rose 5% and the Nasdaq soared 8% in May. The indexes are up 20% and 30%, respectively, since March 30. It’s also worth noting that despite the ongoing Iran war, the price per barrel of West Texas Intermediate crude oil closed down 17% for the month of May.

This week’s Memorial Day observance marked the traditional onset of the summer vacation season for millions of Americans. It’s a time of traveling, sightseeing, picnics and parties. It’s also the peak season for enjoying cold, carbonated beverages like soda pop and energy drinks.

With this dynamic in play, I think it’s time that we give some attention to our holding in PepsiCo (PEP), which is entering a critical period of its sales year.

On the heels of a miserable March and a euphoric April, I wrote several weeks ago in this space that I thought May would determine which direction the market is truly headed, at least in the intermediate term. We have our answer, and it’s a definitive “up.”

All three major U.S. indexes are touching record highs as of this writing, with the S&P 500 up 4.3% in May, the Nasdaq up 7%, and the slower-moving Dow Jones Industrial inching higher by 1.6%. That’s despite the ongoing Iran war and the accompanying sky-high oil and gas prices, escalating inflation, bond yields at multi-year highs, possible Fed rate hikes later this year, and record-low consumer sentiment.

Stocks have largely shrugged off this week’s dust‑ups in the Middle East as investors continue to bet on a near‑term memorandum of understanding (MOU) that would reopen the Strait of Hormuz and push bigger sticking points between the U.S. and Iran down the road.

Yields have cooled off this week and continue to do so this morning, thanks to a slightly lower‑than‑expected core PCE reading. April core PCE rose 0.2% month over month, below both March’s 0.3% reading and consensus, giving the Fed some breathing room as policymakers weigh the competing forces of inflation and growth.

The $145 trillion global bond market is under some stress due to runaway debt. The 30-year U.S. Treasury bond yielded over 5% last week, up from 4.63% at the end of February. Americans are struggling to keep up with their debt payments, as the cost of borrowing money increases. This is a global story. In Japan, the 30-year government bond yield just hit a record of 4.15%, and U.K. government debt jumped to 5.85% earlier this month.

Nothing stops this market. The S&P 500 hit another new high this week.

The spectacular earnings season helped power the rally. Average earnings growth on the S&P 500 is over 28% in the first quarter. That is far better than the expected 13.1% and the highest level of growth for any quarter since 2021.

This fitness equipment maker is due to release earnings tomorrow, now estimated at $0.31 per share. The company beat estimates last quarter, by three cents.

The shares of this real estate company were recently upgraded by Raymond James to ‘Outperform’ and seven analysts have raised their EPS estimates for the company in the past 30 days.

This oil producer just announced a merger deal with SandRidge Energy, Inc., which should result in one of the largest oil players in the Mississippian Lime shale formation.

A small-cap jumps on earnings and a second has announced a voluntary cash offer to acquire all shares of another company.

There are several rating changes today due to earnings.

Five analysts have increased their EPS estimates for our first pick, a midwestern bank, and our second recommendation is the sale of a previous idea.

Our second recommendation is the sale of a previous idea.

This trucking company handily beat analysts’ earnings estimates, and forecasts are for double-digit growth this year.

This airline manufacturer has seen fantastic results, beating analysts’ earnings estimates by $0.17 last quarter.

Right now, my advice is to continue to deploy cash into your favorite stocks.

After a half-hearted mid-week bounce, the stock market had another rough day yesterday. The S&P 500 fell almost 4%, and is now 10% off its all-time high. That means we’re now officially in a correction, although we didn’t really need yesterday to tell us that.

This contributor has concerns about volatility and is recommending a short-term move into this 5-star short-term bond fund.

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.