Last week I told you that we’d received a new buy signal from our intermediate-term market-timing indicator—but it didn’t last long. The market’s widespread selling on Wednesday and Thursday quickly turned it negative again.

So capital preservation is once again of primary importance—though the charts say the time is ripe for at least a modest bounce.

Current Market Outlook


The market had put together a few small positive steps heading into last week, but after a solid G20-induced rally on Monday, it’s been all selling, all the time—the intermediate-term trend has rejoined the longer-term trend in bearish territory, with some indexes (including the S&P 500 today) hitting new correction lows. Because of that, we’re moving our Market Monitor back down a notch to a level 4 and advise remaining in a defensive stance. That said, it’s not all bad news; we’re seeing more stocks that are resisting the market’s pull (forming significantly higher lows), and many indexes are still being defended at their October/November lows. Bottom line, it’s best to take things day-by-day and go with the evidence—which, today, means holding plenty of cash.

This week’s list, though, is a good place to start building a watch list if you’ve yet to do so, as many of these stocks look like they want to move higher if the market gets going. Our Top Pick is MongoDB (MDB), a stock that actually nosed to new highs after earnings before pulling back in.

Stock Name	Price	Buy Range	Loss Limit
Guardant Health (GH)	88.34	42-44.5	36.5-38
Kirkland Lake Gold (KL)	51.30	22-23.5	20-21
LHC Group (LHCG)	103.10	97.5-100	89-91
MongoDB (MDB)	156.56	80-84	70-72.5
Okta, Inc. (OKTA)	148.41	61-64.5	54-56
RH Inc. (RH)	252.93	132-138	119-123
Shopify (SHOP)	585.00	143-150	130-134
Spirit Airlines (SAVE)	57.03	57.5-60.5	52-53.5
Vanda Pharmaceuticals (VNDA)	31.04	26-28	22.5-23.5
Zscaler (ZS)	126.22	38.5-41	33.5-35.5

Today’s new addition is, like last month’s, a stock that has bucked the broad market’s trend and gone up!
It’s an industrial biotechnology stock. And the secret to its success lies in a proprietary technology platform that uses artificial intelligence and machine learning to create new proteins for use in various industries.

The action of the past few weeks looks like a solid bottoming attempt by the market, and we received a Cabot Tides buy signal late last week. But yesterday’s huge decline is a good indication that sellers are still lurking, which along with our still-bearish longer-term Cabot Trend Lines, is a reason to remain mostly defensive and go slow on new buying.

These few companies found in today’s issue are newsworthy, and lots of people are pondering buying and selling these stocks, so let’s get a firm grasp on whether the stocks warrant your attention.

The good news is that we have a new intermediate-term market-timing buy signal. The bad news is that our long-term market-timing indicator remains negative—and that markets as a whole remain in disarray, with no clear leaders.
Thus, some caution is still warranted, at least until the end of the year, as tax-selling forces will hold some stocks down.
But today’s recommendation is not one of those. Instead, it’s a little-known biotechnology stocks with big connections and great growth prospects.

Current Market Outlook


Last week, the market took another step on the road to health, as the intermediate-term trend of the major indexes began to turn up and many potential growth leaders showed strong accumulation. That’s enough for us to nudge up our Market Monitor another notch and, assuming you’ve been in a relatively defensive stance, you should begin to put some money to work. That said, we also think it’s best to go slow—the longer-term trend remains sideways-to-down, very few stocks have hit new highs (as many new lows as new highs on the Nasdaq today) and there’s still a bunch of overhead for most indexes, stocks and sectors to chew through. Still, despite the potential issues, we’re growing more positive as the market’s action has improved in recent weeks.

This week’s list is full of stocks from a variety of sectors that look poised to do well if the market’s recent strength continues. Our Top Pick is Workday (WDAY), which, while it could pull back a bit, is acting like a liquid leader of any sustained advance that develops.

Stock Name	Price	Buy Range	Loss Limit
Amedisys (AMED)	174.06	133-138	120-123
Delta Air Lines (DAL)	54.28	58.5-60.5	54.5-55.5
Glaukos Corp. (GKOS)	67.84	65-68	57.5-59.5
Omnicell (OMCL)	81.03	72.5-75	67-69
PRA Health Sciences Inc. (PRAH)	96.08	114-118	105-107
Tesla, Inc. (TSLA)	818.87	350-360	323-318
Trade Desk (TTD)	468.02	142-147	123-126
Veeva Systems (VEEV)	180.23	97-100	89-91
Workday (WDAY)	194.88	160-166	145-148
Xilinx (XLNX)	134.50	89.5-93	82-84

In today’s issue, there are no new buy and sell recommendations, but you’ll find updates on all the stocks. And as we head toward the last of 2018, I’m very optimistic that the sector will have another great run in 2019—just when most investors least expect it!

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 set to enter the summer near all-time highs, but leadership has narrowed, volatility has ticked up, and there’s been renewed scrutiny on the AI trade and valuation concerns in some of the market’s biggest winners.

At the same time, the macro backdrop remains a mix of resilience and intermittent turbulence. While economic data continues to hold up, energy prices remain elevated due to the ongoing Iran conflict – which has no end in sight – keeping upward pressure on inflation and yields.

Tech, commodity, AI, and Explorer stocks struggled this week as concern over capital expenditures increased. Mideast tensions intensified and inflation numbers came in yesterday at their highest rate in over three years, fueled by rising energy costs. The combination of anticipated higher interest rates and rising bond yields impacted the price of precious metals, with gold sliding below $4,200 an ounce and silver falling below $64 an ounce.

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.

Wall Street believes this healthcare stock is going to produce double-digit growth over the next five years. The shares were recently upgraded by Morgan Stanley to ‘Overweight’.

The earnings forecasts for this pharma company were just increased by 14 analysts, and the stock has received two upgrades.

Three analysts have increased their earnings estimates for this telecom company in the last 30 days.

The earnings forecasts for this internet marketplace have been raised by 11 analysts in the past 30 days.

When share prices fall, it’s important to determine whether the situation will last for a couple of months, which can be quite normal, or for several years, which can be insufferable.

With a sizeable earnings beat ($0.29), 14 analysts have now raised their forecasts for this drug company.

Today we’re adding a managed healthcare operator to the Buy Low Opportunities Portfolio.

The top five holdings of this real estate fund are: Lennar Corp (LEN, 5.51%), Land Securities Group PLC (LSGOF.L, 5.49%), Weyerhaeuser Co (WY, 5.44%), Global Logistic Properties Ltd (GBTZF.SI, 5.25%) and Cheung Kong Property Holdings Ltd (CHKGF.HK, 5.14%).

The price of one of our stocks has dropped to one-sixth of its yesterday close and is now trading around 29. The move is the result of a change in the ratio of native shares to ADR shares.

Although this Mexican cement company’s earnings climbed by 41% in its latest quarter, the stock has taken a hit on weaker cash flow numbers.

I’ve seen some unsettling action in a few of our stocks, I think we need to make a few small adjustments.

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.