Issues
Current Market OutlookAfter many weeks of choppy action, the sellers sunk their teeth into many indexes and stocks last week. Friday’s rebound was encouraging, but by our measures, the intermediate-term trend is sideways-to-down, the broad market is weak and few stocks are making any sustained upside moves—i.e., there’s still no money being made out there. On the positive side, many stocks remain near the top of multi-month ranges, and if earnings season goes well, plenty of new leadership could emerge. But right now, the onus is on the bulls to prove that they can create a sustained uptrend in the market and individual stocks. We’re knocking our Market Monitor to neutral and will be watching the action closely.
This week’s list has many resilient stocks that could be part of that new leadership if the bulls step up their game. Our Top Pick is Mohawk Industries (MHK), which is one of a few very strong housing supply stocks and has a recent catalyst to boot.
| Stock Name | Price | ||
|---|---|---|---|
| United Therapeutics (UTHR) | 0.00 | ||
| Taser (TASR) | 0.00 | ||
| Royal Caribbean Cruises (RCL) | 0.00 | ||
| Pharmacyclics (PCYC) | 0.00 | ||
| Outerwall Inc, (OUTR) | 0.00 | ||
| NetEase, Inc. (NTES) | 0.00 | ||
| Mohawk Industries (MHK) | 0.00 | ||
| HDFC Bank Limited (HDB) | 0.00 | ||
| Celgene (CELG) | 0.00 | ||
| Acuity Brands (AYI) | 0.00 |
Current Market OutlookThe market remains all over the place, with nearly every day bringing another 1%-plus move in the major indexes; such wide-and-loose action isn’t usually a good thing after a big market advance. That said, our outlook isn’t negative here (we’re still more bullish than bearish), and we continue to see more and more stocks set-up to get going … if the bulls can create a real, sustained uptrend. For now, though, it’s best to hold your top performers, do a little buying (preferably on weakness) and hold some cash as we wait for the market to show its true colors.
This week’s list is encouraging, as we’re not having any trouble spotting stocks that have consolidated tightly or recently popped to new highs on good volume. Our Top Pick is the first big-cap growth stock to surge above resistance this week—Chipotle Mexican Grill (CMG), which remains a great cookie-cutter story.
| Stock Name | Price | ||
|---|---|---|---|
| Valeant Pharmaceuticals (VRX) | 0.00 | ||
| Rackspace (RAX) | 0.00 | ||
| Rackspace (RAX) | 0.00 | ||
| Lululemon Athletica (LULU) | 304.69 | ||
| Leggett & Platt, Incorporated (LEG) | 49.79 | ||
| D. R. Horton (DHI) | 66.55 | ||
| Chipotle Mexican Grill (CMG) | 773.32 | ||
| CF Industries (CF) | 45.23 | ||
| Brunswick Corporation (BC) | 0.00 | ||
| Alkermes (ALKS) | 0.00 | ||
| Align Technology Inc. (ALGN) | 316.20 |
Current Market OutlookThe major indexes have been pulling back in recent days, and many are now back to their 50-day moving averages after a nice snapback for the second half of December. The question is whether the recent wobbles have more to do with year-end/start-of-year positioning (this portion of the calendar is notorious for crosscurrents creating volatility), or a renewed wave of selling that would basically be a continuation of what we saw in early December. We’re still optimistic, but we’re knocking our Market Monitor down a couple of notches today, and if all’s well, buyers should appear very soon as many stocks test support.
This week’s list has a larger-cap, steadier feel to it as the market favors “defensive growth” names most of all. Going along with that theme, our Top Pick is Whole Foods Market (WFM), whose stock is firmly in a turnaround phase.
| Stock Name | Price | ||
|---|---|---|---|
| Whole Foods (WFM) | 0.00 | ||
| Visa (V) | 0.00 | ||
| Virgin Airlines (VA) | 0.00 | ||
| PPG Industries (PPG) | 0.00 | ||
| O’Reilly Automotive (ORLY) | 0.00 | ||
| CarMax (KMX) | 0.00 | ||
| KLA Corp. (KLAC) | 158.80 | ||
| Jones Lang LaSalle (JLL) | 0.00 | ||
| Electronic Arts (EA) | 0.00 | ||
| Cirrus Logic Inc. (CRUS) | 0.00 |
Current Market OutlookA lot has changed since our last issue two weeks ago! Most important of all is the “blast-off” or “volume thrust” signal that came from two consecutive days (December 17 of 18) of very broad and powerful upside market action. It was strong enough to erase any lingering negative technical action, setting the stage not only for a nice Christmas rally but also the traditionally solid start to January that we expect. Thus our Market Monitor is now solidly back in the green bullish zone. So what to buy? Not oil stocks; it’s better to focus on what’s going up! Today’s issue brings a diverse group of both big old companies and younger faster growers, and all of them have great potential, but our Top Pick is Freescale Semiconductor (FSL), a chip manufacturer that has great potential to benefit from the boom in machine-to-machine (MTM) communication.
| Stock Name | Price | ||
|---|---|---|---|
| Whirlpool (WHR) | 0.00 | ||
| Taser (TASR) | 0.00 | ||
| Swift Transportation (SWFT) | 0.00 | ||
| RockTenn (RKT) | 0.00 | ||
| Red Hat (RHT) | 0.00 | ||
| ServiceNow (NOW) | 341.86 | ||
| Hawaiian Holdings Inc. (HA) | 0.00 | ||
| Freescale Semiconductor (FSL) | 0.00 | ||
| Bluebird Bio (BLUE) | 0.00 | ||
| Broadcom Limited (AVGO) | 266.26 |
Current Market OutlookIf we came down from another planet and looked at the state of the market, we would conclude that there are more things for the bulls to be excited about than not—few stocks have broken down, the indexes are above their 50-day lines and the major trends are still up.
But we’ve been around for the past month, and we know there’s clearly been an increase in distribution as investors fret over the reverberations of the oil price plunge. At the very least, not a lot of money has been made since mid-November. And that’s the reason we’re taking our foot off the gas; if the market and most stocks hold support, we’ll be quick to return to a more bullish stance, but for now, we think it’s best to do some watching and waiting, and possibly sell your weakest stock or two (and take partial profits in a winner or two).
This week’s list is more growth oriented than in recent weeks as investors abandon all things commodity-related. Our Top Pick is Restoration Hardware (RH) which has a great growth story and just broke out to new highs last week.
| Stock Name | Price | ||
|---|---|---|---|
| United Continental Holdings (UAL) | 96.76 | ||
| Sierra Wireless (SWIR) | 0.00 | ||
| RH Inc. (RH) | 252.93 | ||
| Outerwall Inc, (OUTR) | 0.00 | ||
| Lululemon Athletica (LULU) | 304.69 | ||
| Fiesta Restaurants (FRGI) | 0.00 | ||
| Dollar Tree (DLTR) | 0.00 | ||
| Centene (CNC) | 0.00 | ||
| Buffalo Wild Wings (BWLD) | 0.00 | ||
| Adobe Inc. (ADBE) | 315.23 |
Current Market OutlookAfter a relatively quiet week, the major indexes and most stocks remain in uptrends, and that’s why we’re keeping our Market Monitor in bullish territory. But there remain a growing list of yellow flags, and the fact is that the broad market is very split, with lots of crosscurrents pushing and pulling various stocks and sectors. So far, the gyrations are normal and, possibly, bullish, helping to shake the tree, as we wrote last week. But many stocks are now approaching support—the next few days will be telling, as buyers should arrive on the scene if the intermediate-term uptrend is intact. All told, we remain bullish, but we’re keeping a watchful eye on things.
This week’s list includes everything from big, old-world companies to high-flying new-age firms. Our Top Pick is AMAG Pharmaceuticals (AMAG). The firm has transformed itself thanks to a recent acquisition, and the stock has been acting great for the past few weeks.
| Stock Name | Price | ||
|---|---|---|---|
| Valeant Pharmaceuticals (VRX) | 0.00 | ||
| Packaging Corp (PKG) | 0.00 | ||
| Palo Alto Networks (PANW) | 236.92 | ||
| Old Dominion Freight Line Inc. (ODFL) | 221.91 | ||
| Infinera (INFN) | 0.00 | ||
| Celgene (CELG) | 0.00 | ||
| Brunswick Corporation (BC) | 0.00 | ||
| Applied Materials (AMAT) | 0.00 | ||
| AMAG Pharm. (AMAG) | 0.00 | ||
| Alliance Data Systems (ADS) | 0.00 |
Current Market OutlookAfter a quiet-but-good holiday week (except for the energy stocks, which have crashed), the sellers came out of the woodwork today, pulling down many stocks that have enjoyed good runs. Big picture though, while there remain a few yellow flags and divergences (including the small caps, which are again acting poorly), the major trend remains up for the indexes and the vast majority of stocks. Thus, our advice is to remain bullish, and to remain focused on what’s working—for many stocks, this pullback could go further, but the odds favor weakness leading to higher prices in the weeks ahead.
This week’s list has a slightly larger-cap tint to it, but all of the stocks have enjoyed huge-volume buying sometime during the past month. Our Top Pick is D.R. Horton (DHI), the nation’s largest homebuilder that’s participating in a powerful upmove for that group.
| Stock Name | Price | ||
|---|---|---|---|
| Whirlpool (WHR) | 0.00 | ||
| Whole Foods (WFM) | 0.00 | ||
| SolarWinds (SWI) | 0.00 | ||
| NetEase, Inc. (NTES) | 0.00 | ||
| KLA Corp. (KLAC) | 158.80 | ||
| Incyte Corporation (INCY) | 76.98 | ||
| Gentex Corp. (GNTX) | 0.00 | ||
| D. R. Horton (DHI) | 66.55 | ||
| Tableau Software (DATA) | 126.42 | ||
| Bloomin’ Brands (BLMN) | 0.00 |
Current Market OutlookIt looks as if the first “test” of the nascent uptrend has arrived; the major indexes have barely been dented, but under the market’s hood, we’re seeing something of a rolling correction, with a couple of sectors getting hit every day, and with a few stocks breaking down. The next few days will probably be where this rally’s rubber will meet the road—to this point, the selling has been normal (even expected) given the month-long rally from the mid-October lows. Thus, we remain bullish, but we’re also keeping a close eye on the action, both to judge the market’s health and to identify stocks that are setting up new entry points.
This week’s list has a nice array of stocks of varying sizes and from different sectors. We like many of them, but we’re going to go with Sierra Wireless (SWIR) as our Top Pick—it’s a bit speculative, but has a powerful chart and huge numbers, and any shakeout could create a nice buying opportunity.
| Stock Name | Price | ||
|---|---|---|---|
| Taser (TASR) | 0.00 | ||
| Sierra Wireless (SWIR) | 0.00 | ||
| NetSuite, Inc. (N) | 0.00 | ||
| Leggett & Platt, Incorporated (LEG) | 49.79 | ||
| Health Net (HNT) | 0.00 | ||
| Electronic Arts (EA) | 0.00 | ||
| Dexcom (DXCM) | 421.36 | ||
| CyberArk (CYBR) | 111.74 | ||
| Ambarella (AMBA) | 52.79 | ||
| Apple (AAPL) | 248.94 |
Current Market OutlookAfter a vacuum of selling pressures helped the S&P 500 and Nasdaq soar to new highs, last week’s generally tight, calm action was just what you want to see—despite the run, investors aren’t booking profits and the bears aren’t coming out of the woodwork. That’s not to say there won’t be pullbacks (possibly brief, sharp dips) or that every investor is rowing in the same direction—some groups are lagging and many major indexes are still shy of their September peaks. Thus, you shouldn’t buy with both fists, but there’s clearly enough evidence to be bullish and look to latch onto new leading stocks as they emerge.
This week’s list is chock-full of stocks with big stories and powerful charts. There are many we like, but for our Top Pick we’ll go with Medivation (MDVN), a well-traded (but little-known) biotech firm that has a blockbuster treatment for prostate cancer on its hands.
| Stock Name | Price | ||
|---|---|---|---|
| Wabtec (WAB) | 0.00 | ||
| Ulta Beauty (ULTA) | 331.95 | ||
| Textron (TXT) | 0.00 | ||
| Spirit Airlines (SAVE) | 57.03 | ||
| Receptos (RCPT) | 0.00 | ||
| MercadoLibre, Inc. (MELI) | 980.83 | ||
| Medivation (MDVN) | 0.00 | ||
| Marriott International, Inc. (MAR) | 0.00 | ||
| Alibaba (BABA) | 254.81 | ||
| Allison Transmission (ALSN) | 51.79 |
Current Market OutlookWe wrote a few weeks ago that a straight-up move from October’s vicious selloff would be highly unusual bullish action … and that’s just what we’ve seen! Now, to be clear, not everything is positive—many commodity-related sectors are still struggling, and earnings season has resulted in more than a few duds. Plus, having soared back to their highs, the indexes could easily take a breather in the short-term. That said, the snapback from the October lows has produced tons of stocks surging to (or close to) new highs, and the power of the move tells us to expect better times ahead. Following the evidence, we’ll move our Market Monitor up another couple of notches. There will be pullbacks, but the path of least resistance is up.
This week’s list focuses on a bunch of recent earnings winners, including some big-cap firms that big investors are gravitating toward. Our Top Pick is Visa (V), which is on the move after building a base for most of 2014.
| Stock Name | Price | ||
|---|---|---|---|
| Whirlpool (WHR) | 0.00 | ||
| Visa (V) | 0.00 | ||
| Ulta Beauty (ULTA) | 331.95 | ||
| Infinera (INFN) | 0.00 | ||
| Incyte Corporation (INCY) | 76.98 | ||
| Salesforce.com (CRM) | 0.00 | ||
| Centene (CNC) | 0.00 | ||
| Baidu (BIDU) | 0.00 | ||
| AbbVie Inc. (ABBV) | 93.53 | ||
| AmerisourceBergen (ABC) | 0.00 |
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
If you’re wondering which excellent stock to add to your portfolios right now, H&R Block (HRB) is the one.
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.