Current Market Outlook


Once again, nothing has changed in the market’s bigger picture health—the intermediate- and longer-term trends of all the major indexes are still up (though small-cap indexes are now testing their 50-day lines) and the broad market is healthy, with few stocks breaking down and even fewer hitting new lows. That said, we’re now entering the sixth week of no progress in most indexes, so it’s clear that the short-term trend is neutral, which has capped most stocks, too. We’re still overall optimistic, but we are going to nudge down our Market Monitor by one notch (to level 7 out of 10), so be sure to honor your stops, and be selective on the buy side or take smaller than normal positions until the bulls return. On the flip side, you should continue to give your strong stocks a chance to resume their rally.

The good news is that there are still many strong charts despite the market’s pause. Our Top Pick this week is Netflix (NFLX), which reacted well to earnings last week and looks like a big-cap leader if the market gets going from here.

Stock Name	Price	Buy Range	Loss Limit
ASML Holding (ASML)	350.01	117-121	109-111
Adient (ADNT)	0.00	60-63	55-56
Alcoa (AA)	0.00	34-36	31-32
Charter Communications (CHTR)	0.00	295-305	278-283
Hancock Holding (HBHC)	0.00	43.5-46	40-41.5
Netflix, Inc. (NFLX)	423.92	133.5-138	122-125
Southern Copper (SCCO)	0.00	34.5-36	32-33
T-Mobile US (TMUS)	0.00	57-59	53-54
TD Ameritrade (AMTD)	0.00	44.5-46	41-42.5
United Rentals, Inc. (URI)	0.00	107-110	100-102

Current Market Outlook


There’s little question the overall market environment remains bullish—the intermediate- and longer-term trends are up, most stocks and sectors are in the same boat and we’re spotting more set-ups (either pullbacks or longer bases) out there. Short-term, though, nothing would surprise us—most major indexes haven’t made any progress since mid-December, we’re entering the thick of earnings season and some sentiment measures have gotten extended, indicating investor complacency. We’re not advising any drastic change in stance; our Market Monitor remains in bullish territory at a level 8 out of 10, and we’re looking to latch on to any new leadership that lifts off. But just be sure to have your plan in place, both on the buy side and sell side, as earnings season revs up.

This week’s list is a mixed bag and includes a few stocks that are reporting earnings within a couple of weeks. Our Top Pick is Coherent (COHR), a little-known laser company that’s benefiting from an uptick in OLED demand and from a major acquisition that’s just closed. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Alaska Air Group (ALK)	0.00	90.5-93.5	84-85.5
Charles Schwab (SCHW)	0.00	39.5-41	36.5-37.5
Coherent, Inc. (COHR)	0.00	138-145	128-130
Glaukos Corp. (GKOS)	67.84	37.5-39.5	35-36
HealthEquity, Inc. (HQY)	70.70	45-48	40-42
Incyte Corporation (INCY)	76.98	112.5-118	102-104
MSC Industrial (MSM)	0.00	95-98	91-89
Rio Tinto plc (RIO)	57.05	40-42	37-38
Tesaro (TSRO)	0.00	148-153	134-137
Univar (UNVR)	0.00	27-28.5	25-26

Current Market Outlook


Beneath the market’s surface, there’s been lots of rotation and volatility, with buyers focusing on the laggards of late last year (especially the big-cap growth stocks), while the strong materials and transportation sectors continue to consolidate. (Even as the major indexes probe new high ground, the number of stocks hitting new highs is way down versus a few weeks ago.) That’s something to keep an eye on, but the trends of the major indexes and most stocks are still up, sellers have been unable to put much of a dent in the market despite the huge post-election run and few stocks have broken down. Until that changes, we’re keeping our Market Monitor in bullish territory, though it’s probably best to be a bit more discerning on the buy side, looking for tight setups and big volume breakouts.

Tonight’s list remains heavy on turnaround stocks, especially those in cyclical industries; the odds continue to favor higher prices as these stocks consolidate their strong post-election gains. Our Top Pick is AK Steel (AKS)—you can buy a little here and look to add shares on a powerful move to new highs.

Stock Name	Price	Buy Range	Loss Limit
AK Steel Holding (AKS)	0.00	9.9-10.4	9.0-9.3
Atwood Oceanics (ATW)	0.00	12.5-13.5	11-11.5
CF Industries (CF)	45.23	32-33	29-30
Clovis Oncology (CLVS)	0.00	45-48	41-43
Grand Canyon Education (LOPE)	121.03	57-59	54-55
Greenbrier (GBX)	57.73	44.5-47	40.5-42
Lions Gate Entertainment (LGF-A)	0.00	25-27	23-24
Oil States International (OIS)	0.00	39-41	36-37
Shopify (SHOP)	585.00	45-47	42-43
SVB Financial Group (SIVB)	0.00	170-175	157-160

Current Market Outlook


Early January is almost always a tricky time as big investors rotate and reposition their portfolios, leading to lots of crosscurrents and volatility. We saw some of that today and won’t be surprised to see more gyrations in the days ahead. Thus, we’re focusing mostly on the bigger picture, and on that front, the trend remains up, and we’re seeing a lot of pullback resumption set-ups (mostly from cyclical and financial stocks) and base-breakout set-ups (among some growth-oriented stocks). Now’s not the time to chase a stock’s every tick higher or lower, but you should remain bullish, and have a list of set-ups ready should the buying pressures resume after the modest late-December market retreat. We’re leaving our Market Monitor at a level 8 out of 10.

This week’s list has many stocks that have formed the aforementioned set-ups—should they resume their uptrends, many could have nice runs. For our Top Pick, we’re going with Micron Technology (MU), which gapped up strongly on earnings two weeks ago before pulling back. Dips look buyable to us.

Stock Name	Price	Buy Range	Loss Limit
Arista Networks (ANET)	0.00	95-98	90-92
Dave & Buster’s (PLAY)	57.01	54-56.5	51-52
HD Supply Holdings, Inc. (HDS)	0.00	41-43	37.5-38.5
Micron Technology, Inc. (MU)	43.31	21.5-23	19.5-20
Nabors Industries (NBR)	0.00	16-17	14.5-15
Oasis Petroleum (OAS)	12.57	14.5-16	13-13.5
Quanta Services (PWR)	91.45	34-36	31.5-32.5
Texas Capital Bancshares (TCBI)	0.00	76-78	71-72
United States Steel Corporation (X)	0.00	31.5-33	29.5-30.5
WellCare Health Plans, Inc. (WCG)	271.83	135-138	127-129

Two weeks ago we saw a tremendous number of stocks hit new highs, which usually indicates some short-term euphoria. Sure enough, the major indexes have generally hesitated in recent days, and under the market’s hood, some previously strong sectors (especially metals and transportation stocks) have come under pressure while a few growth stocks perk up. You should always watch your stops, especially if you have losses, but to this point, we’ve seen little in the way of abnormal action—a few stocks look ugly, but most are still holding key support, and many pullbacks are likely setting up solid entry points. Bottom line, while the short-term is likely to bring some bumps in the road, the odds continue to favor higher prices ahead for the market, so we’re OK putting some money to work in strong stocks during the current retreat.

This week’s list is heavy on the old world stocks that have been leading the rally, though there are a few growth names here, too. Our Top Pick is Berry Plastics (BERY)—it doesn’t have the most thrilling story, but the numbers are excellent and shares are in a solid uptrend.

Stock Name	Price	Buy Range	Loss Limit
Berry Global (BERY)	64.22	49.5-51.5	45.5-47
Chemours Company (CC)	0.00	23-24.5	21-22
Incyte Corporation (INCY)	76.98	98-103	91-93
KLX Inc. (KLXI)	0.00	43-45	38.5-40
MasTec, Inc. (MTZ)	66.65	36.5-38.5	33.5-34.5
MRC Global (MRC)	0.00	19.5-20.5	17.5-18
Netflix, Inc. (NFLX)	423.92	122-126	114-116
Square, Inc. (SQ)	91.04	13.5-14.5	12-13
Thor Industries (THO)	104.76	99-104	90-92.5
Zions Bancorporation (ZION)	0.00	40-42	37-38

Current Market Outlook


Not much has changed with the major indexes during the past week—all remain in intermediate- and longer-term uptrends, with small- and mid-cap indexes leading the way and the Nasdaq pulling up the rear. Below the surface, we have seen some profit taking in among many of the market’s top stocks and sectors (even the super-strong industrials, commodities and transports), and given the huge runs those names have seen during the past month, further retrenchment is certainly possible. But when we consider all of the evidence, the odds strongly favor dips being buyable, as pullbacks or shakeout-type action will probably lead to higher prices down the road. We’ll keep our Market Monitor in bullish territory at level 8.

This week’s list is heavy on turnaround stories, especially those in the industrial and commodity sectors. Our Top Pick is Steel Dynamics (STLD), a leader of the steel sector that’s starting to pull back after a big run. You can buy some here or (preferably) on further weakness.

Stock Name	Price	Buy Range	Loss Limit
Cavium (CAVM)	0.00	61-63.5	55-57
DeVry (DV)	0.00	29.5-32	27-28
Oshkosh (OSK)	95.04	67-69.5	61-62
PDC Energy (PDCE)	0.00	77-81	70-72
Signature Bank (SBNY)	0.00	147-151	136-138
Steel Dynamics (STLD)	0.00	35-37	31-32.5
SunCoke Energy (SXC)	0.00	11-12	10-10.5
Tailored Brands (TLRD)	0.00	24.5-27	22-23.5
Transocean Ltd. (RIG)	0.00	14-15	12-12.5
Western Digital Corporation (WDC)	0.00	63-67	56.5-58

Current Market Outlook


The market has turned into a case of the haves and have nots, as most major indexes and many cyclical sectors (materials, energy, industrials, transports) remaining in clear uptrends, while growth stocks and indexes either mark time or come under severe distribution. It’s not the healthiest situation—the market tends to do best when everything is in gear—but at this point, we’re not willing to make any broad statements. In other words, we’re just taking the evidence for what it is: The trends of the overall market are up and many stocks are acting well, so you should focus your attention on those strong sectors, while honoring stops and cutting losses in the areas that are under pressure. We’re keeping our Market Monitor at a level seven.
This week’s list is heavy on the market’s strongest areas, with materials, energy, financials and some retail represented. Our Top Pick is Freeport-McMoRan (FCX), the largest copper firm in the world, which appears to be just starting a new uptrend after a horrible bear phase. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Burlington Stores (BURL)	193.95	86-90	78-80
Children’s Place (PLCE)	0.00	100-105	94-95
Dave & Buster’s (PLAY)	57.01	51-55	45-48
Deere & Company (DE)	0.00	97-101	91-93
Freeport-McMoRan Inc. (FCX)	13.78	14.5-15.5	13-13.5
Halliburton (HAL)	0.00	52-55	48-50
Helmerich & Payne (HP)	63.68	77-80	70-72
iRobot (IRBT)	103.17	53-56	48-50
Jack in the Box (JACK)	0.00	103-107	87-99
Stifel Financial (SF)	56.32	48-50	44-45

Current Market Outlook


The market’s immediate post-election action was divergent and confusing, with some stocks soaring and others plunging, and most indexes still confined to sideways trends. But that’s changing—by our measures, the intermediate-term trend has turned up, joining the longer-term trend in positive territory. And we’re now seeing more solid set-ups (and a few breakouts) in growth stocks, which are joining many Old World stocks and sectors at new high ground. Even the S&P 500 and Nasdaq are getting in on the fun, as both tested virgin turf today. It’s not all peaches and cream, but after nudging up our Market Monitor one notch last week (to level 5), we’re pushing it up two more slots this week (to level 7), reflecting the more positive environment.

This week’s list goes along with the strength we’re seeing in the market, as financial, gaming construction/metals, biotech, cybersecurity and transportation stocks are all represented. Our Top Pick is MGM Resorts (MGM), a big-cap name that’s showing excellent power since its earnings report two weeks ago.

Stock Name	Price	Buy Range	Loss Limit
Charles Schwab (SCHW)	0.00	35.5-37.5	31.5-32.5
Commercial Metals (CMC)	0.00	19.5-20.5	17.5-18
Exelixis (EXEL)	27.35	15.5-16.5	13-13.5
Granite Construction (GVA)	0.00	55.5-57.5	51-52
Inphi (IPHI)	120.16	44-46	41-42
MGM Resorts (MGM)	0.00	27-28.5	25-26
Micron Technology, Inc. (MU)	43.31	18.5-19.5	16.5-17.5
Palo Alto Networks (PANW)	236.92	172-180	156-162
Terex (TEX)	0.00	26.5-28	24.5-25
United Continental Holdings (UAL)	96.76	64-67	57.5-59.5

Current Market Outlook


Wow! After a surprise U.S. election result last week, we got a surprise market reaction—straight up, at least when it comes to “old world” and small- and mid-cap stocks. That’s a good sign, and if the major indexes can hold their ground (or build on their advances) from here, the intermediate-term trend should turn up, which will tell us to become more aggressive. That said, there are huge cross-currents out there; the market is very divergent with tons of stocks hitting new highs and new lows, and growth stocks have actually come under pressure in recent days. Right now, then, we still advise being cautious—we’re nudging our Market Monitor up to a level 5 (out of 10), but won’t go further than that until the trend turns up.

The good news is there are many newly-powerful charts. This week’s list is chock full of construction, infrastructure and financial stocks that have solid growth outlooks and whose stocks look great, too. Our Top Pick is XPO Logistics (XPO), a new leader in the strong transportation group that’s just burst to new highs.

Stock Name	Price	Buy Range	Loss Limit
BHP Billiton (BHP)	0.00	35.5-37.5	33-34
Eagle Materials Inc. (EXP)	0.00	90-94	84-86
HealthEquity, Inc. (HQY)	70.70	38.5-41	34-35.5
MasTec, Inc. (MTZ)	66.65	33.5-35.5	30.5-31.5
Nucor Corporation (NUE)	66.20	55-57	51-52
Proofpoint (PFPT)	113.79	79-82	74-75.5
Texas Capital Bancshares (TCBI)	0.00	63-66	56.5-58
Vulcan Materials Company (VMC)	137.10	129-133	119-121
Western Alliance (WAL)	0.00	42-44	39.5-40.5
XPO Logistics (XPO)	0.00	39-41	36-37

Current Market Outlook


After nine straight down days and some signs of investor panic, the market enjoyed a much-needed rebound today (right off key support) ahead of tomorrow’s election. Ideally, the past two weeks were the final leg of the market’s two-plus-month correction and stocks kite higher into year-end; such a scenario is certainly possible. However, the fact is that all we’ve seen is one strong up day—all the major indexes remain below their intermediate-term moving averages, as do most stocks. Thus, on the sell side, you can consider letting go of any broken stocks you’ve been holding on to, and on the buy side, you should continue to keep new positions small until the market confirms a new, sustained uptrend. We’re keeping our Market Monitor at level 4 until that happens.
This week’s list has a bunch of resilient stocks, including another batch that’s recently reacted well to earnings. Our Top Pick is Gigamon (GIMO), which, after a quick shakeout, snapped right back on earnings and lifted to new highs today.

Stock Name	Price	Buy Range	Loss Limit
Archer Daniels (ADM)	0.00	45-47	42-43
AveXis (AVXS)	0.00	58-62	51-53
Clayton Williams Energy (CWEI)	0.00	94-98	85-87
Eagle Pharmaceuticals Inc. (EGRX)	0.00	72-74	66-67
Gigamon (GIMO)	0.00	54-57	48-50
Las Vegas Sands Corp. (LVS)	0.00	57-59	53-54
Martin Marietta Materials (MLM)	261.52	190-195	180-183
Melco Crown (MPEL)	0.00	16.5-17.5	15-16
Spirit AeroSystems (SPR)	92.54	51.5-53	48-49
Take-Two Interactive (TTWO)	123.32	47-49	44-45

Current Market Outlook


From a top-down perspective (looking at the major indexes and overall trends), last week wasn’t a big deal—most indexes remain in their three-month trading ranges, and all of them are above their longer-term moving averages. But there’s no question that the sellers pulled out the bazooka on many high relative performance stocks, cracking many uptrends in the process. So, combined with the tedious trading during the past few weeks, we’re pulling in our horns a bit more by moving our Market Monitor down two notches to a level 4 out of 10. It’s still best to hold your resilient stocks, especially those that have reacted well to earnings (of which there are many). But you should also limit new buying and be holding plenty of cash until the market firms up.
This week’s list has another batch of earnings winners from last week; if the market can find its footing, many should do well going forward. If you’re looking to nibble on something, our Top Pick is ServiceNow (NOW), an emerging blue chip in the cloud software sector that has a huge runway of growth ahead of it.

Stock Name	Price	Buy Range	Loss Limit
Arch Coal (ARCH)	82.27	74-70	63-61
Cirrus Logic Inc. (CRUS)	0.00	54.5-52.5	50.5-49.5
Ellie Mae (ELLI)	0.00	105-102	98-97
Expedia Group (EXPE)	0.00	130-125	116-115
Mastercard Incorporated (MA)	0.00	107-105	101-100
New Oriental Education (EDU)	113.97	50-48	46-45
ServiceNow (NOW)	341.86	86.5-83.5	79-77.5
Tesaro (TSRO)	0.00	120-116	108-106
US Silica Holdings, Inc. (SLCA)	0.00	46-44	41-40
Western Digital Corporation (WDC)	0.00	59-56.5	52-51

Current Market Outlook


Not much changed with the market last week, as the major indexes finished up a fraction of a percent, remaining in the trading range of the past three months. That said, there’s no doubt that individual stocks are acting better, especially the liquid leaders that are generally a good barometer of institutional sentiment. Not only are most well-traded growth stocks holding firm, some have actually emerged to new highs on earnings. We’re not ready to change our Market Monitor yet (the intermediate-term trend remains slightly negative and there are tons of earnings reports this week), so it’s best to pick your spots on the buy side, hold some cash and practice patience with your resilient performers.

This week’s list has a bunch of good-looking charts from a variety of industries. For our Top Pick, we’ll go one of the liquid leaders that’s just emerged.PayPal (PYPL) exploded out of a 15-month base last Friday on its heaviest volume since the day of its IPO. We think it’s buyable here or on dips.

Stock Name	Price	Buy Range	Loss Limit
Copa Holdings (CPA)	0.00	93-89	85-84
Domino’s Pizza (DPZ)	339.47	165-160	151-148
FMC Technologies, Inc. (FTI)	0.00	32.5-31	29.5-29
HDFC Bank Limited (HDB)	0.00	75-72	68-67
ICON plc (ICLR)	0.00	84-82	77-76
Match (MTCH)	0.00	19.5-18.5	17-16.5
Netflix, Inc. (NFLX)	423.92	127-123	112-110
PayPal (PYPL)	147.00	44-42	40.5-39.5
Steel Dynamics (STLD)	0.00	26.5-25.5	23.5-23
Zayo Group (ZAYO)	0.00	31.5-30.5	29-28.5

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.

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.

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.