Current Market Outlook


In the big picture, we still have yet to see much abnormal action from the market—the long-term trend is up, the broad market is relatively healthy and, while many leading stocks have been dented, plenty are still acting well. Because of that, the odds still favor the next big move being up. But the short-term is trickier to game—it looks to us as if the market topped out for a few weeks starting in early September, with last Tuesday’s breakdown and last Friday’s rally rejection signs that big investors are liquidating some positions. With the major indexes just 2% to 3% off their highs, now is not a time to panic, but it is time to prudently manage your risk by cutting losses short, holding some cash and keeping new buys on the smaller side. We’re nudging our Market Monitor down to level 6 (out of 10) and believe the onus is on the bulls to reignite a new uptrend.

This week’s list has a wide variety of stocks and sectors to choose from. Our Top Pick is Paterson-UTI Energy (PTEN), which has been in rough shape during the energy bust, but the stock is now forecasting better times ahead.

Stock Name	Price	Buy Range	Loss Limit
Aerie Pharmaceuticals (AERI)	0.00	37-34	29.5-28
Diamondback Energy (FANG)	0.00	100-97	93-92
GoDaddy (GDDY)	0.00	35-34	32-31.5
ICU Medical (ICUI)	0.00	147-142	130-128
Las Vegas Sands Corp. (LVS)	0.00	58-56	50.5-49.5
Momo Inc. (MOMO)	44.65	24-22.5	21.5-20
Patterson-UTI Energy (PTEN)	0.00	24-22.5	21-20.5
PRA Health Sciences Inc. (PRAH)	96.08	54-52	49-48
RPC Inc. (RES)	0.00	18-17	16-15.5
TAL Education (XRS)	0.00	69.5-67.5	65-64

Current Market Outlook


There’s no shortage of things to worry about today, with everything from the Presidential election to Syria to Russia to interest rates seemingly hanging in the balance. And as all good investors know, bull markets climb a wall of worry! So it’s no surprise that the market continues to lean bullish. Leading the group in the U.S. are small-cap stocks (while the major indexes lag), and leading the way internationally are the Chinese stocks, a couple of which appear in this issue—and not for the first time.

The Chinese stocks, however, may be due for a correction, so our Top Pick is Yelp (YELP), which combines a great growth story with a chart that’s in a good buying range.

Stock Name	Price	Buy Range	Loss Limit
MercadoLibre, Inc. (MELI)	980.83	191-185	175-174
NetEase, Inc. (NTES)	0.00	255-245	235-234
Nintendo Co., Ltd. (NTDOY)	0.00	34-32	30-29
Parsley Energy (PE)	0.00	35.5-34	32-31
TD Ameritrade (AMTD)	0.00	35.5-35	32.5-32
Twilio (TWLO)	183.39	60-55	53-50
US Silica Holdings, Inc. (SLCA)	0.00	47-44	40-37.5
Weibo (WB)	98.16	53-49	46-45
Williams Companies (WMB)	0.00	31-29	27.5-27
Yelp (YELP)	41.30	41-39	37-36

Current Market Outlook


October is an infamous month in market history, with many huge dips and crashes taking place at this time of year. This time around, the major evidence is much more positive than when the market experienced those prior wipeouts—the longer-term trend is up and we remain impressed with the resilience of the broad market and growth stocks. Of course, the intermediate-term trend remains neutral, and with so many uncertainties out there (U.S. election, Deutsche Bank, etc.), we can’t rule out a leg down in the near-term to scare out many investors. As always, we advise going with the flow—today, that means leaning bullish, but not flooring the accelerator until the bulls decisively retake control.

This week’s list has more of a mix of stocks and sectors than previous weeks, but that’s fine with us. Our Top Pick is Inphi (IPHI), a fast-growing networker that looks ready to get going after a few weeks of rest.

Stock Name	Price	Buy Range	Loss Limit
Apache (APA)	0.00	64-61.5	55.5-54
Autodesk (ADSK)	229.00	72-70	65-64
Carrizo Oil & Gas (CRZO)	24.03	41-39	36-35
Inphi (IPHI)	120.16	43-41.5	39.5-38.5
Line Corporation (LN)	0.00	48-46	43-42
Micron Technology, Inc. (MU)	43.31	18.5-17	16-15.5
Quanta Services (PWR)	91.45	28-26.5	25-24
Symantec Corporation (SYMC)	0.00	25-24	23-22.5
Thor Industries (THO)	104.76	85-83	77-76
XPO Logistics (XPO)	0.00	37.5-35.5	34-33

Current Market Outlook


The action of the past couple of days indicates that the market’s recent pullback likely isn’t through yet—while the Nasdaq hit new highs last week, no other index did, and that divergence (and negativity surrounding Deutsche Bank) brought out more sellers. In the short-term, then, the trend is mainly neutral, as most indexes haven’t made much progress during the past two months and are gyrating around their 50-day lines. Longer-term, though, we remain optimistic: Growth stocks and indexes are generally outperforming, the broad market is healthy and investor skepticism remains elevated (all good things). We’re going to leave our Market Monitor at level 7, meaning you should hold your strong stocks but also hold some cash on the sideline until the buyers retake control.

This week’s list has a good collection of stocks, mostly on the growth side. Our Top Pick, though, is a special situation—Tech Data (TECD) just announced a transformative acquisition that catapulted the stock to new highs. We think it’s buyable around here.

Stock Name	Price	Buy Range	Loss Limit
Adobe Inc. (ADBE)	315.23	105-108	99-100
CoLucid Pharmaceuticals Inc (CLCD)	0.00	28-30	23-24
Eagle Pharmaceuticals Inc. (EGRX)	0.00	63.5-67	57-58
Etsy (ETSY)	112.97	14-15	12.5-13
Match (MTCH)	0.00	16.5-17.5	15.5-16
Penske Automotive Group (PAG)	0.00	47-49	43-44
Penumbra Inc. (PEN)	173.25	75-77	69-70
TECD (TECD)	0.00	83-86	75-77
Twilio (TWLO)	183.39	62.5-65.5	54-56
ZELTIQ Aesthetics Inc (ZLTQ)	0.00	40-38	35.5-36.5

Current Market Outlook


The market’s not out of the woods yet, as many indexes are still hovering below their 50-day moving averages. But the way stocks have handled themselves in recent days is encouraging—there’s been little follow-on selling following the initial dump on September 9, and growth-oriented stocks and indexes have perked up nicely, with some reaching new highs late last week. Throw in a still-healthy broad market (there are very few stocks hitting new lows, which is a good sign), and we remain optimistic, though we’ll keep our Market Monitor in its current place (7 out of 10) and will continue to advise you to keep newer positions smaller than normal until the indexes clearly kick into gear on the upside.


Encouragingly, this week’s list contains a ton of growth stock ideas, including a few newer names to consider. Our Top Pick is Arista Networks (ANET), a fast-growing networker that’s benefiting from the big shift to cloud computing and offers a unique software option for developers. Today’s dip looks buyable.

Stock Name	Price	Buy Range	Loss Limit
gdxi (gdxi)	0.00	102-106	94-96
Tata Motors Limited (TTM)	0.00	40-42	37-38
Seattle Genetics (SGEN)	150.85	50-53	48-49
Gigamon (GIMO)	0.00	50-52	46-47
Glaukos Corp. (GKOS)	67.84	34.5-36.5	31-32
Clayton Williams Energy (CWEI)	0.00	69-73	56-58
Cirrus Logic Inc. (CRUS)	0.00	52.5-54.5	47-48
Arista Networks (ANET)	0.00	80-83	74-76
Aerie Pharmaceuticals (AERI)	0.00	31-34	26-27.5
Abiomed (ABMD)	0.00	123-126	113-115

Current Market Outlook


After trading in a tight range for nearly two months, the major indexes were clobbered last Friday; most fell below their 50-day lines and a couple hit their lowest levels since Brexit. The action should certainly be respected—we’re knocking our Market Monitor down a couple of notches—but it’s important to look at all the evidence. While the intermediate-term trends are mostly sideways at this point, the longer-term trend is still up, the broad market isn’t falling apart as it would at major tops, and many individual stocks are pulling back normally so far. Overall, you should take things on a stock-by-stock basis, selling stocks that crack but giving others a chance to hold support and resume their advance. Overall, we remain optimistic, but picking your spots is important, and the next few days should be telling.



This week’s list includes many resilient stocks from a variety of sectors, which is a positive sign. Our Top Pick is Las Vegas Sands (LVS), a big-cap turnaround stock that has just lifted off following a huge bottoming effort.

Stock Name	Price	Buy Range	Loss Limit
Urban Outfitters (URBN)	0.00	35-36.5	32-33
Twilio (TWLO)	183.39	54-57	47.5-49
Tempur Sealy (TPX)	85.53	78-80	70-71
PDC Energy (PDCE)	0.00	64-66	59-60
MercadoLibre, Inc. (MELI)	980.83	174-178	160-161
Las Vegas Sands Corp. (LVS)	0.00	55-57	50-51
GrubHub (GRUB)	140.03	38.5-40.5	35-36
Callon Petroleum (CPE)	0.00	14-15	12.5-13
Burlington Stores (BURL)	193.95	80-82.5	74-75
Alibaba (BABA)	254.81	95-100	89-90

Current Market Outlook


Major indexes, including the S&P 500, Dow Industrials and Nasdaq Composite remain range bound, chopping sideways in very tight ranges during the past five to seven weeks. But the broad market is looking better and better—most small- and mid-cap indexes hit new highs last week, and we’ve seen some improved action among growth stocks. All told, we remain positive on the market and believe the path of least resistance remains up. Individual stocks have been a bit trickier, but many are acting well. We think it’s best to remain heavily invested.


This week’s list includes many smaller, rapidly growing companies, reinforcing the view that money is flowing toward growth ideas. Our Top Pick is Shopify (SHOP), which has enormous potential as e-commerce expands. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Wix.com (WIX)	302.53	39.5-41.5	35-36
Ubiquiti Networks (UBNT)	170.11	50-52	47-48
Shopify (SHOP)	585.00	40.5-42.5	36-37
Ingevity Corp. (NGVT)	99.98	42-44.5	39-40
Microsemi (MSCC)	0.00	38.5-40	36-37
LGI Homes (LGIH)	86.04	37.5-38.5	33-34
Green Plains Energy (GPRE)	0.00	23.5-24.5	21.5-22
Finisar (FNSR)	0.00	21.5-22.5	19.5-20
Exact Sciences (EXAS)	116.91	18-19	15.5-16
Autodesk (ADSK)	229.00	66-68	60-61

Current Market Outlook


Despite the never-ending Fed watch (many investors are looking forward to this week’s jobs report for clues on the Fed’s next move), the major indexes remain in a very tight trading range, with some (including the S&P 500) basically unchanged since mid-July. Still, by our measures, the intermediate- and longer-term trends remain up, and the fact there has been little giveback by the major indexes in recent weeks is a positive. Individual stocks have been trickier, with some potholes emerging on earnings, rotation among industry groups or simply profit taking, but most remain in good shape. Overall, the odds continue to favor the next big move being up, so you should stay heavily invested in strong stocks.

This week’s list has a nice mix of stories to consider, including a couple that are benefiting from recent acquisitions. But our Top Pick is NetEase (NTES), a leading online game company out of China—growth is excellent, and after a brief shakeout, the stock is back in new high ground.

Stock Name	Price	Buy Range	Loss Limit
ZELTIQ Aesthetics Inc (ZLTQ)	0.00	35-37	32-33
Cimarex Energy (XEC)	0.00	129-134	122-124
Thor Industries (THO)	104.76	78.5-79.5	73-74
Proofpoint (PFPT)	113.79	75-77.5	70-71.5
NetEase, Inc. (NTES)	0.00	208-214	195-196
NetApp (NTAP)	0.00	33.5-35	31-32
Microchip Technology (MCHP)	79.12	59-60.5	55.5-56
Lumentum (LITE)	87.00	32-33.5	29-30
Dexcom (DXCM)	421.36	89-91.5	82-83
Berry Global (BERY)	64.22	43-44	39-40

Current Market Outlook


All eyes are on Janet Yellen this week, who is set to speak Friday morning, and whether she’ll offer hints to the Fed’s next move. As always, we’ll let others slice and dice the comments; we’ll stick with the market’s action itself. And on that front, things look solid—the market’s consolidation of the past few days has been normal thus far, and while a short-term shakeout of some sort wouldn’t surprise us, the odds continue to point toward higher prices down the road. We continue to advise you to remain heavily invested, though be sure to honor your stops for any stocks that break support.

This week’s list includes a nice array of stocks and sectors, including a few recent earnings winners. Our Top Pick is Gigamon (GIMO), a hot stock that’s recently taken a few weeks to catch its breath. Further dips are possible but buying here with a tight stop makes for a good risk-reward opportunity.

Stock Name	Price	Buy Range	Loss Limit
Yelp (YELP)	41.30	35-37	32-33
US Silica Holdings, Inc. (SLCA)	0.00	38.5-40.5	35.5-36.5
Royal Gold, Inc. (RGLD)	129.66	80-83	74-75
Pioneer Natural Resources (PXD)	0.00	177-183	164-166
Insulet (PODD)	175.69	40.5-42.5	37-38
MercadoLibre, Inc. (MELI)	980.83	160-165	149-150
Line Corporation (LN)	0.00	44-46	39.5-40.5
Gigamon (GIMO)	0.00	43.5-46	40-41
Dicks’s Sporting Goods (DKS)	0.00	56-58	50-51
Acuity Brands (AYI)	0.00	273-280	253-256

Current Market Outlook


While most investors are either bearish, neutral or not paying attention at all, the market remains healthy as a horse—most major indexes reached all-time highs last week, which is music to our ears. And we saw improved action among individual growth stocks, too, with some super-hot names racing higher. As we’ve said repeatedly, pullbacks and shakeouts will occur at some point, and if you have a couple of stocks that are very extended to the upside, feel free to book partial profits. But our focus remains on the intermediate- to longer-term, and just about all the evidence on that front continues to point to higher prices in the weeks and months ahead. Thus, you should remain heavily invested.

This week’s list has a mid-cap focus to it, but our Top Pick is a big-cap stock that just emerged from months of base-building: Alibaba (BABA) has all the makings of a liquid leader, and we think it’s starting its first major advance. Details inside.

Stock Name	Price	Buy Range	Loss Limit
Twilio (TWLO)	183.39	55-60	46-48
Symantec Corporation (SYMC)	0.00	21.5-23	20-20.5
Nevro Corp. (NVRO)	0.00	91-95	84-86
MasTec, Inc. (MTZ)	66.65	27.5-29	25.5-26.5
Inphi (IPHI)	120.16	40-42	36-37
Etsy (ETSY)	112.97	13.5-14.5	11.5-12
Copa Holdings (CPA)	0.00	79-81	71-72
Callon Petroleum (CPE)	0.00	13-14	11-11.5
Alibaba (BABA)	254.81	93-96	89-90
Applied Materials (AMAT)	0.00	26-27	24-25

Current Market Outlook


From a top-down perspective, our bullish market stance has not changed—the small- and mid-cap indexes have now joined the large-cap S&P 500 in all-time high territory. Obviously, dips and shakeouts are possible, but to this point, we’ve seen a vacuum of selling pressure on the major indexes. Individual stocks have been a bit trickier, partly because of earnings season; more than a few stocks and sectors have been nailed as money hunts for the leaders of the advance. Overall, we remain bullish and advise you to stay heavily invested, but you should also follow the plan—book some partial profits on the way up and if a stock cracks through support or trips your stop, be sure to exit. Conversely, aim to let most of your winning positions run, as this is the kind of market that should produce many big winners over time.

This week’s list includes many recent earnings winners, including a couple of energy stocks. Our Top Pick is Parsley Energy (PE), which we think is probably the top stock in the sector. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
XPO Logistics (XPO)	0.00	34-36	31-32
Wright Medical (WMGI)	0.00	23-24	21-22
Wingstop (WING)	121.52	28.5-30	26.5-27
Trex Company (TREX)	117.56	57-59	51-52
Shopify (SHOP)	585.00	35-37	31-32
Rice Energy (RICE)	0.00	23.5-25	22-22.5
Parsley Energy (PE)	0.00	30-32	27-28
Paycom Software (PAYC)	0.00	49-51	45-46.5
Louisiana-Pacific (LPX)	0.00	19.5-20.5	18-18.5
Align Technology (ALGN)	316.20	88-91	81-82

Current Market Outlook


One thing that keeps coming up in our research is that the majority of investors think the market is ready for a pullback. Of course, a dip is certainly possible—the major indexes have had a great run over the past month and some short-term measures of sentiment are elevated. But we don’t expect a large market retreat, and besides, obsessing over the next week or two misses the big picture—that a new uptrend is likely underway, and many stocks and sectors are performing extremely well. You still want to find advantageous buy points and cut your losses when things go awry. But we continue to advise you to be heavily invested in strong stocks and let your winners run.

This week’s list has a great batch of high-potential stocks, many of which have excellent growth stories. Our Top Pick is Cirrus Logic (CRUS), a chip firm with great earnings estimates that just exploded out of a year-long base. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
United States Steel Corporation (X)	0.00	24.5-26	22-23
VCA Inc. (WOOF)	0.00	69-71	65-66
Wix.com (WIX)	302.53	33-35	30.5-31.5
Tempur Sealy (TPX)	85.53	73-75	66-68
Lumentum (LITE)	87.00	28.5-30	25-26
GrubHub (GRUB)	140.03	35-38	32-33.5
Cirrus Logic Inc. (CRUS)	0.00	46.5-49	42.5-43.5
Buenaventura (BVN)	16.23	13.5-14.5	12-12.5
B&G Foods (BGS)	0.00	50-51.5	46-47
Abiomed (ABMD)	0.00	117-120	108-109

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.

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

Shares of international package delivery company FedEx Corp. (FDX) rose $17 (11.8%) yesterday, after the company reported a third quarter earnings beat, and raised its full-year 2016 profit estimate.

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.