Issues
Current Market OutlookA batch of disappointing earnings reports combined with the 2015 overhead resistance areas (around 2,080 to 2,140 on the S&P 500 and 5,000 to 5,200 on the Nasdaq) to bring out the sellers last week, especially in some big, old tech stocks, which drove the Nasdaq below its 50-day line. However, the other indexes are in good shape, and while a few stocks have cracked on earnings, most are holding up just fine. The bottom line is that, to this point, not much has changed—the market still doesn’t have the leadership we’d like to see, but the trend is up and the broad market is in good shape. Thus, you should be holding your top performers (though booking some partial profits here and there is always smart) and using normal retreats in strong stocks as buying opportunities.
This week’s list is a hodgepodge of stocks from all over the map, including some growth, commodities and turnarounds. Our Top Pick is Teck Resources (TCK), a giant turnaround play in the commodity space—the firm remained profitable throughout the bust, and after a great quarterly report, earnings are expected to boom in the quarters ahead.
| Stock Name | Price | ||
|---|---|---|---|
| United States Steel Corporation (X) | 0.00 | ||
| VCA Inc. (WOOF) | 0.00 | ||
| Teck Resources Limited (TCK) | 0.00 | ||
| Square, Inc. (SQ) | 91.04 | ||
| Monster Beverage Corporation (MNST) | 0.00 | ||
| Core Laboratories (CLB) | 0.00 | ||
| Boardwalk Pipeline Partners (BWP) | 0.00 | ||
| Boston Scientific (BSX) | 0.00 | ||
| Banc of California (BANC) | 0.00 | ||
| Amazon.com (AMZN) | 2.00 |
Current Market OutlookThe market has met with some selling in recent days, spurred on by some poorly received earnings reports and the fact that the major indexes were butting up against resistance areas formed during much of 2015. In the short term, further consolidation is possible for the indexes, and would be logical after a relatively smooth two-plus month run. And some potholes among individual stocks are sure to pop up during earnings season. But the overall bullish story remains intact—the major trends of the indexes remain up, selling pressures on the broad market are light and Top Ten stocks are generally acting well. You should continue to lean bullish, holding your top performers and buying strong stocks on dips, all while holding some cash (possibly 25% to 30%) on the sideline.
This week’s list has a wide mix of stocks and industries, including a bunch of names that haven’t appeared in many months (if ever). Our Top Pick is Nvidia (NVDA), a chipmaker with huge opportunities in new markets and a stock that is consolidating calmly. Keep new positions small ahead of earnings.
| Stock Name | Price | ||
|---|---|---|---|
| Silver Wheaton (SLW) | 0.00 | ||
| Parsley Energy (PE) | 0.00 | ||
| NVIDIA Corporation (NVDA) | 242.42 | ||
| Medivation (MDVN) | 0.00 | ||
| HD Supply Holdings, Inc. (HDS) | 0.00 | ||
| New Oriental Education (EDU) | 113.97 | ||
| DCP Midstream (DPM) | 0.00 | ||
| 3D Systems (DDD) | 0.00 | ||
| Crescent Point Energy (CPG) | 0.00 | ||
| Broadcom Limited (AVGO) | 266.26 |
Current Market OutlookLast night, the headlines blared that there was no deal among Middle Eastern countries to curtail oil production, which led to a big overnight move down in oil prices and threatened to take a chunk out of major stock markets. Today, though, the reaction was fine—stocks actually rose on the day while oil prices declined only modestly. It’s not just a good lesson (pay attention—not to the news—but the market’s reaction to the news!), but also a good sign that the general market can shrug off “bad news” and continue along its way. More important will be earnings season, which will pick up steam in the days ahead. Right now, we continue to lean bullish and will be watching earnings reactions closely—how stocks react to their reports will be very revealing.
This week’s list has a mix of old world stocks (housing, construction, precious metals) and growth-oriented stocks (retail, technology). Our Top Pick is Adobe Systems (ADBE), a big-cap growth stock that has a great story and looks poised to break out.
| Stock Name | Price | ||
|---|---|---|---|
| TAL Education (XRS) | 0.00 | ||
| Whirlpool (WHR) | 0.00 | ||
| Weibo (WB) | 98.16 | ||
| U.S. Concrete (USCR) | 0.00 | ||
| Steel Dynamics (STLD) | 0.00 | ||
| Universal Display (OLED) | 187.54 | ||
| KB Home (KBH) | 36.05 | ||
| Kate Spade & Company (KATE) | 0.00 | ||
| Agnico Eagle Mines (AEM) | 79.05 | ||
| Adobe Inc. (ADBE) | 315.23 |
Current Market OutlookThe market hit some resistance during the past two weeks, with 2,070 or so on the S&P and 4,900 on the Nasdaq repelling recent advances, and with many individual stocks hitting potholes. While there are still some things missing from the rally (namely, new highs outside of the “yield” stocks and sectors), to this point, the selling is normal given the huge February-March advance and the fact that earnings season is approaching. Some further retrenchment, which could go along with a scary headline or two, would probably be good for the market in the long run. So far, though, we remain more bullish than not, and we’re pleased to see some early earnings winners emerge.
This week’s list has a handful of those winners, though for our Top Pick, we’re delving into the precious metals sector—AngloGold (AU) is under extreme accumulation, bursting to new highs as the gold stocks resume their advance. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Tesla, Inc. (TSLA) | 818.87 | ||
| Silicon Motion (SIMO) | 0.00 | ||
| Ollie’s Bargain Outlet (OLLI) | 103.94 | ||
| Newmont Mining (NEM) | 57.31 | ||
| Ligand Pharmaceuticals (LGND) | 267.14 | ||
| Global Payments Inc. (GPN) | 0.00 | ||
| Five Prime Therapeutics (FPRX) | 0.00 | ||
| Edwards Lifesciences (EW) | 228.06 | ||
| Acuity Brands (AYI) | 0.00 | ||
| AngloGold Ashanti (AU) | 20.45 |
Current Market OutlookThe market has enjoyed something of a “lockout” rally since it bottomed in early February, rarely pulling back for more than a couple of days before finding buyers. Combined with some rare momentum indicators that have flashed, the action is characteristic of a kick-off to a sustained advance. That said, there remain flies in the ointment—most of the strength has been in dividend-related stocks (growth stocks are just doing so-so), and the off-the-bottom sectors (industrials, commodities, etc.) are starting to hit resistance. As earnings season approaches, some pullbacks would not be unusual among individual stocks and sectors. Altogether, you should continue to lean bullish, but we need to see growth stocks get going and the longer-term trend turn up before getting fully bullish.
This week’s list is a good mix of stocks and sectors; we’re seeing more growth-oriented stocks begin to appear. Our Top Pick is Five Below (FIVE), a great cookie-cutter story whose stock recently reacted well to earnings. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| United States Steel Corporation (X) | 0.00 | ||
| Square, Inc. (SQ) | 91.04 | ||
| Sonic Corp. (SONC) | 35.22 | ||
| RSP Permian (RSPP) | 0.00 | ||
| MasTec, Inc. (MTZ) | 66.65 | ||
| Lululemon Athletica (LULU) | 304.69 | ||
| Michael Kors Holdings Limited (KORS) | 73.22 | ||
| Hewlett Packard Enterprise (HPE) | 0.00 | ||
| Five Below (FIVE) | 134.58 | ||
| Amedisys (AMED) | 174.06 |
Current Market OutlookAfter five straight weeks on the upside, the major indexes have retreated mildly in recent days, keeping the intermediate-term uptrend firmly intact. Going forward, the key will be how the market handles itself during any further weakness—if dips are modest and lead to renewed upside (especially with growth stocks beginning to hit new highs), then a legitimate bull phase will likely be in place. If the selling pressures intensify and the major indexes sink, that would obviously tell you the opposite. Right now, given the evidence, we remain optimistic, but not fully bullish, until the longer-term trend and growth stocks kick into gear. We’ll be watching for it.
This week’s list is again heavier on commodity and turnaround ideas than true growth stories. Our Top Pick is Wynn Resorts (WYNN), which has bottomed out and begun a new advance, bolstered in part by a new resort opening in Macau later this year.
| Stock Name | Price | ||
|---|---|---|---|
| Wynn Resorts (WYNN) | 121.08 | ||
| Proto Labs (PRLB) | 0.00 | ||
| Parsley Energy (PE) | 0.00 | ||
| Nucor Corporation (NUE) | 66.20 | ||
| NCR Inc. (NCR) | 0.00 | ||
| Mellanox Technologies (MLNX) | 92.00 | ||
| Inphi (IPHI) | 120.16 | ||
| Barrick Gold (GOLD) | 27.20 | ||
| Finisar (FNSR) | 0.00 | ||
| FedEx (FDX) | 0.00 |
Current Market OutlookLast week made it five weeks up in a row for the major indexes, which keeps the intermediate-term trend solidly up. Moreover, the broad market is now clearly healthy, with many stocks and sectors showing excellent accumulation. All of that is why we’re nudging up our Market Monitor another notch; you should probably be more invested than not, given the evidence. However, we’re going to stay in the upper reaches of neutral until we see growth stocks get going—many of them are set-up nicely, but until they actually break out (and until the market’s longer-term trend turns up, which it has yet to do), it’s best to keep some powder dry.
This week’s list has a strong flavor of industrial and cyclical stocks, though many have excellent earnings estimates so they aren’t pure turnarounds. Our Top Pick is HD Supply (HDS), which has surged higher after a big correction, and is likely to post humongous earnings and cash flow growth in the quarters ahead.
| Stock Name | Price | ||
|---|---|---|---|
| Whirlpool (WHR) | 0.00 | ||
| Trex Company (TREX) | 117.56 | ||
| Reliance Steel & Aluminum Co. (RS) | 117.45 | ||
| HD Supply Holdings, Inc. (HDS) | 0.00 | ||
| Hawaiian Holdings Inc. (HA) | 0.00 | ||
| Dollar Tree (DLTR) | 0.00 | ||
| Communication Sales & Leasing (CSAL) | 0.00 | ||
| Cirrus Logic Inc. (CRUS) | 0.00 | ||
| Copa Holdings (CPA) | 0.00 | ||
| Adobe Inc. (ADBE) | 315.23 |
Current Market OutlookThere’s no question the rally of the past four weeks has done the market a lot of good—the intermediate-term trend remains up, the broad market has returned to health and many stocks are setting up nicely. However, we’re sticking with a relatively neutral stance until we see the final pieces fall into place—many stocks lifting to new highs while the longer-term trend turns up. We’re optimistic that can happen soon (though possibly after a little digestion phase), but we want to actually see it occur before advising you to become heavily invested. For now, then, we’ll leave the Market Monitor where it is and will be watching the action of potential leaders closely for signs the buyers are stepping up in a big way.
This week’s list is another batch of high-potential stocks from a variety of industries. Our Top Pick is Blue Buffalo Pet (BUFF), a maker of organic pet food whose stock came public just last July. It addresses a huge market and is just beginning to attract institutional investors.
| Stock Name | Price | ||
|---|---|---|---|
| Ulta Beauty (ULTA) | 331.95 | ||
| Steel Dynamics (STLD) | 0.00 | ||
| Silver Wheaton (SLW) | 0.00 | ||
| Las Vegas Sands Corp. (LVS) | 0.00 | ||
| Hewlett Packard Enterprise (HPE) | 0.00 | ||
| Barrick Gold (GOLD) | 27.20 | ||
| Express (EXPR) | 0.00 | ||
| Ellie Mae (ELLI) | 0.00 | ||
| Blue Buffalo Pet Products (BUFF) | 0.00 | ||
| Briggs and Stratton (BGG) | 0.00 |
Current Market OutlookThe market has put on a good show during the past three weeks, with the major indexes pushing to two-month highs, turning the intermediate-term trend positive. And many sectors (including the most beaten-down sectors like commodity, industrial and transport stocks) have bounced extremely well. All of that is encouraging … but the question is what comes next. Some indexes are starting to butt up against major overhead resistance (the 2,000 to 2,100 area on the S&P 500 has been a thorn in the market’s side for more than a year), and all indexes are still stuck below their longer-term 200-day lines. Overall, we remain neutral—if you see a good set-up, by all means take it, but we would hold off on flooring the accelerator until we see more breakouts and a longer-term uptrend in the general market.
This week’s list has a mix of stocks and sectors—some new, some old, some growth-oriented while others are turning around. Our Top Pick this week is Lumentum (LITE), which is enjoying a round of analyst upgrades on double-digit earnings growth.
| Stock Name | Price | ||
|---|---|---|---|
| Zoës Kitchen (ZOES) | 0.00 | ||
| Wayfair (W) | 167.03 | ||
| Vulcan Materials Company (VMC) | 137.10 | ||
| Sturm, Ruger & Co. (RGR) | 0.00 | ||
| MaxLinear (MXL) | 0.00 | ||
| MACOM Technology Solutions (MTSI) | 0.00 | ||
| Lumentum (LITE) | 87.00 | ||
| Kate Spade & Company (KATE) | 0.00 | ||
| Credicorp (BAP) | 0.00 | ||
| Broadcom Limited (AVGO) | 266.26 |
Current Market OutlookOur job as investors isn’t to forecast where the market will be in two or three months, but to follow the current evidence and stay on the right side of the market’s trends. The intermediate-term trend turned positive last week for the first time in more than two months, so it’s time to take a couple of steps back into the market’s waters by purchasing some strong stocks with big potential. That said, it’s best to go slow, partly because the longer-term trend remains down, and partly because many stocks are still repairing the severe damage they suffered in recent months. Our Market Monitor remains in neutral territory, and we’ll be looking for more bullish action from leading stocks to tell us to shift to a more aggressive stance.
This week’s Top Ten has a bit more of a growth flavor, which we like to see, with many stocks expected to grow earnings nicely. Our Top Pick is Texas Roadhouse (TXRH), a full-service restaurant operation that should see its bottom line accelerate this year. Even better, the stock just exploded out of a multi-month base.
| Stock Name | Price | ||
|---|---|---|---|
| WellCare Health Plans, Inc. (WCG) | 271.83 | ||
| Texas Roadhouse (TXRH) | 0.00 | ||
| Stamps.com (STMP) | 0.00 | ||
| Sprouts Farmers Market (SFM) | 19.00 | ||
| Motorola Solutions (MSI) | 0.00 | ||
| Mellanox Technologies (MLNX) | 92.00 | ||
| Lennox International (LII) | 270.56 | ||
| First Solar (FSLR) | 83.74 | ||
| Franco-Nevada (FNV) | 125.51 | ||
| () | 0.00 |
Current Market OutlookThe market continues to face many headwinds, the largest of which is the fact that the major indexes and the vast majority of individual stocks remain in longer-term downtrends. However, let’s give the market credit where it’s due—after a panic selloff on January 20, the major indexes chopped around, retested those lows during the following three weeks, and now, have nearly risen to their highest levels since early January. By our measures, the intermediate-term trend is starting to turn up, so after many weeks in a defensive stance, it’s OK to loosen the purse strings and put some cash to work—though we do advise going slow on the buy side and continuing to hold a good-sized cash position. Our Market Monitor will move up a couple of notches into neutral territory.
This week’s list is still a bit light on true growth stocks, but there are other interesting ideas to consider. Our Top Pick is TAL Education (XRS), a stock we’ve recommended before that’s now showing excellent relative strength.
| Stock Name | Price | ||
|---|---|---|---|
| TAL Education (XRS) | 0.00 | ||
| Wynn Resorts (WYNN) | 121.08 | ||
| The Priceline Group Inc. (PCLN) | 0.00 | ||
| NVIDIA Corporation (NVDA) | 242.42 | ||
| Hawaiian Holdings Inc. (HA) | 0.00 | ||
| Five Below (FIVE) | 134.58 | ||
| CenturyLink (CTL) | 22.88 | ||
| CyrusOne Inc (CONE) | 0.00 | ||
| Coherent, Inc. (COHR) | 0.00 | ||
| Burlington Stores (BURL) | 193.95 |
Updates
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.
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.
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.
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.
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.
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.
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.
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%.
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.
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.
Alerts
The market followed up Wednesday’s big-volume turnaround with further gains yesterday—at day’s end, the Dow rose 216 points and the Nasdaq gained 40 points. The push higher by the major indexes took them above resistance levels, and gives us a clear Cabot Tides buy signal.
Portfolios
Strategy
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.