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

Current Market Outlook


Just a few days ago, the intermediate-term trend was looking iffy, but the past few days have shown very encouraging action—every major index has tagged new high ground, and we’re seeing more and more stocks react well to earnings and follow through to the upside afterwards. There are still a couple of yellow lights from some secondary measures (short-term sentiment is a bit complacent; small caps continue to lag), so near-term pullbacks wouldn’t be surprising. But there’s no question the trend of the market and most stocks is up, with many areas resuming their post-election advances. We’ll nudge up our Market Monitor to a level 8 (out of 10) to reflect the improved evidence.

This week’s list has a bunch of stocks that are showing excellent power in recent weeks; many have just gotten going after long sideways phases. Our Top Pick is Lumentum (LITE), a mid-sized player in the optical networking field that’s exploded out of a four-month base. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Box Inc. (BOX)	0.00	16.7-17.7	15-15.7
CDW Corporation (CDW)	0.00	55.5-58	51-52.5
Cleveland-Cliffs (CLF)	0.00	11-12	9.7-10.3
Lam Research (LRCX)	268.47	112-116	106-108
Louisiana-Pacific (LPX)	0.00	21.5-22.5	20-20.5
Lumentum (LITE)	87.00	45-48	41-43
Medicines Company (MDCO)	56.98	46-49	42-43.5
Morgan Stanley (MS)	0.00	44-46	41.5-42.5
Sanmina (SANM)	0.00	38-40	35-36
Weibo (WB)	98.16	51-54	48-49

Current Market Outlook


The market has made a little upside push during the past week or two, but net-net, most indexes are up just a smidgen during the past seven weeks. That sideways trading has contained most stocks and sectors, too, as they chop around with a slight upward bias. Even so, the intermediate- and longer-term trends are up, so the odds continue to favor the next major move being up. And we’re encouraged by both the number of positive earnings reactions we’ve seen, as well as the action of those stocks after they gap up—most have traded constructively post-earnings with no selling pressures coming in even after they ramp. All told, we’re still mostly positive, but we’ll keep our Market Monitor at a level 7 (out of 10) until we see more than just the Nasdaq decisively push out of their recent trading ranges.

This week’s list has another batch of strong stocks, including many that have recently reacted well to earnings. Our Top Pick is a tough call, but we’ll go with Ally Financial (ALLY), which just exploded higher on earnings after years in the market’s doghouse. It looks to be just starting its run.

Stock Name	Price	Buy Range	Loss Limit
Ally Financial (ALLY)	30.44	21.5-23	20-21
Century Aluminum Co. (CENX)	17.24	14-15	12.5-13
Essent Group (ESNT)	0.00	34-36	31.5-32.5
Exelixis (EXEL)	27.35	18.5-19.5	17-17.5
Olin Corp. (OLN)	0.00	28.5-30	26-27
Symantec Corporation (SYMC)	0.00	26.5-28	25-25.5
Teradyne (TER)	82.83	27-28.5	25-26
Tesla, Inc. (TSLA)	818.87	247-256	225-229
Texas Capital Bancshares (TCBI)	0.00	82-86	76-78
Yandex (YNDX)	0.00	22-23	20-21

Current Market Outlook


Last week brought the long-awaited breakout by the major indexes, but after a couple of days at new high ground, most sank back into their prior five-plus-week ranges today; small-cap indexes even broke their 50-day lines. With that said, most indexes remain in good shape, and the same can be said about the vast majority of stocks (a bunch of which have gapped up on earnings) and sectors—in other words, the evidence remains far more positive than not. Because of that, it’s fine to take a swing at some strong stocks on pullbacks, especially those that have recently shown great accumulation. However, we’re going to leave our Market Monitor at level 7 today given the lack of progress in the indexes, and we’ll keep our eyes open should today’s selling persist.

The good news is that this week’s list is chock-full of earnings winners that should find support on weakness. Many look enticing, but our Top Pick is Skyworks (SWKS), which is one of many super-strong chip stocks that just enjoyed a big earnings gap as investors anticipate better results ahead.

Stock Name	Price	Buy Range	Loss Limit
Allegheny Technologies (ATI)	27.78	20-22	17.5-18.5
Broadcom Limited (AVGO)	266.26	196-202	182-185
Cheniere Energy (LNG)	63.82	46-48	42.5-43.5
Citizens Financial Group (CFG)	0.00	35-37	32-33
Eagle Materials Inc. (EXP)	0.00	103-106	96-98
International Paper Company (IP)	0.00	55-57	51.5-52.5
Micron Technology, Inc. (MU)	43.31	22.5-24	20.5-21
Royal Caribbean Cruises (RCL)	0.00	92-96	85-87
Seagate Technology (STX)	0.00	42.5-45	38-40
Skyworks Solutions (SWKS)	0.00	88-92.5	82-84

Has there ever been anything as overvalued as SpaceX (SPCX)?

Elon Musk’s rocket and space-based internet company reported $18.7 billion in revenue in 2025. That’s less than half the revenue declining electronics store chain Best Buy (BBY, $41.7 billion) generated last year, less than International Paper Company (IP, $23.6 billion), and barely more than Casey’s General Stores (CASY, $17.6 billion). Those three companies have a combined market cap of roughly $67 billion. As of this writing, SpaceX has a market cap of $2.7 trillion. That’s more than the combined market cap of Walmart (WMT), JPMorgan (JPM) and Visa (V). Together, those three companies generated $847 billion in revenue last year.

Small caps continue to hold up well. The S&P 600 Small Cap Index is up modestly since last Thursday and is trading just below the fresh all-time highs it hit earlier this week. The group’s resilience stands out, especially against a backdrop of narrowing leadership and ongoing rotation beneath the market’s surface.

The main macro development this week was the Fed’s June meeting and Chair Kevin Warsh’s press conference, which confirmed a shift in policy direction.

WHAT TO DO NOW: The market’s bounce has been a good one, and the intermediate-term outlook remains bright. That said, near term, there are still some crosscurrents (rotation into the broad market, Dow outperforming the Nasdaq) that tell us growth stocks could throw us another curveball in the coming week or two. Overall, then, we’re mostly standing pat, but we’re going to add a half-sized stake in Guardant Health (GH) here, leaving us with a still-good-sized cash position of 37% or so. Details below.

Stocks started this week with a huge rally as the Iran ceasefire deal appears to be the real thing.

Of course, it’s been months of supposed peace deals falling apart. It’s hard to believe. I’m sure that fact is holding the market back somewhat. But this one is different for a couple of reasons.

Stocks are starting off this week with a huge rally as the U.S. and Iran have reached a ceasefire deal.

We’ve been here before. These peace deals have fallen apart several times. I’m sure that fact is holding the market back somewhat. But this one is different for a couple of reasons. First, it’s the furthest a peace deal has gotten with both sides agreeing and independent verification from Pakistan. Second, this is what a peace deal would look like at this point if it’s real and lasting.

[Note: The Cabot Turnaround Letter weekly update won’t be published next Friday, June 19, due to the market being closed for the Juneteenth holiday.]

Before we get into the main topic for today’s newsletter update, a quick note on the portfolio is in order. I’m continuing our “spring cleaning” effort that we began last week by trimming a couple more of our holdings, but I’m also adding a new position to take the place of the recent deletions.

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.

I have three pieces of news about BorgWarner (BWA), maker of engineered automotive systems for power train applications.

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.