Issues
Current Market OutlookFirst, the bad news: the intermediate-term trend of the market remains down, and there remains a wide swath of the broad market that’s in rough shape. But following some panic selling on October 15 and 16, the market’s rebound has been very, very impressive—the major indexes have quickly regained 70%-plus of their recent losses, many stocks found huge-volume support at the lows, and a few (mostly growth) stocks have already leapt to new highs. The market isn’t out of the woods, and even if it was, we’re still smack-dab in the middle of earnings season, so at the very least, volatility is a sure thing. All in all, we’re nudging our Market Monitor up into neutral territory—we still believe in holding some cash and keeping positions small, but we’re also seeing lots of stocks acting well.
This week’s list isn’t all go-go stocks, as it also has some “defensive growth” and some sector-specific winners. Our Top Pick is Celgene (CELG), a big-cap growth stock that, after 10 months of consolidation, is under extreme accumulation.
| Stock Name | Price | ||
|---|---|---|---|
| Union Pacific (UNP) | 0.00 | ||
| O’Reilly Automotive (ORLY) | 0.00 | ||
| Lennar (LEN) | 61.85 | ||
| Leggett & Platt, Incorporated (LEG) | 49.79 | ||
| Illumina Inc. (ILMN) | 289.74 | ||
| ICICI Bank (IBN) | 0.00 | ||
| Genuine Parts (GPC) | 0.00 | ||
| Celgene (CELG) | 0.00 | ||
| Alaska Air Group (ALK) | 0.00 | ||
| Akorn (AKRX) | 0.00 |
Current Market OutlookThe good news is that the market found some support in the middle of last week and has finally been able to get off its knees during the past couple of days; some potential growth stock leaders, too, have bounced back nicely, including a few in today’s issue. We do think the current bounce will likely go further given the severe selling of the past month and some of the climactic readings seen last week. But it’s going to take more than a couple of up days to change the market’s intermediate-term trend, which remains firmly down. We’re keeping our Market Monitor in bearish territory, and while a little nibbling is fine, the main goal is to remain defensive until a sustained uptrend emerges.
This week’s list is very interesting, as there are a few vibrant growth stocks that have snapped back nicely. Still, our Top Pick is more slow-and-steady —Domino’s Pizza (DPZ) just leapt out of a tight base on huge volume thanks to a bullish earnings report. Dips look buyable.
| Stock Name | Price | ||
|---|---|---|---|
| Zoës Kitchen (ZOES) | 0.00 | ||
| XPO Logistics (XPO) | 0.00 | ||
| Sherwin-Williams (SHW) | 526.09 | ||
| Regeneron Pharmaceuticals (REGN) | 512.96 | ||
| Pacira Biosiences (PCRX) | 54.85 | ||
| Palo Alto Networks (PANW) | 236.92 | ||
| Jack in the Box (JACK) | 0.00 | ||
| Domino’s Pizza (DPZ) | 339.47 | ||
| Autohome (ATHM) | 98.65 | ||
| Advance Auto Parts (AAP) | 0.00 |
Current Market OutlookWe’ve pointed out the numerous yellow and red flags seen in the market during the past few months, and during the past two or three weeks, those chickens have come home to roost—the massive weakness in the broad market is now infecting the major indexes and most formerly resilient stocks. It’s not 2008 out there (the worst of the selling is still in the commodity and economically-sensitive areas) and there are signs of short-term panic (820 combined new lows on Friday). But the trend of the market and the vast majority of stocks is now down, so you should be in a defensive stance until the bulls prove they have the strength to get things going on the upside. We’re knocking our Market Monitor down to reflect this.
This week’s list isn’t defensive, per se, but most of the stocks here have defensive characteristics (businesses that aren’t too economically sensitive) or have enjoyed a recent bullish catalyst. Our Top Pick is American Eagle (AEO), a turnaround that pays a nice dividend.
| Stock Name | Price | ||
|---|---|---|---|
| United Therapeutics (UTHR) | 0.00 | ||
| Mylan (MYL) | 0.00 | ||
| MercadoLibre, Inc. (MELI) | 980.83 | ||
| The Hain Celestial Group, Inc. (HAIN) | 0.00 | ||
| GoPro, Inc. (GPRO) | 0.00 | ||
| Gilead Sciences (GILD) | 75.10 | ||
| Foot Locker (FL) | 0.00 | ||
| AMAG Pharm. (AMAG) | 0.00 | ||
| American Eagle (AEO) | 0.00 | ||
| Apple (AAPL) | 248.94 |
Current Market OutlookAs each week has passed, we’ve seen more and more yellow and red flags, including divergences, an implosion in the broad market, and recently, some key leading groups (like chip stocks) and individual stocks break down. There are still some positives out there, especially that many growth stocks remain within multi-month consolidations; if the market pulls out of its funk, they could be the leaders of the next advance. But, right now, that’s a big if—with selling pressures intensifying, we’re knocking our Market Monitor down another notch. Holding cash and being very choosy when doing some buying is your best course.
This week’s list has a larger-cap flavor to it as investors hunker down in well-traded names. Our Top Pick is Nike (NKE), which recently staged a huge gap on earnings, something that almost always leads to good performance in institutionally-owned stocks.
| Stock Name | Price | ||
|---|---|---|---|
| Ulta Beauty (ULTA) | 331.95 | ||
| Nike (NKE) | 89.77 | ||
| Monster Beverage Corporation (MNST) | 0.00 | ||
| Mallinckrodt (MNK) | 0.00 | ||
| Home Depot (HD) | 0.00 | ||
| Keurig Green Mountain (GMCR) | 0.00 | ||
| FedEx (FDX) | 0.00 | ||
| Carter’s (CRI) | 0.00 | ||
| Acuity Brands (AYI) | 0.00 | ||
| Actavis (ACT) | 0.00 |
Current Market OutlookIt’s hard to talk about “the market” right now, partly because there are so many diverging trends out there. The broad market remains in rough shape, with 200 to 300 stocks hitting new lows every day and small- and mid-cap indexes looking poor. But the bigger-cap indexes are holding up, and, surprisingly, we’re seeing lots of growth stocks holding up (and a few shooting ahead) despite the turbulence out there. Overall, then, we remain in a cautious (but not defensive) stance—you should hold stocks that are acting fine, and some buying (preferably on dips) is fine, too. But we’re still advising you to hold a good amount of cash in case the broad market infects the resilient sectors.
This week’s list features many stocks that remain in favor today. Our favorite is Stratasys (SSYS), a leader in 3D printing whose stock has spent most of the year consolidating. The recent pullback looks normal, and you could start a position around here.
| Stock Name | Price | ||
|---|---|---|---|
| Twitter (TWTR) | 40.37 | ||
| Stratasys (SSYS) | 0.00 | ||
| Regeneron Pharmaceuticals (REGN) | 512.96 | ||
| Medivation (MDVN) | 0.00 | ||
| Mobileye N.V. (MBLY) | 0.00 | ||
| Facebook, Inc. (FB) | 0.00 | ||
| Deckers Outdoor Corp. (DECK) | 141.68 | ||
| Community Health Systems (CYH) | 0.00 | ||
| Ambarella (AMBA) | 52.79 | ||
| American Eagle (AEO) | 0.00 |
Current Market OutlookThe major indexes continue to whip around, with last Monday’s dip followed by a strong recovery, and now a renewed drop. By our measures, the intermediate-term uptrend is on the fence, and it’s clear that large chunks of the broad market are falling apart (gold, silver and oil shares are especially weak). And, at the very least, it’s obvious the environment remains very choppy and making big money is difficult. Of course, we’ve seen repeated shakeouts followed by recoveries, but the evidence tells us to pull in our horns; we’re shifting the Market Monitor back toward neutral while we wait for the buyers to return.
When doing buying, the key is to focus on what’s working and this week’s list has a good batch to consider. Our Top Pick is Parexel (PRXL), a steady grower in the medical testing field that is just getting going after a couple of big corrections during the past year.
| Stock Name | Price | ||
|---|---|---|---|
| XPO Logistics (XPO) | 0.00 | ||
| Steel Dynamics (STLD) | 0.00 | ||
| Salix Pharmaceuticals (SLXP) | 0.00 | ||
| Charles Schwab (SCHW) | 0.00 | ||
| Parexel Corp. (PRXL) | 0.00 | ||
| Norwegian Cruise Lines (NCLH) | 0.00 | ||
| Gilead Sciences (GILD) | 75.10 | ||
| Canadian Solar (CSIQ) | 0.00 | ||
| Spansion (CODE) | 0.00 | ||
| Archer Daniels (ADM) | 0.00 |
Current Market OutlookWe’re eight and a half months into 2014, and it finally looked as if the choppy (four weeks up, four weeks down, etc.) type of environment had been left behind. But not yet! Just during the past couple of trading days, we’ve seen the market churn near its highs and the sellers come out of the woodwork. We can’t conclude at this point that the market is set to sink for a few weeks; the evidence doesn’t support that. But given that sustained trends have been hard to come by, we also continue to think holding some cash on the sideline and booking partial profits makes sense. We’ll keep our Market Monitor in a “lean bullish” position, but we’ll be watching the upcoming action closely. If the uptrend is OK, buyers should show up soon.
This week’s list has a broader array of stocks and sectors on it, with a few stable stories. Still, we’re going with a true growth stock as our Top Pick—Palo Alto Networks’ (PANW) quarterly report was a barnburner and the stock soared to new highs on record volume. And we think its pullback since looks normal.
| Stock Name | Price | ||
|---|---|---|---|
| WhiteWave Foods (WWAV) | 0.00 | ||
| United Therapeutics (UTHR) | 0.00 | ||
| TriQuint Semiconductor (TQNT) | 0.00 | ||
| Gentherm (THRM) | 0.00 | ||
| Palo Alto Networks (PANW) | 236.92 | ||
| Monster Beverage Corporation (MNST) | 0.00 | ||
| Southwest Airlines (LUV) | 0.00 | ||
| Jazz Pharmaceuticals (JAZZ) | 0.00 | ||
| Greenbrier (GBX) | 57.73 | ||
| Foot Locker (FL) | 0.00 |
Current Market OutlookSeptember is often a herky-jerky month, with crosscurrents arising as institutional investors position their portfolios for the rest of the year. So far, though, despite some ups and downs in the major indexes, the action has been encouraging—growth stocks are waking up, with some glamour stocks (including a few recent IPOs) tearing up the charts. As we’ve written repeatedly, there are still some dark clouds out there; despite the improved action, we still see many broader, smaller-cap indexes acting poorly, and even the big-cap indexes have hit resistance in recent days. But the action of individual stocks continues to have us leaning bullish.
This week’s list has a few out-of-the-way ideas today, and our Top Pick is one of them—Mallinckrodt (MNK) is a little-known (but well-established) drug firm with huge earnings estimates for the next few quarters. And the stock has been super strong during the past few weeks.
| Stock Name | Price | ||
|---|---|---|---|
| Western Refining (WNR) | 0.00 | ||
| Mallinckrodt (MNK) | 0.00 | ||
| Health Net (HNT) | 0.00 | ||
| GoPro, Inc. (GPRO) | 0.00 | ||
| Green Plains Energy (GPRE) | 0.00 | ||
| Chipotle Mexican Grill (CMG) | 773.32 | ||
| Cavium (CAVM) | 0.00 | ||
| Baidu (BIDU) | 0.00 | ||
| Banco Bradesco (BBD) | 0.00 | ||
| Ambarella (AMBA) | 52.79 |
Current Market OutlookYou shouldn’t read too much into last week’s action; volume was super-light as most investors were on the beach. We’ll get a clearer read on things this week and next as institutional investors return to their trading desks. Still, taking a step back, the market’s rally from early August is intact, and we’ve seen a continued, gradual improvement among leading stocks, with a few popping higher each week and, importantly, with many moving higher after their initial breakouts. Right now, we’ll keep our Market Monitor where it stands—we continue to lean bullish, but we’re not yet willing to pound the table—but we like the persistently positive action of the past month.
This week’s list features another strong group of stocks that have seen heavy-volume buying of late, a sign big investors are getting in. Our Top Pick is Avago Technologies (AVGO), a chipmaker with a couple of major catalysts that should propel earnings much higher in the quarters ahead.
| Stock Name | Price | ||
|---|---|---|---|
| Twitter (TWTR) | 40.37 | ||
| Skyworks Solutions (SWKS) | 0.00 | ||
| Seagate Technology (STX) | 0.00 | ||
| Petrobras (PBR) | 14.78 | ||
| Madison Square Garden (MSG) | 298.38 | ||
| Macquarie Infrastructure (MIC) | 0.00 | ||
| Mobileye N.V. (MBLY) | 0.00 | ||
| The Hain Celestial Group, Inc. (HAIN) | 0.00 | ||
| Broadcom Limited (AVGO) | 266.26 | ||
| Aruba Networks (ARUN) | 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
Sell Abercrombie & Fitch (ANF) for a 21% gain and Buy Federated Investors (FII).
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.